Nike should be your role model to innovate in China

Back in 2021, China accounted for more than 20% of Nike's worldwide sales. Fast-forward to today, and sales have steadily eroded below 15% without hope of recovering in the next few years.

The reasons for this seemingly irreversible decline might be numerous, but at the core, it's all about the Chinese consumer caring less and less about how famous brands are in the West. Facing this common threat to all foreign companies in China, Nike decided to more or less accept the decline of its main brand while, at the same time, pivoting to one of its satellite brands: the Jordan. The strategy? Make the Jordan brand 100% focused on China's tastes and never look back.

Nike is now leveraging the Jordan brand to spearhead its re-entry into the Chinese market with the launch of $1,000 high-top sneakers. This strategy is innovative and strategically sound for several reasons. By using the Jordan brand as a daughter brand, Nike insulates its main brand from potential market risks. This separation allows Nike to experiment with high-end products without directly impacting the broader Nike brand if the venture faces challenges.

This is a textbook example of what we talked about many times already:

How to close the gap with competitors when your venerable brand slows you down?

When discussing innovation (changing the market), it’s often overlooked that your brand will hold you back, sometimes drastically. A brand embodies your market’s tacit and explicit expectations about what you deliver. If in doubt about it, or even if you don’t know how much brand you have, strip away the

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The Jordan brand provides a more flexible platform to explore radical new approaches in a key regional market. Given the unique consumer behaviors and preferences in China, this strategy allows Nike to tailor its offerings more precisely to local tastes without the constraints of its primary brand identity.

As pointed out by Sarah Mensah, President of the Jordan Brand at Nike:

Our consumer really expects us to tell unique, distinct, often hyper-local oriented stories. They want authenticity, and they want to see themselves reflected, particularly the consumer here in China.

The subtext here is also about accepting the reality of a world where China is increasingly decoupling from the global economy.

The concept of "brand optionality" plays a crucial role here. By utilizing the Jordan brand, Nike can address some of the more difficult aspects of the innovator's dilemma, where established companies struggle to innovate without disrupting their existing business models. This approach provides Nike with the flexibility to explore new market opportunities and product innovations at a pace suited to the slow-evolving nature of the retail and fashion industries, ensuring that both the main and daughter brands can thrive. Or, in case their Chinese strategy goes bust, the damages are minimal and insulated from Nike's "crown jewels."

If you're working in China as a foreign business, whether you're with Starbucks or Airbus, this should now be your go-to strategy: insulation x hyper-regionalization.

The extra pay-off?

Forking your activities to the fast-moving Chinese market will allow you to move faster than your main brand and, quite soon, reintroduce innovation back into your main US and/or EU market.

This last part is what most of your competitors will completely overlook and miss out on... 🤫