Nike Inc. started cleaning up its stats sheet last week and for the first time, the Cheap Nike Shoes From China 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 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 removing 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-instead of a wholesaler-was actually a relative highlight. Sales on Nike’s own web store were up 19% within the recent quarter, while its retail locations notched a 5% grow in same-store sales. 28% of all the sales are direct this coming year, in comparison with 4% five years ago. CEO Mark Parker said the business is obsessed at this time with making shopping more personal. “Retailers who don’t embrace distinction is going to be put aside,” he warned over a conference call Tuesday.
Still, that wasn’t enough to thrill investors-at least, not yet. The overlooked attractiveness of bricks-and-mortar retail is just how well retail chains lend themselves to what economists call price segmentation. Shoemakers including Nike can certainly target customers by sending the right shoes 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 in these places as DSW Inc.
If performed correctly, this socioeconomic slotting moves the maximum amount of merchandise as you can with minimal fuss, without tarnishing the greater brand. Making no mistake: Nike will it correctly. On its face, the Swoosh is really 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 each and every Nike Shoes Cheap in Beaverton, Ore., there’s a mid-level manager using a giant spreadsheet, making certain “Momofuku” Dunks aren’t too easy to find, ordering up a special design for China, distributing its best-sellers to any or all the right Di.ck’s Sporting Goods Inc. outlets and dumping a lot of Chuck Taylors at outlet malls.
Nike has become 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 attempting to make a stop run around the fundamental 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 demonstrate that the bet appears to be working, primarily because Nike continues to be sharpening its digital game.
Sought-after sneakers now ship out via Nike’s own ecosystem of apps, including SNKRS, which it launched early this past year. The heart of their lineup, meanwhile, sells on Nike.com and in their own big box stores. As for the cheaper, less-popular kicks, they quietly trickle into the company’s “factory” stores (read: outlet) and onto Amazon.com. Nike even features a studio in New York City which makes customized shoes on-site within an hour or so.
In short, the business is deemphasizing its ready-made network of retailers to produce a much more precise targeting mechanism. Tuesday Parker said the conclusion goal is to get in front of the consumer and provide “the most personal, digitally connected experiences” in the industry. “While switching your approach is never easy, Nike has proven before that if we do, it’s always tmrzsh the following phase of growth for our company,” he explained.
Theoretically, 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 will likely be building the mechanism to sort all the data, and by doing this, the customers. In real life, they sort themselves: The top-end boutique isn’t right next to the cut-rate discount outlet. Within the virtual world, it’s not so easy.
For that record, Under Armour Inc. is slightly ahead of Nike Inc., with 31% of the sales coming straight from consumers; Cheap Nike Shoes China 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 is going to be being sure that not one of them get too good a deal.