Nike Reinforces Future as a DTC Dominant Brand
In the last week, analyst reports circulated suggesting that Nike reportedly plans to cut ties with at least six of its US wholesale partners, including DSW, Urban Outfitters, Shoe Show, Dunham’s Sports, Olympia Sports and Big Five Sporting Goods. The move comes as an apparent bid to prioritize their growing direct-to-consumer (DTC) channels and exit accounts considered out of step with their brand image. Nike’s direct to consumer business made up roughly a third of their revenues in 2019 and has experienced pandemic-fueled growth. The company’s recent decision to remove the Nike brand from several large US wholesale accounts comes on the heels of pulling back from Amazon and reinforces their strategic focus on growth in owned retail.
- Expanding Focus on Digital and First Party Data Analytics: During Nike’s Q3 2020 earnings call that took place on March 18th, executives reported the company’s digital business has grown over 70% year-to-date. In a year characterized by significant ecommerce gains, Nike’s digital growth is not necessarily surprising. However, the company’s accelerated digital growth reflects investments aimed at improving the company’s proprietary data, tools, and analytics prowess. Over the last few years, the company has made four data and technology acquisitions, suggesting a strategic focus on growing Nike’s first-party datasets and advancing their data science capabilities to complement digital commerce growth.
- Continued Innovation in Owned Omni Channels: Alongside growth in digital, Nike has continued to innovate and grow their increasingly personalized omnichannel store footprint. The company has introduced and continued to invest in modern store formats like their hyperlocal and digitally connected Nike Live stores they’ve been testing for a few years, their experiential House of Innovation flagship concept, and their most recent community-driven Nike Unite stores. Announcements suggest the brand will roll out roughly 150-200 stores in the image of Nike Live within three years across North America, Europe, the Middle East and Africa. Nike is also testing a community-first and digitally enabled format dubbed Nike Rise, and its first Rise store opened to the public in July of 2020 in Guangzhou, China. At Nike Rise stores, visitors can use the Nike app to navigate the store and plug into workshops, events, live sports games and workouts.
- Preferred Wholesale Accounts Still Play Role in Nike’s Business (for now): The mandate is clear that Nike’s wholesale partners need to offer a differentiated and innovative experience that is unique and brand-building for Nike – or risk losing the business. Preferred wholesale partners stand to gain from Nike’s recent exits from perceived non-differentiated retailers. But for how long? Nike has reported that it plans to become a 50% digital business by 2025, and the company is on track to achieve that goal (perhaps well in advance of the 2025 timeframe). Combine that with favorable margins for directly sold merchandise, and it stands to reason that Nike will become an increasingly direct to consumer retailer.
Looking out to a post-pandemic future, Nike is poised to continue evolving into an elevated, digitally nimble, and increasingly consumer-centric brand – with potential gains in personalization, loyalty and lifetime value as the company collects more robust customer data and analytics to tailor products and experiences to meet the needs of their consumers.
At McMillanDoolittle, our retail experts help brands and retailers consider and prioritize initiatives across all channels and opportunities to drive business growth. We help brands build and evolve their distribution strategy into new markets, new channels, and with new partners. For more information on our services at McMillanDoolittle, simply contact us.
And, if you enjoyed this story on Nike’s move away from legacy wholesale partnerships, check out our other blogs, where we discuss Nike’s success in Operationalizing Customer Data and comment on Nike’s Sustainability-focused Re-Creation Pop-up Store.