Cutting the ribbon during the opening of Nike’s Jordan-specific World of Flight store in Beijing in

March. Source: Bloomberg

Industries | Consumer

Nike Bets Its China Comeback on Michael

Jordan’s New $1,000 High-Tops
The brand can play to local culture and luxury consumers in a way the
parent company can’t.
By Bloomberg News
June 25, 2024 at 12:01 PM GMT+8

Cashmere ponchos, lambskin bras and $1,000 Air Jordans. A 1,000-square

meter retail homage to Michael Jordan in Beijing’s trendiest neighborhood.
Affiliations with China’s domestic basketball elite and limited-edition Jordan
collabs with local street artists.

These are the highlights of a new push for the Jordan brand in China, one tha
Nike Inc. hopes will lay the foundation of a permanent comeback there.
Beyond the significant economic slowdown that’s sapped sales for all the big
brands, Nike’s been buffeted by rising consumer nationalism — a trend fueled
by legitimately hot products from local brands like Li Ning Co. and Anta Spor
Products Ltd.
At its peak in 2021, the Greater China region accounted for almost one-fifth of
Nike’s total global sales. It now accounts for less than 15%, compounding a
difficult year for the company. Layoffs have hit headquarters and investors ar
concerned about weakening demand for Nike sneakers and sportswear. Share
are down 11% so far this year and management has warned that sales will fall
over the next six months.

As a testament to how badly Nike needs to reinvigorate its business in China,

and to its conviction that Jordan is the way to do it, the company chose Beijin
for its fourth global outpost of the Jordan-specific World of Flight, well ahead
of the US debut planned for Philadelphia. The night before the store opened t
the public in March, local basketball stars slipped in for a VIP reception.
Chinese rapper Asen performed on an outdoor stage for a raucous crowd.

The limited-edition Air Jordan 1 High '85 Wings and Air Jordan 1 Low '85 Wings, released
exclusively in China, in March 2024. Source: Nike Inc.

Sarah Mensah, president of the Jordan Brand, flew from Nike’s Oregon
headquarters for the event. Sitting on one of the leather couches in the store’
upstairs lounge, Jordan artwork and memorabilia on the walls around her, sh
pointed out the workshop area, where shoppers can personalize products wi
embossings, engravings and patches.

“Our consumer really expects us to tell unique, distinct, often hyper-local

oriented stories,” she said. “They want authenticity, and they want to see
themselves reflected, particularly the consumer here in China.”

Performers at the pre-opening event. Source: Bloomberg

 Fans react as Chinese rapper Asen arrives for the pre-opening event. Source: Bloomberg

To that end, the World of Flight in Beijing will serve as a sort of laboratory, a
new opportunity for company executives to observe customer behavior and
gather data, to find clues to success that parent Nike may have missed.

“It's an important strategy for Nike to lean more on its trendy luxury brand
Jordan to embrace young consumers and gain higher growth,” said Blair
Zhang, a Shanghai-based senior luxury and fashion analyst with Mintel, a
market research firm. “Its challenge lies in how to lure the young generation
and the high-income shoppers to keep spending on the brand.”

Jordan’s China campaigns now feature domestic stars like Guo Ailun, point
guard for the Liaoning Flying Leopards, winners of the last three Chinese
Basketball Association titles. The brand is also a title sponsor of Next Stop
Dongdan this summer, a streetball tournament played on a Beijing court that’
China’s version of New York’s Rucker Park. For the store in Beijing, the brand
will work with local street artists to create limited-edition shirts and hoodies;
Jordan is set to release five new limited edition sneakers next spring.

Two-thirds of consumers surveyed by Mintel say the availability of limited

editions make them more likely to go shopping. That’s especially true in high-
income families.

Local flavor is pitched at consumers eager to support homegrown brands —

and less tolerant of Western ones. Nike enraged Chinese shoppers in 2021 wit
its announcement that it would no longer use cotton from Xinjiang because o
persistent allegations of labor abuses against the area’s Uyghur population.
The Chinese government has consistently denied those charges, and mainlan
consumers launched a de facto boycott. (Adidas AG took the same position,
and its China sales also suffered.) Within a year, Nike fell to third place, behin
Chinese labels Li Ning and Anta.

Sneaker Sales in China

Jordan's growth has outpaced Nike and most other brands
Sales growth from 2019-2023
Adidas -35.8%
Anta 37.6
Li Ning 42.4
Nike 43.0
Qiaodan 47.5
Jordan 197.6
Fila 515.8

Source: Hangzhou Zhiyi Technology

Note: Sneaker sales on e-commerce platform Tmall

Nike is back on top now, but the outrage dealt a blow to the company’s marke
share as some Chinese consumers switched to the local brands and never
looked back. No longer second-rate copycats, Chinese products are now both
fashionable enough for patriotic sneakerheads and good enough for the
world’s best players. Several NBA players wear Li-Nings, and this season’s
playoffs were particularly good to Anta, the shoe of choice for Kyrie Irving
since Nike cut ties with the Dallas Mavericks star in 2022.
Shoppers can personalize products with embossings, engravings and patches. Source:
Bloomberg

The World of Flight in Beijing will serve as a sort of laboratory, a new opportunity for company
executives to observe customer behavior and gather data, to find clues to success that parent
Nike may have missed. Source: Bloomberg
The Jordan brand, though, has proven more resilient than its parent. It has
about one-third of the market share that Nike has in China, a greater
proportion than in many other markets, according to data from market
research firm Zhiyi Tech, which monitors sales data on the country's major e-
commerce platform Tmall. And while its share has ticked down slightly since
2021, it never suffered Nike’s precipitous drop.

