The Journal. - Why Chinese Customers Are Running From Nike

Episode Date: May 20, 2026

Nike co-founder Phil Knight visited China nearly 50 years ago and dreamed of selling sneakers. He laid out an ambitious vision—“One billion people, two billion feet”— it was an ambitious strategy. By 2010, China was among Nike’s most lucrative markets, offering a blueprint for U.S. companies seeking to cash in on China’s rise. Today, Nike’s China business is bleeding. WSJ’s Jon Emont explores the cautionary tale of Nike’s rise and fall in China. Ryan Knutson hosts. Further Listening: - Can Nike Make Its Shoes Cool Again?. - The Missteps That Led Nike Off Course - The Chinese Coffee Giant Taking on Starbucks Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

50 years ago, when few American companies were thinking about China, Phil Knight, the founder of Nike, saw an opportunity. He had this vision, and the vision was called 1 billion people, 2 billion feet. So he understood very early on that this was a huge market. That's our colleague John Emont, who covers Asia. He says that Knight's vision turned out to be prophetic. How big of a success was China for Nike? An extraordinary success.

I mean, just this awesome cash cow. They had a very strong quarter, mainly driven by strength in China in emerging markets. Shares of Nike reached an all-time high on Friday. Nike continues to shine, beating bottom and top line, punctuated by 22% revenue growth this quarter. And the company became a model for Western businesses looking to break into China. But now, what's happening to Nike in China is looking more like a cautionary tale. Like many American brands, Nike is now struggling there, and it's dragging down the whole company. This quarter, Nike is projecting a 20% decline in revenue in the region.

The last four years have seen, you know, really significant deterioration in the brand. Sales have been dropping, you know, fairly precipitously. China is definitely its biggest challenge right now. But if it can't figure out China, there's a reasonable question. we'll be able to figure out everywhere else. Sounds like Nike's souls are worn down. There's maybe a hole in the toe. Yeah, the shoelaces are tied together.

Yeah. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Wednesday, May 20th. Coming up on the show, how Nike lost its footing in China. When I sell my business, I want the best tax and investment advice. I want to help my kids. And I want to give back to the community.

Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivatewealth.com. The Madamy Holmes Bike for Brain Health supporting Baycrest returns on May 31 for its fifth anniversary, with a new start and finish at the Aga Khan Museum.

Join thousands of cyclists as we take over the DVP and Gardner Expressway in support of dementia research and brain health. Riders of all abilities are welcome, and both regular bikes and e-bikes can participate. Bring your friends, family, or corporate team, and make an impact. Register today at bikeforbrainhealth.ca. Phil Knight's big idea, which he came up with as a student at Stanford, was that you could manufacture shoes cheaply in Asia

and sell them for a big profit in the U.S. In the 1970s, he started making Nike's in Japan and South Korea. And these places were getting expensive, and so he was looking for a new place to make them, and China seemed like it had potential, right? In 1978, China began opening to the West. But it was just emerging for the Cultural Revolution, and it was not a place on most American businessmen's to-do lists.

Knight wanted to get into China, at first just to make shoes. but the trick was figuring out how. It wasn't easy. It's not like today where you can just get on a plane to China and now it's extremely easy to do business in China. It simply wasn't done. And so he asked people he knew, influential people, how do you get into China?

How do you go about doing this? And he discusses in his autobiography the nervous drinking that went on before they went to China. They just really didn't know what they were getting. into. Nike ended up hiring a China expert. And in 1980, Knight and a team of executives made their first big visit to the country. He insisted that all of his executives, they get on the country and they travel by train. So they weren't just flying places. They got in, I think it was like a 16-hour train ride from... They didn't jog everywhere? I mean, that would have been almost as fast at that time.

I mean, now we think of China as this place of high-speed rails where, what, I think China to to Shanghai to Beijing is something like four hours. But then it would have been like 16 or 18 and there was no air conditioning, and it was the summer, and China gets hot, and so everyone was just wandering around kind of in their underwear. And he said that some of his executives decided to just stripped it, too. That's how hot it was. By the time of this sweaty business trip, Knight had developed a playbook. Nike would open factories in East Asian countries that were just starting to industrialize.

Eventually, as people got wealthier and could command higher wages, Nike would move on. And John says that eventually, the country that used to make a major. make the shoes, would instead start buying them. So Knight went to China with two goals. One was turning it into a global manufacturing hub for Nike. But then there was the other part, which is actually turning this place into a market. To pull that off, Nike set out to make the brand cool in China from the very beginning.

As it was setting up factories there in the 80s, it also struck deals to put its shoes on prominent Chinese athletes. Olympians, pole voters, raise. and they were wearing Nike's from well before the vast majority of China's population could have really afforded Nike's. And I think it definitely generated goodwill and it associated Nike with the tenacity of China's top athletes.

