Nike Inc. started clearing up its stats sheet last week and the very first time, the sneaker empire declined to report “future orders,” a critical way of measuring wholesale demand from the 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 combination of EDI and e-commerce. While Nike reported its slowest quarterly sales growth since 2010, its performance being a retailer-instead of a wholesaler-was 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 comparison with 4% five-years ago. CEO Mark Parker said the organization is obsessed right now with making shopping more personal. “Retailers who don’t embrace distinction will likely be put aside,” he warned over a conference call Tuesday.
Still, that wasn’t enough to impress investors-at the very least, not. The overlooked appeal of bricks-and-mortar retail is how well retail chains lend themselves to what economists call price segmentation. Shoemakers including Nike can certainly target customers by sending the cheap nike shoes from china free shipping 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 such places as DSW Inc.
If done correctly, this socioeconomic slotting moves the maximum amount of merchandise as possible with minimal fuss, whilst not tarnishing the bigger brand. And make no mistake: Nike does it correctly. On its face, the Swoosh is actually 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 with a giant spreadsheet, making certain “Momofuku” Dunks aren’t too simple to find, ordering up cheap nike shoes wholesale for China, distributing its best-sellers to any or all the best Di,ck’s Sporting Goods Inc. outlets and dumping plenty of Chuck Taylors at outlet malls.
Nike is now 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 working to make a stop run around the basic economics of price segmentation. The strategy-a bold move, because of the historical manufacturer-to-retail model being discarded-requires no shortage of swagger. But Nike’s numbers demonstrate that the bet is apparently working, primarily because Nike has become 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 and then in its very 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 has a studio in New York that makes cheap nike shoes within an hour or so.
In short, the company 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 industry. “While changing your approach is rarely easy, Nike has proven before that whenever we all do, it’s always ignited another phase of growth for our company,” he explained.
In principle, 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 task will be building the mechanism to sort all the data, and by doing this, the customers. In the real world, they sort themselves: Our prime-end boutique isn’t right next to the cut-rate discount outlet. In the virtual world, it’s not too easy.
For your record, Under Armour Inc. is slightly in front of Nike Inc., with 31% of their sales coming directly 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 the sales dollars right from consumers. Its challenge will likely be being sure that not one of them get too good an agreement.