“In China, Jordan has a group of loyal consumers who have experienced
Michael Jordan's era — they are mostly 40 years old or above, with strong
spending power,” said Ari Chen, general manager of Jordan in Greater China.
“The consumers here are very sophisticated.”

China got its first introduction to Michael Jordan at the 1984 Olympics. Fresh
off the NBA draft, the 6-foot-6 guard from the University of North Carolina led
the US to 48-point win over Team China, kicking off a gold-medal run that
captivated a global audience. Three months later, Jordan signed an
unprecedented endorsement deal with Nike that awarded the rookie a
percentage of sales, cementing his status as a player off the court as well.

In the 15 years following, no one was more responsible than Jordan for
basketball’s global rise. CCTV began airing playoff games during his dynastic
run with the Chicago Bulls, which Chinese fans called the Red Oxen. In 1997,
Nike started selling Air Jordans in China. A year later, a poll from Beijing
Meilande Information Co. ranked Jordan as the second-most famous America
behind Thomas Edison, who’d been dead for almost 70 years.
Michael Jordan during a visit in China in May 2004 Photographer: AFP/Getty Images

So maybe it was only a matter of time before a local Chinese shoe company
renamed itself Qiaodan, a transliterated version of Jordan. The company had
already sold Jordan-esque shoes and No. 23 jerseys; its logo featured a
silhouetted basketball player in motion. In a market already rife with
counterfeits and knock-offs, Qiaodan’s sales soared.

Even after Jordan stepped away from basketball in the early 2000s, his brand
had staying power, and his continued popularity buoyed the Chinese copycat
too. By 2012, when Jordan filed a trademark infringement lawsuit in Shanghai
Qiaodan was pondering a domestic IPO.

The case spent years in the Chinese legal system before the court ruled in
Jordan’s favor . Qiaodan had to apologize and clarify that its brand is
unrelated to Jordan’s, but it was allowed to stay in business, keep its name an
use its older trademarks. And in those intervening years, Qiaodan, like other
domestic shoe companies, found its own style and fans.
Qiaodan sneakers worn by Keldon Johnson. Photographer: Rocky Widner/NBAE/Getty Images

In 2022 it signed a deal with an NBA player, San Antonio Spurs forward Keldo
Johnson, who now wears the brand on the court. The shoes have a patch on
the side bearing Johnson’s full name, nothing a seasoned sneakerhead would
mistake for the Jordan brand’s Jumpman logo, but whether anyone is confuse
by the name or affiliation anymore is almost beside the point. Today Jordan
has about 5% market share in China, according to Zhiyi Tech data. Qiaodan si
just behind it, with 4.3%.

Even as Nike embarks on a three-year plan to trim as much as $2 billion in

global costs, including job cuts that will slash 2% of the company’s workforce,
Jordan is getting more resources. Chief Executive Officer John Donahoe said in
an internal memo in February that the Jordan brand will play a key role in the
revival effort. Nike is divesting in “less critical work,” he said, to make room fo
areas that matter most.

“The Jordan brand is one of Nike Inc.’s growth drivers moving forward,” said
Mensah. “We’re mindful of the importance of our role.”
 Sarah Mensah Source: Bloomberg

Jordan brand apparel Source: Bloomberg

Apparel now accounts for about 15% of Jordan’s annual sales worldwide, or
about $1 billion. Products include knit dresses and fleece pants along with
sports bras and workout shorts. There are even red No. 23 dresses for toddler
Mensah says it will be crucial to grow the apparel business and get new
products to store shelves faster.

Management is also looking at sports beyond basketball. Jordan, an avid golfe

is working closely with executives on building out that part of the business,
which sells spikes, clothes, gloves and bags.

As for the famous sneakers, 21-year-old Orlando Magic forward Paolo Bancher
debuted the 39th iteration of Air Jordans during the first round of the NBA
playoffs. His white-on-white version will be available in July for $200 online
and at World of Flight outposts — in Milan, Tokyo, Seoul and now Beijing —
among other outlets.

Jordan sneakers worn by Paolo Banchero. Photographer: David Liam Kyle/NBAE

None of Nike’s efforts in China will succeed, though, if consumers there don’t
open their wallets. A housing crisis is dragging on the economy, and spending
is anemic. That’s especially true at the high end. Bain & Co. estimates that
luxury sales within the country will slow to mid-single-digit growth this year,
down from 12% in 2023. For mass-luxury labels like Marc Jacobs and Ralph
Lauren, returns and order cancellations spiked significantly during the first
quarter of this year, according to data from Tmall.

“I don’t think any brand’s continued growth in China is guaranteed,

particularly with softening consumer spending,” said Mark Tanner, managing
director at marketing agency China Skinny. “But the brands and categories th
are faring the best are those who are connecting emotionally,” he added. “And
Jordan has done that well with both product and its subcultural positioning.”

Mensah says the Jordan brand is one of Nike Inc.’s growth drivers moving forward. Source:
Bloomberg

The day World of Flight opened in Beijing, dozens of shoppers hovered outsid
long before the doors unlocked. Among this group of die-hards, the new
luxury lineup was the big draw.

Cocoa Li, 23, took a three-hour flight from Shenzhen for the opening. He wea
Jordans and resells them online on social media sites like Xiaohongshu and
Taobao. He budgeted about 50,000 yuan ($6,900) for the occasion, planning
to simultaneously nab inventory to resell and splurge for himself. “It’s nothin
to wait a few hours,” he said. “Everything will be worth it if you find somethin
really cool.”
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