Nike also understood that it had something going for it. Foreign brands were cool, so the company leaned into that. One former Nike employee told John a story about how that helped. the company weather the Asian financial crisis of the late 1990s. My source of Nike had gotten orders to basically try to sell a lot of Nike's fast. And so we had to think hard, how do I, how can I just get these things out the door?

And he set up an event where you'd be able to buy discounted Nike's, but you had to have a foreign passport to go. And his thinking was, if I say you have to have a foreign passport to go, that's just going to make this seem like super exclusive and super foreign. Chinese people are going to really dig that. And he said it worked like wonders. I mean, that sort of just shows how, you know, in those years, how much cachet came from being foreign and, you know, the perception that if it's a foreign product, it's elite,

and if foreigners buy it, it's cool. I mean, it's also interesting that shows sort of two things. One, this executive understood how to create a buzz in a way that people would like. You know, I mean, that sounds like in a different context, people might be offended by that. I mean, you try that today. that might not work very well. No, I don't think so. But then, too, just also to your point

that, like, American brands at this time were extremely popular in China. Totally. At that point, foreign brands were seen to be a very high quality, and just everything you'd aspire to. As Nike's success in China was taking off, its strategy there also created controversy.

Filmmaker Michael Moore made Nike, the subject of a scathing documentary called The Big One, where he challenged Knight to open factories and struggling American towns like Flint, Michigan, rather than continuing to invest in Asia. I want the people of Flint who would like to work, who would like to have a job at Nike, to come here and stand in front of City Hall.

I'll have my film crew here, dress warm, and show him that the people of Flint, if they had an opportunity to work, would certainly work. In the documentary, Moore talked to Knight, who said he didn't think Americans, really wanted to work in shoe factories. Nike also faced allegations of poor working conditions in its overseas factories, including the use of child labor.

Here's Knight responding to those allegations and announcing reforms in 1998. We have raised the minimum age of all footwear factories to 18. And all apparel and equipment factories, the minimum age is 16, the same as it is in the United States. And I really do have to add this, that there has never been a time in Nike's history where child labor has been a problem. Still, none of this seemed to stop the company's momentum in China.

In 2008, Beijing hosted the Olympics for the first time. It was a huge moment for China, and Nike sponsored many of the country's Olympic teams. Around that time, the country transitioned from being a Nike manufacturing base to being a big buyer of its sneakers. From about 2008 to 2015 period, that's when two things started happening. One, China was just growing quite fast for a lot of that period.

So China was becoming just a major market for Nike in terms of selling its shoes. And also, at the same time, Nike was getting antsy about wage growth in China. And so it was actually shifting its manufacturing to Vietnam. So it was around that period. that we started seeing a lot of the China market for shoes just to explode. So Phil Knight carries out this strategy. He steps down as chairman of the board in 2016. And so at the end of his tenure, how big and how important had China become at that point?

I would put the peak at around, like, just pre-COVID-ish, early COVID. You know, it was huge. So in 2019, for example, the company announced 20 consecutive quarters of double. double-digit growth in China. Wow, that's enormous. Double-digit growth. I mean, I imagine that, right? How often do you get that in business?

So it's not only that China is just so huge in terms of what is bringing in for the company, but it's also just growing so fast. So if you think about yourself as an investor, you're thinking, like, wow, this is, like, this is incredible. But Nike was about to hit a great wall. That's next. Great news. The federal EV rebate is back.

Eligible customers get up to $5,000 with the federal EVAP rebate on select 2027-bolt and 26 Equinox EV models. Visit your local Chevrolet dealer today for more details. The first hint of trouble for Nike and China started on social media. Around 2021, there was a lot of global attention on Xinjiang, a region in Western China where a lot of companies source cotton and where the U.S. accused China of human rights abuses. Companies like Nike announced that they were not going to source from Xinjiang. And around 2021, a Chinese nationalist sort of caught in on to what these Western brands had been saying

and took great offense to it. Chinese customers were furious about Nike's boycott and posted videos online burning Nike sneakers. They took a big hit in sales, and they just had to put their head down for a while. It was almost like Nike got, Nike was trying to make a statement to the American market that they were not going to be perceived as supporting, you know, these allegations of human rights abuses. And then they got almost canceled in China for making a statement. Yeah, a lot of American brands did. That's right.

