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Nike’s revenue growth in Greater China slowdown sharply

Nike has distribution networks in more than 200 markets around the world. But there are only three most important: the United States, China and Vietnam. Today, two of these three regions have problems – Vietnam and China.

Vietnam’s impact on Nike is mainly on the supply side. More than half of Nike’s shoes and about a third of its clothing are produced there. Not long ago, the local government postponed the blockade until at least October 1 due to the epidemic. In the past quarter, it took 80 days for Nike shoes to be transported from Asia to North America, twice the time before the outbreak of the epidemic.

The shutdown in Vietnam will cause Nike’s North American market to be in short supply in the peak sales season of holidays. Therefore, Nike significantly reduced its revenue forecast for the fiscal year 2022 at the financial report meeting on September 24.

Nike has enough ability to solve the problems created by the epidemic to all global enterprises. The trouble is still the recession in the Chinese market. The Chinese market has brought Nike continuous growth and huge demand.

John Donahoe, CEO of Nike, said at the latest earnings conference that Nike is fighting a long game in China. Like the “fine tradition” of foreign brands in the Chinese market in the last century, he also gave himself a Chinese name, “Tang ruoxiu”.

Nike's CEO
Nike’s CEO

But now, on the 40th anniversary of Nike’s entry into China, their popularity in China is far less than usual.
As Nike’s most profitable and fastest-growing regional market, Greater China recorded year-on-year revenue growth of 11% in this quarter, with an increase of only 1% excluding the impact of the exchange rate, which is the slowest growth in all regions.

China’s domestic brands seize the opportunity to accelerate development. The average revenue growth of the 10 Chinese outdoor sports-related enterprises that recently released the first half financial reports reached 27.05%, of which Anta and Li Ning both grew by more than 50%. Recently, Peak Sports also announced that it had completed the financing of US $300 million and said it would fully enter the first and second-tier cities in China.

Since entering the Chinese market in 1981, Nike, which had not yet established itself as the world’s largest sports brand at that time, has educated a generation of Chinese sports products companies and consumers on how to run a good sports business and what is sports spirit. From products, marketing methods to sales strategies, many industry-leading innovations come from Nike, including using sports idols as spokesmen, accurately insight into the needs of different sports groups, and strictly grasping the terminal image.

Of course, the most important thing is that in the past few years, Nike has demonstrated the courage of a leading enterprise to deal with the digital crisis. It has taken the lead in turning to e-commerce and direct marketing mode, so as to catch young consumers.

John Donahoe’s background before airborne the CEO of Nike group last year was originally helpful to maintain Nike’s influence in the new era. He used to be the CEO of eBay and Paypal and led to winning the No.1 sports brand in China’s double eleven sales. After taking office, he began to strengthen the digital direct selling strategy, but also led a series of global layoffs and restructuring, which brought a lot of shocks to the company.

A manager of a domestic sports company who asked not to be named once worked at Nike said: “many old colleagues left in the first half of the year, mainly related to the change of management last year.”

Since this year, Nike has had to deliberately low-key strategy, making it difficult to speak actively and communicate with young consumers as before. John Donahoe said at the meeting that Nike direct (Nike’s direct revenue) in the Chinese market fell by 3%, partly affected by the closure of retail stores.

Nike, which usually puts a lot of advertising in the Olympic Games, spent 9.6% less than Wall Street expected this year.

The good news for Nike is that this quiet period seems to be ending. For example, Nike shoe sales platform SNKRS achieved revenue growth of more than 130%. Analysys Qianfan’s data showed that the monthly activity of the Nike App picked up in August.

Angel Zhang

Editor in Chief of FirmKnow.
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