Nike is doing really well almost everywhere—but why is it failing in China?

Is Nikey getting beaten by Didibao?
Is Nikey getting beaten by Didibao?
Image: AP Photo / Greg Baker
By
We may earn a commission from links on this page.

It’s not all good news for Nike. The sports equipment and apparel company today reported a 55% rise in net income over the same period a year earlier. That was beyond expectations and caused Nike’s share price to jump 8.3% after its report. But the athletic-apparel juggernaut is still struggling in one of the world’s most important apparel markets.

Sportswear is booming in China. Between 2006 and 2012, the market has had a compound growth rate of 29% every year. Yet Nike’s sales in “Greater China” (i.e., including Hong Kong, Macau and Taiwan) fell for a third consecutive quarter. Revenues for its Nike brand products rose everywhere except China and Japan.

Poor sales in Japan, with an aging population, a long-running economic slump and a weakening currency, are hardly surprising. But why in China? Observers of China’s market say that winning it takes more than just celebrity branding. Chinese youth, the main target of sportswear firms, need to feel that the brands resonate with them, Mary Bergstrom, founder of the The Bergstrom Group, told BrandChannel last month:

Both Nike and Adidas have large followings on Sina Weibo, China’s main microblogging platform. In 2008, when Chinese gymnast Chen Yibing failed to win a gold medal, a move that many Chinese attributed to anti-Chinese judges, a post by Nike’s Weibo account about it was reposted over 60,000 times. Still, Nike lacks enough visibility, Credit Suisse’s Christian Buss told CNBC ahead of the earnings today. Heavy discounts from Chinese retailers and fake or bootleg sportswear in China’s shanzai (pirated goods) market, as seen in the picture above, pose further challenges.

But it’s not that Chinese youth aren’t buying foreign clothes; they’re just not buying Nike as much. Nike has historically dominated the Chinese sportswear market, holding 12.1% of it (paywall), according to the research firm Euromonitor International; but Adidas now has 11.2% of that market and appears to be gaining on Nike (paywall) by positioning itself as more brash, youthful, and fashionable. (It’s offered $3,100 fur-lined trench-coats and high-heeled tennis shoes). While Nike sales have declined in China, Adidas’ sales rose 12% for the fourth quarter.