So it just showed how it was becoming much harder to both succeed in the U.S. and the West and succeed in China at the same time. Meanwhile, homegrown Chinese athletic shoe companies were starting, to eat into Nike's business. One of Nike's main Chinese rivals is a company called ANTA. It was started in 1991 and was originally a factory

for Western companies before striking out on its own. ANTA was making decent quality athletic shoes and was able to advertise to the Chinese market that were a Chinese shoe brand. And they were able to sell shoes

rather inexpensively, right? I mean, Nike did have large markups, right? That's why China brought in so much profit. Price was one way Anta started beating Nike, but its quality was also making huge leaps. China's got really good material scientists, right? I mean, it's just this global manufacturing hub at this point. They figured out how to make, you know, really good foam,

and, you know, they had their own recipe that they developed with Chinese scientists they worked with, and pretty soon they were making, you know, quite good running shoes. And then they also signed NBA players, like Clay Thompson's. Yeah. And then Kyrie Irving. Yeah. Yeah, that's right. And Lee Ning has the way of Wade shoes because of, you know, from Dwayne Wade.

And so they were taking Nike on, right? They were going right into Nike's backyard, essentially. And they were really gutting for Nike's spot. And pretty openly, the CEO of, I meant to said, you know, our goal is not to be. the Nike of China. Our goal is to be the ANTA of the world. An ANTA was quicker to jump on trends in Chinese shopping culture.

So China's retail market, especially in the past few years, is just kind of hyper-competitive. So the Chinese shopper is very online. They're really looking for deals. Lots of sales are happening not just online, but on social media, via live streams.

It's a bit like the shopping network stuff that we sort of grew up with. that somebody holding up a shoe often talking about how the shoes really good, how you could wear it, what it's good for, the price is right, you know, stuff like that. Bro, I'm over here on Chinese TikTok watching the Chinese live streams. Hello, everyone. Today is March 19, the last day of our brand day sales. If you miss today, you'll see yesterday, this is your chance.

It was hard for Nike executives, so how much they should embrace Chinese social media trends? You know, do you jump in on the short form video app, Doyen? or do you have to be a bit cautious about it? And so I think there was a lot of hesitation about how to approach some of these new sales platforms and new ways of selling. But ANTA certainly didn't have that. So ANTA, it brags about how they have AI avatars

that are doing this live streaming and live selling, right? Their future forward. Nike, on the other hand, has been criticized for relying too much on its past. For instance, younger Chinese customers wanted variety and innovation. But Nike was still leaning on its classics, like Air Jordans. You know, younger Chinese, I mean, they don't know much about Michael Jordan.

So, like, for example, I spoke to one person in, you know, an employee in Nike, a former employee in Nike in China. He remembers a cousin coming up to him saying, wait, Michael Jordan, he's dead, right? And it's like, no, no, no, the legend still lives is what the guy I told him. But so Nike is still rolling out, you know, sort of the old hits. but younger people in China aren't as interested. All these factors have created real pain for Nike's business. After years of double-digit revenue growth in China,

the company is now seeing double-digit declines. Nike said it's working hard to turn its business in China around by writing off unsold inventory and revamping its stores. Executive said in March that sales of running products were growing. As we've covered a lot in the show, Nike is also struggling everywhere, including in the U.S. So how much do you think this is a product of Nike just slipping across the board versus Nike struggling specifically in China? Yeah, it's a really great question. And I suspect folks in Nike are trying to get to the bottom of this one, too.

This is part and parcel with Nike's broader global struggles. There's this feeling among consumers that they have, uh, drop the ball in innovation, that their products are not as good as their competitors, that they're just not leading to pack anymore. But then there are these major China-specific issues. They didn't have too much competition in China for so long. And so the fact that they were sort of caught sleeping on the innovation front is hitting them even harder in China, where there are these domestic brands who have been innovating,

who are cheaper, and who are very popular. Nike isn't the only American brands struggling in China right now. A lot of U.S. companies are having a hard time there these days. American brands that once dominated are facing new competition from local ones. And John says it shows that China isn't quite the same opportunity it was when Phil Knight first showed up there on that sweaty train ride. American companies, they have to be prepared to move much faster, embrace digital tactics that maybe don't feel.

feel right or don't feel necessary elsewhere to not think that just because you are huge and seemingly dominant in this market, that that's necessarily going to be the case two years right now. How difficult will it be for Nike to turn things around in China? Nike's peak in China was so high, and the company was so successful and so dominant. It's really hard to imagine ever ascending to those Olympian heights again. They're working hard on recovering, and certainly not. for me to say that they won't have some success, but it's going to be really tough to get back to where they were.

And that's in part just because of they were so smart and so early getting into China. But it's a much more competitive environment right now, and there's not a single brand, I think, could really, really tame that same level of dominance for the market that Mickey had. Before we go, we have a question for you. Are you about to graduate or did you just graduate?

If so, how are you feeling about AI in your... your career. Hopeful, annoyed, excited, anxious? Why? We want to hear from you, college grads. Send us a voice memo to The Journal at WSJ.com, and we might include it in an upcoming episode. That's all for today, Wednesday, May 20th. The journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Intipacheco. Thanks for listening. See you tomorrow.