Retail - Consumer Goods (CPG)

Nike turns its back on ‘undifferentiated, mediocre’ retailers

Nike store in Miami

This article is republished courtesy of RetailWire. Click here to read the full discussion

Nike plans to put its eggs in fewer baskets going forward. The athletic wear brand announced yesterday a plan to focus its organizational resources going forward on 40 key retail partners and its own consumer direct efforts while pulling back from “undifferentiated” channels of distribution.

By George Anderson

Nike’s announcement leaves many of the 30,000 retailers that sell its products, no doubt, questioning what it will mean for them. While Nike hasn’t ruled out selling to them, it has said that it will focus marketing, exclusive product offerings, in-store events and other resources on retailers like Foot Locker and Nordstrom. The Wall Street Journal reports that Amazon.com, which is currently running a pilot program with Nike, and Farfetch, an online luxury boutique, are on Nike’s short list. The athletic wear brand has not released a full list of the 40 retailers.

Trevor Edwards, Nike Brand president, said the move is being made because “undifferentiated, mediocre retail won’t survive.” Nike’s plan involves a shift that will take place over five years.

“Where others see disruption to old models, we see opportunities for new growth,” Nike CEO Mark Parker said at the company’s annual investor day event (via Portland Business Journal). “Whether that’s redefining our approach to the retail landscape or accelerating our international momentum, we’ve mobilized our priorities and we’re driving growth in new ways.”

Nike has set a target of reaching $50 billion in sales by 2022. Over that time, the company expects digital sales of its products, both consumer direct and through partner channels, to climb from the current 15 percent level to 30 percent.

Consumer direct is a significant element of Nike’s plan going forward. The company, which says it has more than 100 million members who have created accounts using one of its apps or on Nike.com, is looking to triple that number over the next five years. The strategy appears to be key to Nike’s goals as members spend three times more on its site than guests.

Nike plans to build its membership numbers, in part, by having more than a third of the products on the site unique to Nike.com and exclusive to members.

 

DISCUSSION QUESTIONS: How likely is Nike’s “massive transformation” to prove successful? Do you think Nike has a solid plan to grow its consumer direct business? Will its consumer direct efforts result in conflicts with its 40 key retail accounts?

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