CHINA FASHION BUSINESS

▼The following discussion in the Lengyun Fashion Circle revolves around industry issues and summarized insights. These shared ideas are a collective reflection of industry wisdom and do not represent Lengyun’s personal views. The aim is to benefit more industry professionals through this format.

Part 1:

NIKE’s New Strategy, Its Reasons, and Objectives

Why Share the NIKE Case?

Apart from being a leading brand, NIKE experienced a performance downturn from 2020 to 2024, leading to a CEO replacement. This marks a critical period of transformation. Whether the new CEO can reverse the situation remains to be seen. However, this case serves as a realistic and instructive example for many companies currently struggling with performance issues.

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1. Focus on Sports and Creativity

Interpretation of the Statement

The emphasis on sports highlights NIKE as a sports brand, distinct from general fashion or luxury products. From a product perspective, this means prioritizing “athletic functionality.” NIKE’s sportswear and shoes stand out for their safety and functional features, such as ankle protection during exercise, quick sweat-wicking, anti-slip soles, waterproofing, and wind resistance.

Strong functionality requires creativity. Technological innovation depends on creative ideas. Did you know that NIKE established its product research center back in 1980? Recently, it even set up a product research center in Shanghai to cater to the body and foot shapes of Chinese consumers.

Thus, NIKE is a “creativity-driven” company.

Different CEO Strategies

The previous CEO came from an e-commerce background, bringing a sales-driven approach focused on traffic and hit products. However, this led to a lack of innovative products, relying instead on classic styles.

Why was the previous CEO hired? At the time, NIKE aimed to innovate in digitalization and direct-to-consumer (D2C) models. This strategy proved beneficial during the pandemic in 2020, accelerating NIKE’s digital transformation.

However, being neither a product expert nor an athlete, the previous CEO neglected NIKE’s core—”product first.” NIKE excels in product and marketing innovation and thrives as an innovator, not a price competitor. The “traffic mindset” ultimately hurt its DNA.

This explains why NIKE recently reappointed a veteran as CEO to refocus on sports and innovation.

Example: Signing Jackson Wang as Brand Ambassador

NIKE’s choice of Jackson Wang, a former fencer with achievements in music and fashion, reflects its brand essence of sports, creativity, and style. Unlike other brands, NIKE strategically selects ambassadors, avoiding controversies or following trends.

2. Focus on Categories: Running, Basketball, Training, Football, and Sports Apparel

The second focus is on categories, determined by NIKE’s strengths and market potential. Running, basketball, and football are the world’s most popular sports. Training represents versatile products suitable for general exercises, such as tennis.

Surprisingly, tennis is not listed despite its growing popularity in China, akin to how Gu Ailing popularized skiing and Zheng Qinwen boosted interest in tennis. Tennis also embodies stylish sportswear, making it a fashionable activity.

3. Focus on Specific Markets and Channels

Although the article does not specify particular markets, based on direct conversations with their partners, the primary focus appears to be on the United States and China. These two regions are already NIKE’s largest markets, which is great news for China’s Top Sports (Topsports), NIKE’s second-largest distributor worldwide.

What Insights Can This Provide?

For brick-and-mortar stores, the distributor model remains the mainstream approach for footwear and apparel brands. In China, distributors have evolved from being undervalued to now possessing bargaining power comparable to that of brand owners. In the distributor model, channels are second only to products in importance.

Part Two:

Lessons for the Industry

NIKE’s Unique Approach to Distributor Management

(Sports companies’ distributor models largely originated from NIKE’s, though few have achieved NIKE’s level of excellence.)

1. Credit System for Large Distributors

This system has been in place since the 1990s.

While the credit system might seem minor, it plays a critical role in mitigating cash flow issues inherent in the order conference model commonly used by footwear and apparel companies. For instance, distributors must pay upfront for goods months in advance, but the sales revenue may take 3-6 months to materialize. If selling through department stores, payments can be delayed by another 2-3 months. In some cases, distributors may have to wait 9-12 months to recoup their cash.

For reputable enterprises (assessed through pre-conducted creditworthiness investigations), NIKE offers a credit system that allows distributors to receive goods upfront and pay within 3-6 months.

This system is particularly favorable for distributors during economic downturns. However, NIKE’s credit system is also rigorously managed, with strict financial risk controls in place.

2. Training Programs: NIKE University

While it is common for large companies to have internal training programs, NIKE’s stands out as a leader. Since the 1990s, NIKE has provided comprehensive training for its distributors. Unlike most companies that focus only on product or sales training, NIKE’s programs cover a broad range, including order placement, athletic functionality, visual merchandising, and more.

In certain cases, trainers are sent directly from NIKE’s U.S. headquarters to conduct these sessions.