Nike Inc. started clearing up its stats sheet the other day and the first time, the sneaker empire declined to report “future orders,” a critical way of measuring wholesale demand from your 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 centered 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-had been a relative highlight. Sales on Nike’s own web store were up 19% inside the recent quarter, while its retail locations notched a 5% grow in same-store sales. 28% of sales are direct this season, in comparison with 4% 5 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 even. The overlooked beauty of bricks-and-mortar retail is just how well retail chains lend themselves as to what economists call price segmentation. Shoemakers such as Nike can simply target customers by sending the wholesale nike shoes off to the right sort 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 properly, this socioeconomic slotting moves as much merchandise as you can with minimal fuss, whilst not tarnishing the larger brand. Making no mistake: Nike will 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 each sneaker sketching savant in Beaverton, Ore., there’s a mid-level manager using a giant spreadsheet, making certain “Momofuku” Dunks aren’t too simple to find, 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 a lot of Chuck Taylors at outlet malls.
Nike is currently 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 attempting to make a stop 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 Nike’s numbers demonstrate 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 a year ago. The center of the lineup, meanwhile, sells on Nike.com as well as in its 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 cheap nike shoes free shipping within an hour.
In short, the business is deemphasizing its ready-made network wemjjs retailers to generate a more precise targeting mechanism. Tuesday Parker said the final goal is to get ahead of the consumer and present “the most personal, digitally connected experiences” in the business. “While switching your approach is never easy, Nike has proven before that when we do, it’s always ignited the following phase of growth for our company,” he explained.
In principle, Nike can know any customer better-and his or her willingness to pay-by using their own venues and platforms, particularly on its digital properties. The process will likely be building the mechanism to sort all the data, and by doing this, the customers. In the real world, they sort themselves: The top-end boutique isn’t right next to the cut-rate discount outlet. In the virtual world, it’s not too easy.
For the record, Under Armour Inc. is slightly in front of Nike Inc., with 31% of its sales coming right from consumers; Adidas AG is slightly behind, with 23% of revenue from retail. At its current pace, Nike will soon be collecting one out of three of its sales dollars right from consumers. Its challenge will be making sure that none of them get too good a deal.