Nike Inc. started cleaning up its stats sheet a week ago and the very first time, the sneaker empire declined to report “future orders,” a vital measure of wholesale demand from the galaxy of retailers who sell the famous kicks. Nike, No. 9 inside the B2B E-Commerce 300, says the metric doesn’t matter much anymore, because now it’s focused on working directly with consumers and eliminating 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 as being a retailer-instead of 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% gain in same-store sales. 28% of all sales are direct this season, compared with 4% five years ago. CEO Mark Parker said the organization is obsessed at this time with making shopping more personal. “Retailers who don’t embrace distinction is going to be left out,” he warned over a conference call Tuesday.
Still, that wasn’t enough to thrill investors-a minimum of, not even. The overlooked beauty of bricks-and-mortar retail is the way well retail chains lend themselves from what economists call price segmentation. Shoemakers including Nike can simply target customers by sending the cheap nike shoes to the correct kind 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 these places as DSW Inc.
If done properly, all this socioeconomic slotting moves the maximum amount of merchandise as possible with minimal fuss, while not tarnishing the bigger brand. To make no mistake: Nike can 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 exactly what to ship where. For every sneaker sketching savant in Beaverton, Ore., there’s a mid-level manager having a giant spreadsheet, making sure “Momofuku” Dunks aren’t too easy to find, ordering up wholesale nike shoes free shipping for China, distributing its best-sellers to all the best Di,ck’s Sporting Goods Inc. outlets and dumping lots of Chuck Taylors at outlet malls.
Nike has become 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 a stop play the essential economics of price segmentation. The strategy-a bold move, because of the historical manufacturer-to-retail model being discarded-requires an abundance of swagger. But Nike’s numbers reveal 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 a year ago. The heart of its lineup, meanwhile, sells on Nike.com and in their own big box stores. As for the cheaper, less-popular kicks, they quietly trickle in to the company’s “factory” stores (read: outlet) and onto Amazon.com. Nike even features a studio in Ny that makes cheap nike shoes china in about an hour.
In short, the business is deemphasizing its ready-made network wemjjs retailers to produce a much more precise targeting mechanism. Tuesday Parker said the final goal is to buy ahead of the consumer and provide “the most personal, digitally connected experiences” in the market. “While switching your approach is rarely easy, Nike has proven before that when we all do, it’s always ignited the following phase of growth for the company,” he explained.
In theory, Nike can know virtually any customer better-and their willingness to cover-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 of the data, and in doing so, the shoppers. In the real world, they sort themselves: Our prime-end boutique isn’t right near the cut-rate discount outlet. Within the virtual world, it’s not easy.
For the record, Under Armour Inc. is slightly before Nike Inc., with 31% of their sales coming right from consumers; Adidas AG is slightly behind, with 23% of revenue from retail. At its current pace, Nike will be collecting one in three of its sales dollars directly from consumers. Its challenge will likely be being sure that none get too good a deal.