Since writing a blog back in 2020 in relation to Nike’s direct-to-consumer (DTC) strategy, I’ve taken a keen interest in the company.
As many would know, DTC is all about brands communicating directly with their customers and creating a direct purchase relationship via e-commerce channels or company owned stores. It bypasses the wholesale intermediaries and takes responsibility for the customer journey from initial engagement through to fulfilment and after-sales service, with valuable first party data driving the ongoing relationship.
A byproduct of securing supply chain ownership has also seen Nike digital sales delivering margin improvements. However, in the latest quarterly results Nike Direct was down 7% while stores and digital were down 2% and 10% respectively.
While initially promising to be the future growth engine, DTC has encountered some significant headwinds. It’s also come at a time when new competitors such as On and Hoka are growing rapidly; and Adidas (while reporting a decline in quarterly revenues) is showing signs of turnaround and improvement.
So what’s gone wrong?
According to analysts and avid market watchers, the problems have really centred around Nike underestimating the power of the wholesale channel and the fact that many shoppers still prefer multi-brand retailers for choice and convenience. And with the DTC focus, Nike also significantly reduced its retail partner footprint which also led to its brand presentation suffering.
As Nike’s CFO admitted, “We don’t like the way our brand is showing up in wholesale, and we own that”.
With the reduction in digital traffic, Nike is also reassessing the digital customer experience and the assumption that customers would prefer to buy directly from the brand if given the choice.
While there have been other related issues that may well have contributed to recent underperformance, Nike is planning to take a more balanced approach to DTC and wholesale channels moving forward.
After years of being focused on DTC, the company is now investing in wholesale relationships to grow their entire marketplace, improve their product and brand presentation and leverage wholesale partners to help scale new product innovations and launches.
With the renewed focus on wholesale, Nike still sees value in having closer connections with their consumers. They want to be where it suits their consumers whether that’s digital, within their own stores, or wholesale. By rebalancing its approach, Nike has returned to reaching its audience through multiple touchpoints in a manner that suits the consumer.
Nike has a unique position of brand power, however, there are some real learnings for all brands when it comes to recognising that when it comes to consumer shopping choice, one size does not fit all.