Adidas, Nike Web Sales Plunge in China Amid Xinjiang Boycott

(Bloomberg) -- Online sales of Adidas AG and Nike Inc. plunged in China after a boycott of international brands that have taken a stand against the treatment of Muslim Uyghurs in the Xinjiang region, reflecting the blow to businesses that cross Beijing’s political lines.

Sales in the Adidas store on Alibaba Group Holding Ltd​​​​.’s Tmall -- China’s largest business-to-consumer e-commerce platform -- slumped by 78% in April from a year ago, while Nike’s dropped by 59%, according to analysis done by Morningstar Inc. Fast Retailing Co.’s clothing brand Uniqlo, also targeted by the boycott, dropped by more than 20%.

Mainland consumers instead turned to Chinese sportswear competitors, including Anta Sports Products Ltd. and Li Ning Co. Ltd., which have supported using materials from the contentious far west region.

China Lining, Li Ning’s premium fashion arm, was by far the biggest beneficiary of the nationalist turn, with its sales on Tmall jumping more than 800% in April, Morningstar said.

“Tmall is the single largest sales channel for the many brands in mainland China now and a leading indicator to what is selling well,” said Catherine Lim and Eric Zhu, consumer analysts at Bloomberg Intelligence. “Based on our checks with sportswear companies as well as their distributors, contribution from the platform alone accounts for more than 10% of revenue in the country.”

Political Tightrope

The boycott’s impact underscores the dilemma facing foreign brands for which China is an increasingly important market, yet are held to account on human rights issues by consumers in their home countries.

Chinese consumers have become a growth driver for global brands as the country roars ahead economically after stamping out Covid-19. But patriotism among mainland shoppers -- benefiting domestic brands -- is also at an all-time high given China’s thorny relationship with foreign nations over everything from trade to the pandemic.

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Revenue from Greater China amounted to almost one-fifth of Beaverton, Oregon-headquartered Nike’s sales in its 2020 fiscal year ended May 31, and nearly a quarter of net sales for Adidas. Herzogenaurach, Germany-based Adidas is scheduled to report its first-quarter earnings on Friday. While there’s no information on what share of total sales is transacted through Tmall, the platform is a major presence in China retail.

Still, there are signs that local brands aren’t yet considered substitutes for the global giants. Tmall sales of sports apparel and footwear declined 11% in April compared with a year ago -- a reverse from the more than 30% growth in the last quarter of 2020 -- according to Morningstar. This suggests that some consumers are waiting out the boycott rather than bypassing the brands entirely.

Chinese consumers’ current shopping behavior was “most likely temporary,” said Ivan Su, an equity analyst at Morningstar in Hong Kong.

“As there aren’t renewed attacks from state media, consumer boycotts against Nike and Adidas should most likely fade over the next months,” he wrote.

​The dilemma over Xinjiang deepened in March for international companies operating in China, when the Communist Youth League and People’s Liberation Army slammed Hennes & Mauritz AB over an undated company statement about accusations of forced labor in the region. Calls to boycott the retailer in the mainland spread to include other foreign brands that have expressed concerns over labor there, including Nike, which has said it won’t source products from Xinjiang.

Brand ambassadors in China cut ties with companies including Nike, Adidas and Uniqlo, and H&M had some of its stores forcibly closed by landlords.

©2021 Bloomberg L.P.