The future of Nike in China after shutting down its NIKE Run Club app in 2022

Nike first entered the Chinese market in 1981. Nike grew rapidly in China, but instead of bringing its products over directly, Nike chose to sponsor Chinese sporting clubs and athletic events. During the 2008 Beijing Olympics, Nike took the initiative to sponsor several sports teams, which took the brand across the entire country.

Today, Nike targets China’s middle-class consumers through sponsorships of famous athletes with large followings in China. Nike also focuses on Chinese e-commerce taking the advantage of the high penetration of online shopping platforms. In 2021, Nike’s revenue from the Chinese market amounted to about 55.66 billion RMB (8.29 billion USD)

Source: Nike, designed by daxue consulting, Nike’s revenue in Greater China 2012-2021

Michael Martin, VP of Nike China, explained that “China’s fast-growing 5G technology infrastructure, artificial intelligence, machine learning, and digital related-business environment, as well as people’s willingness to connect with various products via digital applications, are creating many opportunities.” This shows Nike’s dedication to digital solutions going forward.

The Chinese sportswear market will continue to be significant for international brands. As the largest athletic apparel company in the world, Nike in China owes some of its success to an adaptive digital strategy.

Nike in China: Business is booming

Nike, Inc., has operated in China since 1981. Over the years, China has been a significant growth driver for Nike. In 2021, the total revenue of Nike China reached 55.66 billion RMB, with 38.6 billion RMB coming from footwear and 15.7 billion RMB from apparel. Nike’s worldwide revenue in 2021 was 299 billion RMB (44.5 billion USD) meaning China accounted for 18.6% of Nike’s total revenue.  

Source: Nike, designed by Daxue Consulting, Nike’s revenue by segment in Greater China, 2012-2021

Channel Strategy of Nike in China: Digital Sales

Source: daxue consulting, “Nike’s digital direct retail framework in China”

Nike’s strong sales growth was largely thanks to its digital strategy in China. In 2012, Nike started its online journey in China by opening its first flagship store on Tmall, one of China’s largest e-commerce shopping platforms. Nike also launched its official website store, the SNKRS app, and its WeChat Store over the next several years. In November 2019, Nike launched its flagship app in China, a one-stop shop delivering exclusive content, events, and personalized services while collecting consumer data to inform its products and marketing initiatives. Today, digital sales now comprise over 42% of Nike’s sales and Nike believes it is well on track to earn >50% of its business from digital sales.

D2C strategy of Nike in China

Nike has been establishing a Direct-to-Customer (or D2C) retail framework covering online and offline, 7,975 offline stores, and a digital supply chain since 2012. Nike is always placing a heavy emphasis on direct-to-consumer channels through Nike.com, brand-owned Apps, the Nike WeChat store, and its own retail stores.

Although D2C’s revenue share in Greater China increased from 23% in 2014 to 40% in 2019, Nike’s wholesale business fell from 81% in 2013 to 61% in 2021. Nike also streamlined its wholesale partnerships. In 2013, Nike sold its product through an estimated 30,000 retailers, but in 2019 had minimized this to only 40 strategic retail partners. On top of this, Nike China also reduced its reliance on department stores, moving towards selling through its own channels which served them well during the pandemic.

This shift towards Nike’s own channels shows that not only does Nike want to place more emphasis on its D2C business, but Nike also aims to “create a consistent, connected, and modern shopping experience.”

Nike’s China brand-own digital channels

Source: daxue consulting, “Nike’s Brand-owned channels”

Apart from the Nike Tmall flagship store and Nike China’s official website, Nike also sells online through its WeChat mini-program, which also offers consumers a full range of products and services. Using WeChat, Nike can connect with their Chinese consumers closely and personally.

Since the launch of the Nike China App in 2019, Nike has driven traffic from its website and WeChat program to its brand-owned app, where Nike can deliver the most personal access to its products, as well as exclusive content such as coaching tips and personalized services.  

Nike China is also gradually shifting its sales to brand-owned channels, especially the Nike App since self-owned channels mean higher profits and more loyal members than e-commerce platforms.

While Nike in China got their foot in the door by using platforms Chinese consumers were used to, Nike is gradually switching their customers to their own channels to enjoy higher profits and brand loyalty.

Cooperation with e-commerce platforms

The cooperation with Chinese e-commerce platforms like Tmall has had a great impact on Nike’s business in China, Today, Nike IS is still placed as the top apparel-industry seller on Chinese e-commerce platforms.

Also thanks to Tmall’s large customer base all around the country, Nike has seen an impressive increase in new members in China. For example, Nike+ gained 3 million new members in 2019 Single’s Day.

