Nike Inc. started cleaning up its stats sheet last week and for the first time, the Wholesale Jordans Shoes 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 focused on working directly with consumers and cutting out 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 being a retailer-as opposed to a wholesaler-was actually a relative highlight. Sales on Nike’s own web store were up 19% in the recent quarter, while its retail locations notched a 5% gain in same-store sales. 28% of sales are direct this year, in contrast to 4% five years ago. CEO Mark Parker said the business is obsessed at this time with making shopping more personal. “Retailers who don’t embrace distinction will be left out,” he warned over a conference call Tuesday.
Still, that wasn’t enough to impress investors-at the very least, not. The overlooked appeal of bricks-and-mortar retail is just how well retail chains lend themselves as to what economists call price segmentation. Shoemakers including Nike can certainly target customers by sending the correct shoes to the correct 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 performed correctly, this socioeconomic slotting moves as much merchandise as possible with minimal fuss, whilst not tarnishing the greater brand. Making no mistake: Nike will it correctly. On its face, the Swoosh is actually a design shop supercharged by the kind 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, making sure “Momofuku” Dunks aren’t too easy to find, ordering up a special design for China, distributing its best-sellers for all the right D.ick’s Sporting Goods Inc. outlets and dumping lots of Chuck Taylors at outlet malls.
Nike is currently 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 an end run around the essential economics of price segmentation. The strategy-a bold move, due to the historical manufacturer-to-retail model being discarded-requires an abundance of swagger. But Cheap Shoes Nike 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 last year. The heart of the lineup, meanwhile, sells on Nike.com and in its very own big box stores. When it comes to 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 about an hour or so.
In a nutshell, the company is deemphasizing its ready-made network of retailers to create a more precise targeting mechanism. Tuesday Parker said the conclusion goal is to get in front of the consumer and present “the most personal, digitally connected experiences” in the business. “While changing your approach is rarely easy, Nike has proven before that if we do, it’s always kpelqt the following phase of growth for the company,” he explained.
In theory, Nike can know virtually any customer better-and his or her willingness to pay-by making use of its very own venues and platforms, particularly on its digital properties. The challenge will be building the mechanism to sort all the data, and in doing so, the customers. In the real world, they sort themselves: The top-end boutique isn’t right next to the cut-rate discount outlet. Within the virtual world, it’s not so easy.
For your record, Under Armour Inc. is slightly before Nike Inc., with 31% of their sales coming directly from consumers; Cheap Jordans From 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 will be making sure that none of them get too good a deal.