Nike Inc, the leading sportswear company in China, has experienced declining growth rates over the past five years, facing competition from Chinese rivals such as Anta and Li-Ning. However, Nike remains committed to the dynamic and crucial Chinese sportswear market, showing no signs of decoupling. The company has been consistently adapting its strategies to cater for Chinese consumers, with a strong emphasis on hyper-localisation and targeting Gen Z consumers.
Nike sees stalled growth trajectory in China while the market remains crucial
As the largest sportswear company in China with a 23% share, Nike and other international brands, such as adidas, have experienced declining year-on-year growth in recent years. Allegations of forced labour in Xinjiang have damaged Nike's reputation and given rise to Chinese rivals such as Anta and Li-Ning, which have benefited from the “Guochao” (“Chinese fashion”) trend across various industries. The rapid growth of Chinese-owned brands, such as Anta, Salomon, and Li-Ning, poses a significant threat to Nike's share in China, intensifying competition as these brands expand globally.
China plays a crucial role in sportswear, accounting for approximately 15% of global sales and ranking as the second-largest sportswear market after the US in 2022
Source: Eurmonitor International
Chinese sportswear is expected to outperform both the global market and Nike's other top five markets, with a higher CAGR projected for 2022-2027. Given the allure of the Chinese sportswear market, Nike maintains an optimistic outlook on growth opportunities in the country. However, competition there is becoming increasingly fierce, which is forcing Nike to be at the top of its game. As mentioned in its FY2023 Q3 earnings calls, the company is indeed committed to further investing and expanding, eyeing hyper-localisation and Gen Z consumers.
Adapting to the Chinese market: Repositioning as a locally strong brand
Chinese consumers, particularly young consumers, have exhibited a growing preference for local brands over those with international recognition in recent years. This shift reflects an increasing sense of national pride and a desire to support domestic products as China's economy and global influence continues to expand. This presents both challenges and opportunities for companies such as Nike, necessitating stronger connections with Chinese consumers and a keen understanding of China's unique market and culture. To address this, Nike has recently taken several initiatives, for example:
- Re-engaging with the Chinese esports community (2022): Nike signed a collaboration with Jian Zihao, a prominent Chinese esports star player known as Uzi. This partnership marks Nike's first venture into the esports realm, aiming to establish a connection with the rapidly- growing esports culture in China.
- Launch of products for women in China (2023): Nike introduced the Nike Zenvy and Nike Go leggings series exclusively for women in China. To promote these products, Nike organised a product experience event in Wanning, Hainan. This initiative highlights Nike's attentiveness to local demands and its dedication to offering products that resonate with Chinese consumers.
Adapting to the Chinese market: Catering for the values and behaviour of Gen Z
As the incomes of China’s Generation Z rise, brands such as Nike are increasingly targeting this lucrative generation for sales growth. Chinese Gen Z consumers, having grown up during rapid economic expansion, exhibit distinct characteristics compared to other generations: 1) They value uniqueness and personalisation; 2) They heavily rely on social media and e-commerce for shopping; and 3) They seek connections with like-minded hobby groups.
To align with the values and behaviours of China’s Gen Z, Nike has implemented several initiatives. For instance, in 2022, it partnered with sportswear retailer, Topsports, to launch the Nike Rise retail store in Beijing. This store operates as a Nike membership club, providing exclusive product information and hosting offline activities such as yoga classes, sports salons, and handicraft workshops. Additionally, Nike has expanded its partnerships beyond basketball and football players to include local influencers, particularly female influencers in diverse fields such as dance and fashion design.
Looking forward
While Nike has consistently adapted its strategies to cater for Chinese consumers, particularly younger generations, it is crucial to acknowledge that the country’s Gen Z is a nationalistic generation that gravitates towards brands aligning with personal values. Geopolitical tensions between China and the US will continue to pose a significant risk for international brands such as Nike. Moreover, although Gen Z generally holds a more positive outlook on the future compared to other generations, these consumers face increased pressures and higher expectations, compounded by high unemployment rates. Considering these factors, it is imperative for brands to continuously reassess their strategies and establish long-term emotional connections with consumers. This can be achieved by avoiding unnecessary political statements and instead focusing on promoting self-acceptance among young consumers.