Nike also collaborated with Tmall for data-driven marketing projects. By partnering with commerce platforms, Nike China can access vast consumer behavior and industry trend data from third-party online platforms to develop its consumer study and improve products and services for Chinese consumers.

New retail strategy of Nike in China: Starting from Nike 001

Source: Nike, “Nike Shanghai 001 shop”

“Nike’s lead in retail and sports innovation is also redefining the future of sports retailing,” said Heidi O ‘Neill, President of Nike global Nike Direct. “Opening up digital and offline retail services is critical to providing a seamless connection to the personalized consumer experience.”

Opened in Oct. 2018, Nike’s first global flagship store (Nike 001) aims to bring digital-driven sports retail innovation, design, and personalized services to the Chinese market. The launch of Nike 001 can be viewed as a cornerstone of Nike’s new retail and digital strategy in China.

“The ‘House of Innovation’ is set to propel our consumer-direct strategy as it provides the best that Nike brands have to offer through the integration of digital and physical retail,” said Angela Dong, vice-president of Nike Inc. and general manager of Nike China.

Digitalization, personalization, online-and-offline integration, the key elements of “new retail” can be found at each corner of Nike 001. The store is equipped with a mobile checkout so the customers do not have to wait in line. Through advanced or in-store booking, the Nike Expert Studio of the Nike 001 gives Nike+ members unrivaled access to try on exclusive and personalized products in one-on-one sports expert sessions.

Nike members also have access to their customized products and private services in the store through online reservations. Also, from Nike’s WeChat Mini-program, members can learn about Nike’s latest products and exclusive members’ benefits. Starting from Shanghai 001, Nike is leading the transformation of sports retail in China.

Nike’s Community in China

Nike’s brand community in China allows two-way interactions, drawing regular customers closer to the brand, as well as offering Nike an understanding of customer behaviors and needs. For Nike in China, their lifestyle community revolves around the Nike+ platform.

Nike offline community in China: increase members’ loyalty

Nike has garnered the power of community and learned more about what Chinese users want through holding a series of offline activities. The sports brand has organized annual ‘social’ sports events, such as the China High School Basketball League, as well as holding events regularly through many community clubs.

For example, the Nike “JUST DO IT SUNDAY!” running campaigns are held on a regular basis in different cities around the country, and use elements such as books, music, and charity, in order to make the events more interesting and meaningful.

Source: Nike, “Nike ‘JUST DO IT SUNDAY’ event”

Events like races provide consumers with a platform for immersion in the Nike experience.  By engaging socially online and offline, Nike and its runners are co-creating an experience together. This motivates Nike fans in China to actively connect with each other by taking part in Nike’s offline events, which further results in more sense of belongings and loyalty of the members to Nike.

Through the offline community events with their engaging themes, Nike China can establish emotional resonance with its members to build brand equity with Nike’s Chinese customer base.

Nike shuts down NIKE Run Club (NRC) app in China in 2022

While Nike has previously achieved success in fostering a vibrant community with its social-enabled apps and community events, Nike elected to deactivate its Run Club app in China: As of July 8, 2022, the app will “cease service and operation” for mainland China runners. NRC had more than 8 million users in China, who had collectively covered more than 600 million kilometers (nearly 373 million miles).

Source: Jing Daily. Nike Ends Running App in China Indicating Uphill Struggle

While Nike has not specified the reason for the discontinuation, we believe that Nike deactivated the app due to increasing compliance requirements from the Chinese government. In early 2022, Beijing implemented two new laws designed to protect users’ personal information and data privacy: The Personal Information Protection Law and Data Security Law.

In a statement to CNN Business, a Nike spokesperson said that Nike China would roll out a “localized” platform for Chinese runners in the future, and will continue to invest in updating its digital platforms in China. Nike is not abandoning its app ecosystem, but instead “…creating an ecosystem from China for China, specifically catered to the region’s unique consumer needs…”.

These new curbs on collecting and exporting personal data in China will make a collection of consumer data much more difficult in the Chinese market, forcing both domestic and foreign companies to revisit their data collection methodologies. While the Chinese market remains appealing, the end of the era of easy consumer data collection will make business decisions more difficult for Nike China.

Digital Marketing Strategy of Nike in China

As more consumers start adopting various digital technologies in their daily lives across the country, Nike has developed its new digital marketing strategies in order to continue engaging the Chinese audience.

