Business Dynamic (1) — Is Nike The Future?
I have kept an eye on Nikes’ strategy since 2017. Nike finally unveils its shade. Even though we are not Nike, we still can break those curtains apart to see where the lane is.
“Our targeted strategic investments are accelerating Nike’s digital transformation and extending our competitive advantage, “ said Andy Campion, Executive Vice President and Chief Financial Officer, Nike, Inc.
In Nike’s distribution channels, Nike focuses on direct selling to the consumer with Nike Direct. Comparing Nike’s distribution channels, straight sales to the consumer provide higher margins than do sales to wholesalers. Nike’s DTC sales have increased considerably, as its contribution to an overall sales mix. Nike’s revenue for Nike brand was $10.7 billion, up 10% on a currency-neutral basis driven by growth across Nike Direct and wholesale, higher than expected 10.4 billion.
Let’s take a look into Nike’s distribution channels, that can be divided into two ways :
- Selling merchandise to wholesalers straightly. This is Nike’s the most important distribution channel.
- Direct-to-consumer (DTC) sales, which includes factory retail outlets and e-sales through the websites like Amazon. This is Nike’s the fastest-growing distribution channel
Nike’s DTC strategy is two-pronged-the retail store like FootLocker, which is the brick-and-mortar stores, and its digital platform like Amazon. This cull is the next step in Nike’s growth plan, Triple Double Strategy (2X), announced back in 2017. Nike is now performing this change to its distribution strategy, by reducing the amount of retailers selling Nike products.
Added to this, the latest change allows them to keep the control of the customer relationship helping them to avoid any loss of the brand value through the 3rd party discounting. Also, the change could help Nike to reduce the unnecessary expense and administrative fee through working with the 3rd party. Nike already forbids both, wholesale customers from selling their products on eBay or Amazon.
Nike with its market cap of nearly 143.6 billion is almost as Paul Bunyan comparing to Adidas who has a market cap of $59.85 billion while Under Armour’s is at $7.83 billion. Nike expects to grow its online distribution channel more and expects 30% of its sales to come from online sales by 2023 and its digital distribution strategy might be the key to its success.
In the following years, Nike expanded its tactics. By focusing on the sales of its products and integrating it into a successful strategy and signing contracts with successful athletes and sports-women. This was the most known strategy they did in the past few years. In short way, devising an effective e-commerce strategy is the key to all consumer companies. Vice versa, Nike is no exception.
Nike has already established its brand and that has many different beliefs and culture behind it. To stand for it, Nike’ strategies are always cutting-edge. However, is Nike the Future for what the future holds?
$50 on me to say: Aye ! they are the future.
But will they? I have no idea honestly.
