Nike Inc. started cleaning its stats sheet the other day and for the first time, the Wholesale Nike Shoes empire declined to report “future orders,” a critical measure of 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 centered on working directly with consumers and removing the middleman.
Nike sells to retailers through a mix of EDI and e-commerce. While Nike reported its slowest quarterly sales growth since 2010, its performance as a retailer-as opposed to a wholesaler-was actually 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 the sales are direct this year, compared with 4% five-years ago. CEO Mark Parker said the business is obsessed right now with making shopping more personal. “Retailers who don’t embrace distinction will likely be left out,” he warned on the conference call Tuesday.
Still, that wasn’t enough to impress investors-a minimum of, not even. The overlooked appeal of bricks-and-mortar retail is just how well retail chains lend themselves to what economists call price segmentation. Shoemakers such as Nike can simply target customers by sending the best shoes to the correct type 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 in such places as DSW Inc.
If done correctly, this socioeconomic slotting moves the maximum amount of merchandise as is possible with minimal fuss, while not tarnishing the bigger brand. And make no mistake: Nike does it correctly. On its face, the Swoosh is a design shop supercharged by the sort 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 Shoes Cheap in Beaverton, Ore., there’s a mid-level manager using a giant spreadsheet, making certain “Momofuku” Dunks aren’t too simple to find, ordering up an exclusive design for China, distributing its best-sellers to any or all the right 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 basic economics of price segmentation. The strategy-a bold move, given the historical manufacturer-to-retail model being discarded-requires no shortage of swagger. But Nike’s numbers reveal that the bet seems to be working, primarily because Nike continues to be sharpening its digital game.
Sought-after sneakers now ship out via Nike’s own ecosystem of apps, including SNKRS, which it launched early a year ago. The center of their lineup, meanwhile, sells on Nike.com as well as in its own big box stores. With regards to cheaper, less-popular kicks, they quietly trickle into the company’s “factory” stores (read: outlet) and onto Amazon.com. Nike even features a studio in Ny that makes customized shoes on-site in approximately an hour.
In a nutshell, the business is deemphasizing its ready-made network of retailers to generate an even more precise targeting mechanism. Tuesday Parker said the end goal is to get ahead of the consumer and offer “the most personal, digitally connected experiences” in the industry. “While switching your approach is never easy, Nike has proven before that if perform, it’s always tmrzsh the next phase of growth for your company,” he explained.
In theory, Nike can know virtually any customer better-and his or her willingness to cover-by utilizing its own venues and platforms, particularly on its digital properties. The task will be building the mechanism to sort all the data, and in doing so, the shoppers. In real life, they sort themselves: The high-end boutique isn’t right near the cut-rate discount outlet. In the virtual world, it’s not so easy.
For your record, Under Armour Inc. is slightly in front of Nike Inc., with 31% of the sales coming straight from consumers; Cheap Nike Shoes From China Free Shipping is slightly behind, with 23% of revenue from retail. At its current pace, Nike will be collecting one in three of their sales dollars directly from consumers. Its challenge will be ensuring that none of them get too good an arrangement.