Nike Inc. started cleaning its stats sheet last week and for the first time, the Cheap Nike Shoes China 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 focused on working directly with consumers and cutting out the middleman.
Nike sells to retailers through a mixture of EDI and e-commerce. While Nike reported its slowest quarterly sales growth since 2010, its performance as being a retailer-as opposed to 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% gain in same-store sales. 28% of all the sales are direct this season, compared with 4% five-years ago. CEO Mark Parker said the company is obsessed right now with making shopping more personal. “Retailers who don’t embrace distinction will likely be put aside,” he warned on a conference call Tuesday.
Still, that wasn’t enough to impress investors-at the very least, not yet. The overlooked appeal of bricks-and-mortar retail is just how well retail chains lend themselves to what economists call price segmentation. Shoemakers such as Nike can easily 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 in such places as DSW Inc.
If performed correctly, all this socioeconomic slotting moves the maximum amount of merchandise as is possible with minimal fuss, without tarnishing the bigger brand. To make 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 what to ship where. For each sneaker sketching savant in Beaverton, Ore., there’s a mid-level manager having a giant spreadsheet, making sure “Momofuku” Dunks aren’t too readily available, ordering up a special design for China, distributing its best-sellers for all the right D.ick’s Sporting Goods Inc. outlets and dumping plenty 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 an end run around the essential economics of price segmentation. The strategy-a bold move, given the historical manufacturer-to-retail model being discarded-requires no shortage of swagger. But Cheap Shoes Nike numbers demonstrate that the bet is apparently 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 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 includes a studio in New York which makes customized shoes on-site in approximately an hour or so.
In short, the organization is deemphasizing its ready-made network of retailers to generate a more precise targeting mechanism. Tuesday Parker said the final goal is to buy in front of the consumer and offer “the most personal, digitally connected experiences” in the business. “While changing your approach is rarely easy, Nike has proven before that if we all do, it’s always kpelqt 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 making use of its very own venues and platforms, particularly on its digital properties. The process is going to be building the mechanism to sort each of the data, and in doing so, the buyers. In real life, they sort themselves: The high-end boutique isn’t right next to the cut-rate discount outlet. In the virtual world, it’s not so easy.
For the record, Under Armour Inc. is slightly ahead of Nike Inc., with 31% of its 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 out of three of its sales dollars directly from consumers. Its challenge is going to be making sure that none get too good an agreement.