Nike reboots retailer relationships

Nike is strengthening its “strategic relationships” with retailers, five years after the sportswear brand cut ties with around half of them in order to focus on a DTC strategy.

What’s happening

In recent days, Nike has renewed lapsed partnerships with a number of third parties, including Designer Shoe Warehouse, Macy’s and Foot Locker, Modern Retail reports. 

It comes in the wake of comments made by CEO John Donahoe earlier this year when he told CNBC, “Our strategic wholesale partners, partners like Dick’s Sporting Goods or Foot Locker or JD, are very, very important because consumers want to be able to try on products, they want to be able to touch and feel. And so, we’ve invested in strengthening those strategic relationships.”

Why it matters

The shift is in part a recognition of a business reality – that profit margins tend to go down as e-commerce penetration goes up. While Nike’s DTC business isn’t just about its own websites – it has its own-brand stores too – the one-to-many fulfillment model is the main issue, as JP Castlin and James Hankins explained in The gravity of e-commerce, a paper published by WARC earlier this year. 

Regarding Nike Direct, they observed: “In the last five years, despite a direct sale contributing 66% more revenue than a comparative wholesale sale, the company’s lauded e-commerce branch has been net-contribution positive once, and that was when online sales declined.” 

The big idea

Customer migration from physical to digital hurts the bottom line.

Sourced from Modern Retail, Pymnts, WARC