Nike Inc. started cleaning up its stats sheet last week and for the first time, the Wholesale Nike Shoes empire declined to report “future orders,” a critical way of measuring wholesale demand from the galaxy of retailers who sell the famous kicks. Nike, No. 9 within the B2B E-Commerce 300, says the metric doesn’t matter much anymore, because now it’s focused on working directly with consumers and removing the middleman.
Nike sells to retailers through a combination of EDI and e-commerce. While Nike reported its slowest quarterly sales growth since 2010, its performance as being a retailer-instead of a wholesaler-had been a relative highlight. Sales on Nike’s own online store were up 19% inside the recent quarter, while its retail locations notched a 5% gain in same-store sales. 28% of all sales are direct this season, compared with 4% five years ago. CEO Mark Parker said the business is obsessed today with making shopping more personal. “Retailers who don’t embrace distinction is going to be put aside,” he warned on the conference call Tuesday.
Still, that wasn’t enough to thrill investors-a minimum of, not yet. The overlooked attractiveness of bricks-and-mortar retail is the way well retail chains lend themselves as to what economists call price segmentation. Shoemakers including Nike can certainly target customers by sending the best shoes off to the right sort of store (think: first-class vs. coach, iPhone X vs. iPhone 8, Banana Republic vs. Old Navy). In Nike’s case, it ships expensive, limited edition sneakers to high-end boutiques, routes its stock Jordans to chains like Foot Locker Retail Inc., and dumps its low-end product and off-key colorways such places as DSW Inc.
If done properly, all this socioeconomic slotting moves as much merchandise as is possible with minimal fuss, while not tarnishing the bigger brand. Making no mistake: Nike can it correctly. On its face, the Swoosh is a design shop supercharged by the type of storytelling its TV commercials, billboards and magazine ads are famous for. But Nike’s real genius isn’t marketing, it’s merchandising: knowing exactly what to ship where. For every Nike Cheap Shoes in Beaverton, Ore., there’s a mid-level manager using a giant spreadsheet, ensuring “Momofuku” Dunks aren’t too easy to find, ordering up a unique design for China, distributing its best-sellers to any or all the best Di.ck’s Sporting Goods Inc. outlets and dumping plenty of Chuck Taylors at outlet malls.
Nike has become upsetting their own well-oiled applecart. In giving traditional retail the stiff arm, which Nike made official in June, the Oregon empire is tearing up that playbook and working to make a stop run around the fundamental economics of price segmentation. The strategy-a bold move, because of the historical manufacturer-to-retail model being discarded-requires an abundance of swagger. But Nike’s numbers show that the bet seems to be working, primarily because Nike has become sharpening its digital game.
Sought-after sneakers now ship out via Nike’s own ecosystem of apps, including SNKRS, which it launched early last year. The center of its lineup, meanwhile, sells on Nike.com and in its very own big box stores. As for the cheaper, less-popular kicks, they quietly trickle to the company’s “factory” stores (read: outlet) and onto Amazon.com. Nike even has a studio in Ny that creates customized shoes on-site in approximately an hour.
In short, the business is deemphasizing its ready-made network of retailers to generate an even more precise targeting mechanism. Tuesday Parker said the final goal is to get in front of the consumer and present “the most personal, digitally connected experiences” in the business. “While switching your approach is rarely easy, Nike has proven before that whenever perform, it’s always tmrzsh another phase of growth for your company,” he explained.
Theoretically, Nike can know any given customer better-and their willingness to pay for-by using its very own venues and platforms, particularly on its digital properties. The task is going to be building the mechanism to sort each of the data, and by doing this, the shoppers. In the real world, they sort themselves: The top-end boutique isn’t right next to the cut-rate discount outlet. Inside the virtual world, it’s not too easy.
For your record, Under Armour Inc. is slightly ahead of Nike Inc., with 31% of their sales coming right from consumers; Cheap Nike Shoes is slightly behind, with 23% of revenue from retail. At its current pace, Nike will soon be collecting one out of three of the sales dollars right from consumers. Its challenge is going to be ensuring that not one of them get too good a deal.