Nike, the US sportswear giant, has been working to bring its manufacturing process closer to the point of sale, and concurrently adopting a direct-to-consumer strategy with a focus on owning the experience. It’s working.
This is according to an in-depth report from the Business of Fashion, which explores how the Oregon-based company is putting substance behind CEO Mark Parker’s ambition to pivot to direct sales.
At the core of this manoeuvre is the impressive work of Nike Direct president, Heidi O’Neill, and its general manager, digital and geographies, Adam Sussman (formerly VP and Chief Digital Officer). The team has worked to bring together a single customer profile of every NikePlus member, which means that the experience and purchase history for each customer can be as smooth in a San Francisco outlet as it is in Singapore.
“Adam and I have always felt that there’s a bit of magic in how our teams have come together,” O’Neill told Business of Fashion. “I see a time in the future when we don’t talk about channels. Consumers are very fluid from physical to digital.” This is pretty common fare in the marketing world, but Nike’s investment of $2.1 billion in overheads attests to the firm’s seriousness.
Despite Nike’s investment in personalisation and localisation – two themes slated to be key to retail in the coming year – investors are not always happy to see their profits funnelled back into the business. To counter this, Sussman explained, the company deploys an “incredibly disciplined approach”, he said. “Applying a digital operating model to a retail model has transformed how we manage the business,” he added, referring to the company’s acquisition in March of the data analytics firm Zodiac. This investment in effectiveness measurement has allowed the company to go beyond the impression/conversion layer through to deeper analysis of active membership and predicted lifetime customer value.
It seems to be working. In the fiscal year 2018, almost a third (29% - or $10.5 billion) of Nike’s global sales came through Nike Direct, the company’s DTC division, which operates both online and a network of owned stores. Though the wholesale business continues to dominate Nike’s sales globally – in the US during 2018, 68% of sales came through wholesale channels, for comparison – direct channels are posting far greater growth.
In North America, compared to a 6% decline in wholesale sales growth, direct grew 5%. In EMEA, direct grew 21% compared to 14% for wholesale. In fast-developing markets, like Asia Pacific and Latin America, wholesale saw just 5% growth compared to 21% direct sales.
Sourced from Business of Fashion, Nike; additional content by WARC staff