Nike plans R&D drive

02 July 2012

NEW YORK: Nike, the sportswear giant, is looking to innovate across the digital, retail and product sectors as it seeks to drive future growth.

Speaking on a conference call, Mark Parker, the firm's chief executive, cited several "competitive advantages" the company possesses, from its product range and focus on "digital experiences" to "deep and meaningful" relationships with customers and athletes.

"There's a strong appetite for authentic brands and genuine innovation. Digital technology is just beginning to show what's possible in products, services and retail. And new partnerships continue to advance how products are manufactured and distributed," he added.

"The real skill in converting innovation is converting innovation into long-term growth ... Innovation really takes place at all price points: good, better and best. And ... our focus is making sure that we get that price-value relationship as strong as possible."

Parker first joined Nike as a designer in 1979, when it was not yet a $1bn business. Over its last fiscal year, the organisation secured $24.1bn in sales, with the aim of generating $28–30bn by 2015.

"Quite simply, we are a growth company and that always – it always starts with innovation. I'm a designer and a self-avowed product geek, so I have incredibly high expectations of our team when it comes to innovating for athletes," he said.

Among its recent introductions are digital offerings like the FuelBand and Nike+ wristbands, which track performance and can be connected to the web. Its Flyknit lightweight trainers and "new generation" of uniforms for all 32 NFL teams proved equally popular.

The firm's direct-to-consumer sales have also reached $3.9bn, largely as it has created "retail experiences that bring excitement to the marketplace," Parker said. Elsewhere, Nike Free Footwear, originally a running shoe, now makes 50% of sales in other categories.

Converse has also grown into a $2.5 billion brand on a wholesale equivalent basis, aided by franchising and "celebrating youth culture". Lunar footwear is also a $2bn franchise at the retail level.

"That's the leverage model at its best; turning these great product ideas into company-wide platforms," said Parker. "All of these mega businesses started out as simple ideas; opportunities that showed promise for growth, so we committed to them, we invested in them and they continue to deliver new potential."

Adopting a tight focus is also important to securing the best results from R&D, Parker argued. In evidence of this, Nike is seeking to sell its Cole, Haan and Umbro brands, and thus focus on its core assets.

"Sometimes the decisions are easy, like investing in a new generation of digital products and services while bringing great consumer experiences to retail. And sometimes the decisions are much tougher, like divesting of Cole Haan and Umbro," he said.

Data sourced from Seeking Alpha; additional content by Warc staff