Nike Inc. started cleaning its stats sheet a week ago and for the first time, the sneaker empire declined to report “future orders,” a crucial measure of 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 dedicated to 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-as opposed to a wholesaler-was actually a relative highlight. Sales on Nike’s own online store were up 19% within the recent quarter, while its retail locations notched a 5% gain in same-store sales. 28% of all the sales are direct this coming year, in contrast to 4% five-years ago. CEO Mark Parker said the company is obsessed today with making shopping more personal. “Retailers who don’t embrace distinction is going to be left out,” he warned on a conference call Tuesday.
Still, that wasn’t enough to thrill investors-at least, not. The overlooked appeal of bricks-and-mortar retail is the way well retail chains lend themselves from what economists call price segmentation. Shoemakers such as Nike can certainly target customers by sending the cheap nike shoes from china free shipping 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 such places as DSW Inc.
If done correctly, all of this socioeconomic slotting moves the maximum amount of merchandise as is possible with minimal fuss, without tarnishing the bigger brand. Making no mistake: Nike can it correctly. On its face, the Swoosh is actually a design shop supercharged by the sort of storytelling its TV commercials, billboards and magazine ads are famous for. But Nike’s real genius isn’t marketing, it’s merchandising: knowing what to ship where. For each and every sneaker sketching savant in Beaverton, Ore., there’s a mid-level manager having a giant spreadsheet, ensuring “Momofuku” Dunks aren’t too readily available, ordering up nike shoes wholesale for China, distributing its best-sellers to any or all the correct Di,ck’s Sporting Goods Inc. outlets and dumping lots of Chuck Taylors at outlet malls.
Nike has become upsetting their 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 attempting to make a stop run around the basic economics of price segmentation. The strategy-a bold move, given the historical manufacturer-to-retail model being discarded-requires no shortage of swagger. But Nike’s numbers show 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 last year. The center of their lineup, meanwhile, sells on Nike.com as well as in its very 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 includes a studio in New York City which makes cheap nike shoes in approximately an hour.
In short, the business is deemphasizing its ready-made network wemjjs retailers to generate a much more precise targeting mechanism. Tuesday Parker said the end goal is to obtain ahead of the consumer and provide “the most personal, digitally connected experiences” in the industry. “While changing your approach is never easy, Nike has proven before that if we do, it’s always ignited the following phase of growth for your company,” he explained.
In theory, Nike can know any customer better-and her or his willingness to pay for-by utilizing its very own venues and platforms, particularly on its digital properties. The process will be building the mechanism to sort each of the data, and in doing so, the buyers. In real life, they sort themselves: The top-end boutique isn’t right next to the cut-rate discount outlet. In the virtual world, it’s not easy.
For the record, Under Armour Inc. is slightly in front of Nike Inc., with 31% of the 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 straight from consumers. Its challenge is going to be making sure that not one of them get too good a deal.