Female-focused strategy

Data from the Nike+ Running community proves the growth in women’s running around the world, but especially in China where the female Nike+ runner market is growing faster pace than the male runner market. In recent years, Nike has emphasized the female consumer market by launching various community campaigns and providing tailored services targeting women.

Source: Nike, “Nike Women China ‘Better For It’ Brand Campaign”

Nike has activated the Nike Run Club (NRC) and Nike Training Club (NTC) to provide women runners of all levels with more comprehensive running programming and elite coaching. Nike also launched the Nike Women WeChat account, which provides a social platform for Nike to advertise products and events for female customers.

With the wide digital platform base (integrating NRC, NTC, Nike App, Nike, and Nike Women WeChat account), Nike China is able to realize its woman-based marketing strategy and build a more cohesive female fitness community.

Nike markets to women by empowering them

In addition, Nike launched its global “Better for It” campaign meant to spark women’s interest in sports. In China, the campaign was localized under the tagline “Just for better (只为更赞)”. For the Chinese campaign, Nike leveraged female influencers, such as actress Wang Luodan, to relate to consumers’ frustrations with everyday exercise and their love-hate relationship with working out. Influencers on WeChat and Weibo helped Nike connect with the target by sharing their training stories and inspiring women to be “Better for It.”

Nike also drives traffic on the NTC app, fostering a community and providing personalized workouts with professional trainers for women. The NTC Tour was released on March 8, 2015, and has since completed its first-ever Greater China tour, connecting with over 8,000 women across 4 cities. Two-time tennis Grand Slam winner Li Na joined over 1,000 young women for the inaugural Shanghai NTC Tour celebration and joined the #betterforit call to action with her own story.

Nike China opens women’s only store

In 2014, Nike opened its second-ever women’s-only store in Shanghai. In this store, specialized services, weekly programming, and tailored events are designed to inspire and enable the community of active women. Nike Women Shanghai also features a digital community area displaying updated calendars for the NRC, NTC classes, and store events. Profiles of Nike coaches and trainers, the latest product and campaign information, Nike content, and downloads will also be easily accessible.

From this, we can see that Nike China’s digital marketing strategy relies on integrating online communication and offline retail terminals around digital community platforms. The key goal of Nike China’s marketing strategy is creating an omnichannel experience that is constantly present for consumers, rapidly building brand equity.

Source: Nike, “Nike Women store in Shanghai”

Nike’s community on Chinese social media

Nike actively encourages customer engagement to build relationships with its online brand community. Fans post photos of their workouts on social media using Nike templates and hashtags, sharing goals, struggles and achievements with other community members. Additionally, community members spread information about Nike and its products and act as stealthy brand ambassadors.

Source: Weibo, “Posts with #NikeTraining hashtag on weibo”

On Weibo, one of the top social media platforms in China, Nike’s brand community members share their experiences under the hashtags #NikeTraining or #Nike+训练营. With the help of social media, brand stories created and shared by users can influence prospective customers by showing the loyalty of existing customers and the popularity of the brand.

In this case, Nike successfully promoted itself among billions of users on Chinese social media platforms, further leading to long-lasting relationships between the Chinese customers and the brand. 

The omnichannel experience is key to Nike’s success

“The digital economy will bring huge market opportunities for China and the other parts of the world, as technology has profoundly affected consumer behavior and raised the expectations of potential customers.” Iris Yen, vice-president of Nike Direct China said.

Nike China believes combining a variety of platforms is crucial in the Chinese market. Nike aggregates segmented users to create different communities and provide diverse online services and offline experiences. For brand marketing and promotion, Nike integrates retail terminals, digital platforms, and offline experience activities to create a comprehensive omnichannel experience.

With the omnichannel strategy in China, Nike is creating its brand ecosystem, which covers consumer insight, product innovation, customer experiences, and value creation.

Key takeaways from Nike’s China strategy

  • Nike built its foundation in the Chinese market by adopting the wholesale/retail model, which was necessary to reach customers in the pre-pandemic era.
  • Nike China sponsored athletes and sports events to gain brand exposure.
  • Nike anticipated the reach of e-commerce and digital sales channels, opting to cultivate its own digital sales channels for D2C sales.
  • Nike gains brand equity in China through engaging with consumers on online platforms, letting their customers act as brand ambassadors, and building a community
  • Nike actively supports content creation and information sharing between Nike fans about its brand.
  • The Nike Training Club and Run Club apps provided an omnichannel experience to consumers, cultivating a community and building brand loyalty
  • With new laws in China reducing access to consumer data, Nike and other brands must rethink how they interpret the data they can collect.  

Learn about the market strategy of the Chinese sportswear company, Li-ning