Nike's Strategic Shift and China Dilemma: A DTC Reversal and Path to Recovery

Nike's recent strategic pivot from a direct-to-consumer (DTC) model to a wholesale-focused approach has sparked both cautious optimism and skepticism. The company's first-quarter 2025 results, which showed a 5% currency-neutral growth in wholesale revenue and a 14% reduction in inventory, suggest early progress in its "Win Now" strategy according to Reuters. However, the broader picture remains complex, particularly in China, where Nike's market share has stagnated amid fierce competition from domestic rivals like Anta and Li-Ning. This analysis evaluates whether Nike's wholesale-centric approach, combined with inventory discipline, can reverse its multiyear sales decline and restore investor confidence in a cost-pressured global environment.

The Strategic Shift: From DTC to Wholesale Discipline

Nike's retreat from its DTC-heavy model marks a significant reversal. For years, the company prioritized digital channels and owned retail locations, a strategy that initially drove margin expansion but eventually led to overstocking and declining profitability as research shows. By 2024, Nike's DTC sales had contracted by 8%, while wholesale revenue grew 5% in the same period. This shift reflects a recognition that wholesale partners can better manage regional demand fluctuations and reduce inventory risk.

The company's inventory reduction-returning to pre-pandemic levels-has been a critical early win. As stated by Reuters, Nike's 14% year-over-year inventory decline demonstrates improved discipline, a necessary step to avoid the markdowns and margin erosion that plagued its earlier strategies. However, the long-term success of this approach hinges on whether wholesale partners can sustain demand without diluting Nike's brand premium.

China's Persistent Challenges: A Market in Transition

Nike's struggles in China underscore the limitations of its current strategy. The Greater China region, which accounts for 15% of Nike's global sales, has seen five consecutive quarters of declining revenue according to Reuters. Domestic brands like Anta and Li-Ning have capitalized on the "Guochao" movement-a surge in nationalism and preference for local innovation-to erode Nike's market share. Anta's dominance in China's sportswear market (23% share in 2024) contrasts sharply with Nike's 20.7% share, highlighting the scale of the challenge.

The root of Nike's difficulties lies in shifting consumer preferences and economic headwinds. Chinese consumers increasingly favor brands that align with cultural identity and offer competitive pricing. Anta's multi-brand portfolio, including premium labels like FILA, allows it to cater to diverse segments, while Li-Ning's focus on running and cross-training has strengthened its relevance in core sports categories according to Kr-Asia. In contrast, Nike's recent product innovations have failed to resonate, contributing to a 86% drop in its China net profit in Q4 2024 according to Daxue Consulting.

Competitor Strategies: Lessons from Anta and Li-Ning

Anta and Li-Ning's wholesale strategies offer instructive contrasts. Anta's "Single-focus multi-brand omni-channel" model emphasizes digital transformation and localized marketing, such as tea-themed stores and Gen Z-targeted campaigns according to Daxue Consulting. This approach has driven a 36.2% e-commerce revenue share for Anta in 2025, despite a slight gross margin decline to 63.4% according to ITiger. Meanwhile, Li-Ning's "Single Brand, Multi-Categories" strategy has prioritized operational efficiency, with a 61-day inventory turnover compared to Nike's less transparent metrics according to ResearchGate.

Both companies have also adapted to cost pressures by optimizing retail footprints. Anta reduced its store count by 3.1% in 2025, closing underperforming outlets, while Li-Ning expanded its 7,534 branded retail points to enhance customer engagement according to Matrix BCG. These strategies highlight the importance of balancing inventory discipline with channel flexibility-a lesson Nike must heed as it navigates its own restructuring.

Investor Confidence: A Fragile Rebound

Investor sentiment toward Nike remains mixed. While the company's brand strength score of 94.7/100 per Brand Finance underscores its enduring global appeal, financial fundamentals are weaker. Nike's 2025 Future Readiness Indicator score of 36.1 lags behind Anta's 83.1, reflecting concerns about its ability to adapt to digital and regional market shifts according to IMD. In contrast, Anta's share price dipped after its 2025 earnings report, signaling investor unease over margin pressures and slowing growth according to EMarketer.

The key to restoring confidence lies in Nike's ability to execute its "Win Now" strategy effectively. This includes accelerating product innovation, deepening partnerships with Chinese retailers, and leveraging its heritage in core sports to differentiate from domestic competitors. However, the path to recovery is fraught with risks, including the potential for further margin compression if wholesale discounts intensify.

Conclusion: A Delicate Balance

Nike's wholesale pivot and inventory discipline represent a necessary correction, but their long-term viability depends on execution. In China, where the company's challenges are most acute, success will require more than operational fixes-it demands a reconnection with local consumers and a reinvigoration of its brand's relevance. While Anta and Li-Ning demonstrate that a wholesale-focused, digitally integrated model can thrive, Nike's legacy as a global sports leader offers both an advantage and a burden. The coming quarters will test whether this strategic reset can transform into sustainable growth or merely delay an inevitable reckoning.