Nike Inc. started cleaning its stats sheet the other day and the very first time, the sneaker empire declined to report “future orders,” a crucial measure of wholesale demand through the galaxy of retailers who sell the famous kicks. Nike, No. 9 inside the B2B E-Commerce 300, says the metric doesn’t matter much anymore, because now it’s focused on doing business 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-rather than a wholesaler-was a relative highlight. Sales on Nike’s own web store were up 19% within the recent quarter, while its retail locations notched a 5% gain in same-store sales. 28% of sales are direct this coming year, compared with 4% five-years ago. CEO Mark Parker said the organization is obsessed right now with making shopping more personal. “Retailers who don’t embrace distinction will be put aside,” he warned on the conference call Tuesday.
Still, that wasn’t enough to thrill investors-at least, 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 certainly target customers by sending the wholesale nike shoes off to the right 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, exclusive 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 performed correctly, this socioeconomic slotting moves just as much merchandise as possible with minimal fuss, while not tarnishing the greater brand. Making no mistake: Nike will 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 what to ship where. For each and every sneaker sketching savant in Beaverton, Ore., there’s a mid-level manager with a giant spreadsheet, ensuring “Momofuku” Dunks aren’t too readily available, ordering up nike wholesale shoes for China, distributing its best-sellers to all the correct Di,ck’s Sporting Goods Inc. outlets and dumping a lot of Chuck Taylors at outlet malls.
Nike has become upsetting its very 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, due to the historical manufacturer-to-retail model being discarded-requires no shortage of swagger. But Nike’s numbers show that the bet is apparently 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 a year ago. The heart of their lineup, meanwhile, sells on Nike.com and then in their 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 includes a studio in New York City which makes cheap nike shoes free shipping in about an hour.
In a nutshell, the company is deemphasizing its ready-made network wemjjs retailers to produce a more precise targeting mechanism. Tuesday Parker said the final goal is to obtain in front of the consumer and present “the most personal, digitally connected experiences” in the industry. “While altering your approach is rarely easy, Nike has proven before that if we all do, it’s always ignited the next phase of growth for the company,” he explained.
Theoretically, Nike can know any customer better-and his or her willingness to pay-by using their own venues and platforms, particularly on its digital properties. The process will be building the mechanism to sort each of the data, and by doing this, the customers. In real life, they sort themselves: The high-end boutique isn’t right near the cut-rate discount outlet. Within the virtual world, it’s not too easy.
For the record, Under Armour Inc. is slightly in front of Nike Inc., with 31% of the sales coming right from consumers; Adidas AG is slightly behind, with 23% of revenue from retail. At its current pace, Nike will quickly be collecting one in three of the sales dollars directly from consumers. Its challenge is going to be making sure that none get too good an agreement.