Nike Inc. started cleaning its stats sheet the other day and the first time, the Cheap Nike Shoes empire declined to report “future orders,” a crucial measure of wholesale demand from the galaxy of retailers who sell the famous kicks. Nike, No. 9 in 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 a retailer-instead of a wholesaler-was a relative highlight. Sales on Nike’s own online store were up 19% in the recent quarter, while its retail locations notched a 5% grow 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 today with making shopping more personal. “Retailers who don’t embrace distinction will likely be put aside,” he warned on the conference call Tuesday.
Still, that wasn’t enough to impress investors-a minimum of, not yet. The overlooked beauty of bricks-and-mortar retail is how well retail chains lend themselves to what economists call price segmentation. Shoemakers such as Nike can certainly target customers by sending the correct 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, 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 in such places as DSW Inc.
If performed correctly, all of this socioeconomic slotting moves just as much merchandise as possible with minimal fuss, while not tarnishing the bigger brand. To 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 what to ship where. For each Nike Cheap Shoes in Beaverton, Ore., there’s a mid-level manager with a giant spreadsheet, making certain “Momofuku” Dunks aren’t too simple to find, ordering up an exclusive design for China, distributing its best-sellers for all the correct Di.ck’s Sporting Goods Inc. outlets and dumping plenty of Chuck Taylors at outlet malls.
Nike is currently 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 attempting to make a stop run around the fundamental economics of price segmentation. The strategy-a bold move, given the historical manufacturer-to-retail model being discarded-requires an abundance of swagger. But Nike’s numbers reveal that the bet appears 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 a year ago. The heart of its lineup, meanwhile, sells on Nike.com and in its 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 includes a studio in New York City that makes customized shoes on-site within an hour or so.
To put it briefly, the organization is deemphasizing its ready-made network of retailers to generate an even more precise targeting mechanism. Tuesday Parker said the final goal is to obtain in front of the consumer and offer “the most personal, digitally connected experiences” in the business. “While switching your approach is never easy, Nike has proven before that whenever perform, it’s always tmrzsh another phase of growth for the company,” he explained.
In principle, Nike can know any given customer better-and her or his willingness to pay for-by using their 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 customers. In real life, they sort themselves: The high-end boutique isn’t right next to the cut-rate discount outlet. Inside the virtual world, it’s not so easy.
For the record, Under Armour Inc. is slightly before Nike Inc., with 31% of its sales coming directly from consumers; Cheap Nike Shoes China is slightly behind, with 23% of revenue from retail. At its current pace, Nike will quickly be collecting one out of three of its sales dollars straight from consumers. Its challenge is going to be making sure that none get too good a deal.