Nike has built its leading global brand by selling to shoppers across the globe that found its products on store shelves everywhere, from department stores to its own stores. Things have changed, of course. Thanks to the Internet, fewer and fewer shoppers are passing by actual store shelves. Now Nike is expanding its direct to consumer strategy, expanding local stores and sales channels to cut out more middlemen (including its own).
The Beaverton, Oregon-headquartered sports shoe and apparel giant has decided that selling more directly to consumers is the way forward, with a particular focus on 12 local markets. Part of the impetus to shake up its business is financial, as it reported quarterly earnings and full year results today: the company has had poor sales in many Asian markets and has too much inventory in both Japan and North America, the Wall Street Journal reports.
“The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” Nike CEO Mark Parker said in a statement Thursday. The organization is “getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”
As part of the restructuring the company will lay off around 1,400 people worldwide in order to focus its energy into such metropolises as New York, Paris, Beijing, and Milan, according to the New York Times. The expectation is that the 12 designated cities will deliver 80 percent of the company’s growth in the next two and a half years.
While the brand will use its own stores to continue to build relationships with its consumers, it will also ship product to such places as convenience stores in Japan, known as konbini. The idea is to get the product to customers quickly and begin to design to fit local tastes.
How the Japanese trial will work, according to Nike’s press release:
Beginning this week, consumers across Japan will be able to order nearly any Nike product via Nike.com and have it delivered to one of more than 12,000 konbini in the country.
This service brings the best of Nike to the epicenter of consumers’ daily lives in Japan, meeting consumers where they are – at the konbini – whether that’s on the main floor of their apartment building, next door to their children’s school, within the train station, or around the corner from a local hotel. The delivery locations will be located in almost every neighborhood across the country.
“The goal of this new service in Japan is to bring the best of Nike to the center of life in Japan,” says Erich Siegel, GM of Nike Direct Japan. “By delivering our product to local konbini, we create a faster and more seamless consumer journey and continue to change the game when it comes to sustainability.”
Convenient delivery isn’t the only thing that’s new. Nike apparel delivered to Japanese konbini will arrive in an innovative new polybag – a first for Nike.com orders – made partially of recycled materials, creating an easy ‘grab and go’ experience for consumers and also serving as a return envelope for product, which helps eliminate the need for additional packaging.
The new delivery service is now available in Japan. Most orders placed online will take approximately two days to arrive at local konbini. This service is free for Nike+ members.
In even bigger news, the brand will start selling on Amazon next month, establishing a brand registry to qualify sellers in order to clamp down on counterfeits, Bloomberg reports.
The Amazon deal is mainly to control third-party sellers of the brand, Bloomberg notes: “The approach lets Nike Inc. take greater control over how its products are sold, helping ensure that knockoff shoes aren’t offered by third parties on the e-commerce marketplace.”
As it is, Nike is the top-selling clothing brand on Amazon despite not actually selling its product on the site. “That’s how I make my money. Amazon is the No. 1 marketplace. Nike is the No. 1 brand,” one third-party seller told The Wall Street Journal. “If they’re not in bed together, that’s my opportunity.” Looks like somebody will soon be getting kicked out of the bed.
Consumers in those 12 cities may be the biggest beneficiaries of the new focus, but shareholders may end up being winners, too. The brand’s stock went up 7 percent after hours Thursday after the brand announced that its fourth-quarter earnings were stronger than analysts had projected, CNBC reported. Revenue was $8.68 billion when analysts had expected the company “only” bring in $8.63 billion.
Still, not everybody is sold on the new direction of the company. It will require new investment in the company in the targeted 12 cities and ““Profits also tend to be more cyclical with the economy,” Erin Lash, an analyst at Morningstar, told the Times.
The move fits with Nike’s history. The brand was one of the first to create its own stores as brand destinations, with Niketown launching in Portland back in 1990. “It serves a particular role in our [retail] portfolio and in our communities,” Christiana Shi, who was president of Nike Global Direct-to-Consumer until last September, told brandchannel. “Typically we’ll be one of the earliest movers in an area where retail is accelerating; we are part of that.”
Now Nike will once again be one of the earliest movers in a retail area, while going through the painful process of downsizing in order to do so. Its brain trust in Beaverton, Oregon is certainly hoping the risk pays off.
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