Nike to Cut Off Thousands of China Online Sellers in Bid to End 'Fragmented' Market

Nike is making one of its boldest moves yet to reverse a prolonged sales slump in China, announcing plans to slash thousands of third-party online distributors starting in January. The world's largest sportswear brand will instead funnel digital shoppers toward its own website, app, and newly branded storefronts on major platforms Tmall, JD.com and Douyin, a strategy executives say is designed to clean up what they call a "fragmented and cluttered" marketplace.

The overhaul means that most of Nike's 16 key brick-and-mortar partners in China, which collectively operate thousands of physical stores, will stop selling the brand's clothing and footwear online. Instead, they will pivot to in-store sales. The company's new Greater China chief, Cathy Sparks, framed the shift as a fight for brand integrity rather than a retreat from digital commerce.

"Our marketplace has become so fragmented and cluttered," Sparks, a 25-year Nike veteran who took over the region earlier this year, told Reuters. "What consumers want is an experience that's premium, true to the brand, trustworthy, and certainly connected between digital and physical."

In a separate letter to partners, Sparks wrote that the new flagship stores on China's dominant e-commerce platforms will serve as "the single, elevated destination for Nike within these ecosystems, with clearer product presentation, stronger storytelling and more connected consumer journeys." She insisted the move "is not about reducing access. It is about reducing fragmentation and strengthening the consumer journey."

A Market in Decline

The digital restructuring lands at a precarious moment for Nike in Greater China, its third-largest market. Sales in the region tumbled 17 percent on a constant-currency basis in the most recent quarter, accelerating from a 10 percent decline in the prior period. Over the past five years, the business has shrunk roughly 30 percent as fast-rising domestic brands like Anta and Li Ning, along with foreign upstarts On and Hoka, have steadily chipped away at its dominance.

The China woes have reinforced investor skepticism about the turnaround strategy engineered by CEO Elliott Hill, now nearly two years into the job. Hill has pushed to refocus the company on sports, mend wholesale relationships in North America, and accelerate product innovation—but China remains a stubborn weak spot.

Distributor Fallout

The immediate shock waves will hit Nike's wholesale partners. Topsports, the brand's largest distributor in mainland China, disclosed in a Hong Kong exchange filing that it anticipates a "significant" short-term negative impact. Online sales of Nike products currently account for 22 percent of Topsports' revenue. Still, the retailer publicly backed the decision. "Topsports has worked with Nike for 27 years based on the principle of mutual benefit and shared growth," CEO Yu Wu said in a statement, adding that the adjustment "will help promote a healthier, more orderly, and more sustainable retail ecosystem in China" over the medium to long term.

Skepticism on Wall Street

Not everyone is convinced. When local Chinese media first reported the potential e-commerce changes in June, BNP Paribas senior analyst Laurent Vasilescu issued a stark warning. He compared the strategy to Nike's ill-fated decision years ago to slash North American wholesale accounts—a move that opened shelf space for competitors and contributed to a collapse in market dominance, sales, and margins.

"This strategy opened up shelf space for competitors and the strategy ended poorly for Nike. We believe the same could happen if it takes the same approach in China," Vasilescu wrote in a research note, maintaining an underperform rating on the stock. "Nike doesn't have a distribution problem in China and elsewhere. It has a product problem."

Sparks acknowledges the product critique. She said creating footwear and apparel more relevant to Chinese consumers is a top priority, and Nike has appointed a vice-president of local product creation in Greater China to accelerate that effort.

The Bigger Picture

Nike's bet is that a cleaner, more tightly controlled digital experience will ultimately strengthen its pricing power and brand perception in a market where discount-driven third-party sellers have muddied the waters. By consolidating online sales into a handful of official channels, the company aims to sell more products at full price and rebuild trust with shoppers who have grown accustomed to navigating a chaotic web of storefronts.

The risk is significant. Cutting off thousands of online distributors could trigger an immediate revenue hole in a region already struggling to find its footing, while local rivals stand ready to absorb any shelf space—physical or digital—that Nike vacates. For a CEO under pressure to prove his turnaround is working, the China reset represents either a masterstroke in brand discipline or a high-stakes gamble with little room for error.

Nike shares have been under pressure as the company works through a multiyear restructuring. The China e-commerce overhaul will be closely watched by investors when the company next reports quarterly results.