Nike Inc. started cleaning its stats sheet last week and for the first time, the Cheap Jordans Shoes declined to report “future orders,” a vital way of measuring 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 conducting business directly with consumers and cutting out the middleman.
Nike sells to retailers through a mix of EDI and e-commerce. While Nike reported its slowest quarterly sales growth since 2010, its performance being a retailer-rather than a wholesaler-was actually 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 sales are direct this year, in comparison with 4% five years ago. CEO Mark Parker said the company is obsessed today with making shopping more personal. “Retailers who don’t embrace distinction will likely be left out,” he warned on a conference call Tuesday.
Still, that wasn’t enough to thrill investors-at the very least, not yet. The overlooked attractiveness of bricks-and-mortar retail is how well retail chains lend themselves as to what economists call price segmentation. Shoemakers such as Nike can certainly target customers by sending the correct shoes to the right type 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 this socioeconomic slotting moves just as much merchandise as possible with minimal fuss, while not tarnishing the bigger brand. And make no mistake: Nike does it correctly. On its face, the Swoosh is really a design shop supercharged by the type of storytelling its TV commercials, billboards and magazine ads are famous for. But Nike’s real genius isn’t marketing, it’s merchandising: knowing exactly what to ship where. For every sneaker sketching savant in Beaverton, Ore., there’s a mid-level manager using a giant spreadsheet, ensuring “Momofuku” Dunks aren’t too readily available, ordering up a unique design for China, distributing its best-sellers to all the right D.ick’s Sporting Goods Inc. outlets and dumping lots of Chuck Taylors at outlet malls.
Nike is now 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 trying to make an end play the basic economics of price segmentation. The strategy-a bold move, given the historical manufacturer-to-retail model being discarded-requires an abundance of swagger. But Wholesale Nike Shoes numbers reveal that the bet is apparently working, primarily because Nike has been sharpening its digital game.
Sought-after sneakers now ship out via Nike’s own ecosystem of apps, including SNKRS, which it launched early this past year. The center of their lineup, meanwhile, sells on Nike.com and in their own big box stores. When it comes to cheaper, less-popular kicks, they quietly trickle in to the company’s “factory” stores (read: outlet) and onto Amazon.com. Nike even includes a studio in Ny that creates customized shoes on-site in approximately an hour.
In short, the company is deemphasizing its ready-made network of retailers to generate an even more precise targeting mechanism. Tuesday Parker said the conclusion goal is to get ahead of the consumer and offer “the most personal, digitally connected experiences” in the industry. “While switching your approach is never easy, Nike has proven before that whenever we all 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 for-by using their own venues and platforms, particularly on its digital properties. The process is going to be building the mechanism to sort all of the data, and by doing this, the buyers. In real life, they sort themselves: The top-end boutique isn’t right near the cut-rate discount outlet. In the virtual world, it’s not easy.
For that record, Under Armour Inc. is slightly ahead of Nike Inc., with 31% of their sales coming directly from consumers; Cheap Jordans is slightly behind, with 23% of revenue from retail. At its current pace, Nike will be collecting one out of three of their sales dollars directly from consumers. Its challenge will likely be making sure that none of them get too good a deal.