Nike Hopes China Market Brings A Long Run In Sales

BEAVERTON, Ore. - China's emerging middle class is snapping up Nike shoes at $100 per pair, luring the Oregon athletic clothing and shoe maker to the heart of Asia to pump up flagging sales.

"It could absolutely explode," said Daniel Loeb, general manager of Nike International Ltd. China.

The market is so dynamic that managers at Nike's Asia headquarters in Hong Kong worry that Chinese demand will overwhelm the company's supply and distribution system.

Nike's revenues in the Asia-Pacific region have tripled to $178 million in just two years. Although the region now accounts for less than 5 percent of the company's total sales, it is expected to be one of Nike's fastest-growing divisions.

"It's a gold rush right now, but the methodical, long-term approach is what's best. We want to be in sync with consumers," said Mike Wilskey, Nike's Asia-Pacific marketing director.

Nick Moakes, a Hong Kong stock analyst, expects China to become an even hotter market within five to 10 years. Nike currently leads Reebok and other U.S. athletic shoe companies in China, Moakes said.

Just a few years ago, China was viewed as a source of cheap labor for making shoes, not a country with a growing number of customers who could afford Nike's pricey products. More than 20 percent of its shoes are now made in China.

"This part of the world has now become a market for a lot of guys like us, where 20 years ago nobody considered it a market," said Neal Lauridsen, Nike's Asia-Pacific vice president.

Lauridsen said Phil Knight, Nike's chairman, gave his instructions for China in no uncertain terms: "There are 2.4 billion feet in China. Go get 'em."

But there are problems ahead. Nike has to cope with cheap knockoffs that the company expects will become even more common. And all the shoes sold in China have to be made there because of high duties and tariffs.

Loeb said Nike's future will be helped by the growth of health clubs and tennis and basketball courts in China.