Nike Inc. started cleaning its stats sheet last week and for the first time, the Cheap Jordans Shoes declined to report “future orders,” a crucial way of measuring wholesale demand from the galaxy of retailers who sell the famous kicks. Nike, No. 9 within the B2B E-Commerce 300, says the metric doesn’t matter much anymore, because now it’s focused on doing business directly with consumers and cutting out the middleman.
Nike sells to retailers through a combination of EDI and e-commerce. While Nike reported its slowest quarterly sales growth since 2010, its performance as a retailer-as opposed to a wholesaler-was a relative highlight. Sales on Nike’s own web store were up 19% in the recent quarter, while its retail locations notched a 5% grow in same-store sales. 28% of all sales are direct this year, in comparison with 4% 5 years ago. CEO Mark Parker said the organization is obsessed right now with making shopping more personal. “Retailers who don’t embrace distinction will likely be left behind,” he warned on the conference call Tuesday.
Still, that wasn’t enough to thrill investors-a minimum of, not yet. The overlooked appeal of bricks-and-mortar retail is the way well retail chains lend themselves from what economists call price segmentation. Shoemakers including Nike can certainly target customers by sending the best shoes off 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, limited 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 such places as DSW Inc.
If done correctly, all of this socioeconomic slotting moves the maximum amount of merchandise as possible with minimal fuss, while not tarnishing the larger brand. Making no mistake: Nike does it correctly. On its face, the Swoosh is actually 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 with a giant spreadsheet, ensuring “Momofuku” Dunks aren’t too simple to find, ordering up an exclusive design for China, distributing its best-sellers to any or all the right D.ick’s Sporting Goods Inc. outlets and dumping lots of Chuck Taylors at outlet malls.
Nike is now upsetting its 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 working to make a conclusion play the essential economics of price segmentation. The strategy-a bold move, due to the historical manufacturer-to-retail model being discarded-requires an abundance of swagger. But Nike Cheap Shoes numbers reveal that the bet appears to be 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 last year. The heart of their lineup, meanwhile, sells on Nike.com and in its very own big box stores. When it comes to cheaper, less-popular kicks, they quietly trickle into the company’s “factory” stores (read: outlet) and onto Amazon.com. Nike even has a studio in Ny that creates customized shoes on-site within an hour.
In short, the organization is deemphasizing its ready-made network of retailers to generate a much more precise targeting mechanism. Tuesday Parker said the conclusion goal is to obtain in front of the consumer and offer “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 kpelqt another phase of growth for your company,” he explained.
In theory, Nike can know any given customer better-and his or her willingness to pay-by utilizing its own venues and platforms, particularly on its digital properties. The task is going to be building the mechanism to sort each of the data, and in doing so, the shoppers. In the real world, they sort themselves: The high-end boutique isn’t right near the cut-rate discount outlet. Inside the virtual world, it’s not so easy.
For that record, Under Armour Inc. is slightly before Nike Inc., with 31% of the sales coming directly from consumers; Cheap Jordans From China is slightly behind, with 23% of revenue from retail. At its current pace, Nike will soon be collecting one in three of the sales dollars straight from consumers. Its challenge will likely be ensuring that not one of them get too good a deal.