Mar 28, 2022
Nike has communicated its major “account pivots” as part of its marketplace realignment that reduced the number of wholesale partners worldwide over the last four years by more than 50 percent.
Nike last year in the U.S. stopped selling to six retailers: Big 5 Sporting Goods, DSW, Dunham’s Sports, Olympia Sports, Shoe Show and Urban Outfitters. It also no longer sells apparel to Macy’s. In 2020, cut offs included Belk, Bob’s Stores, Boscov’s, City Blue, Dillard’s, EbLens, Fred Meyer, VIM and Zappos.
For the current year, Nike’s sales will be reduced to 55 percent of Foot Locker’s sales by the fourth quarter and continue at that level into 2023, down from 65 percent in the 2021 fourth quarter.
Nike has said the overall wholesale overhaul was designed to shift away from “undifferentiated” retailers, although many industry insiders believe the main priority is accelerating growth of its direct-to-consumer business.
In the third quarter ended February 28, Nike’s direct sales grew 17 percent to 42.2 percent of sales against 38.5 percent a year ago, led by 54 percent digital growth. Wholesale sales were up one percent.
“Wholesale partners play an integral role in our future marketplace, first, to authenticate our brands, and then to create scale of distribution through a consistent consumer experience across a larger retail footprint,” said Matt Friend, CFO, last week on a quarterly analyst call.
Mr. Friend said the new structure will require Nike “to also invest with our partners in their consumer experiences so that the consumer has a premium consistent experience” regardless of where they’re shopping.
An example of elevated collaboration cited was a program introduced last fall that allows loyalty members from Dick’s Sporting Goods and Nike to link accounts. Via the Dick’s mobile app, customers can browse member-exclusive Nike product and participate in high-heat drops.
Also cited was a collaboration with the Social Status sneaker boutique to develop unique silhouettes of Jordan and Dunk products, as well as produce content on SNKRS Live, Nike’s live-streaming platform.
Mr. Friend said, “We are committed to driving growth with partners like this as they create authentic, deeply connected consumer concepts in key cities and communities around the world.”
DISCUSSION QUESTIONS: Is the bigger reason behind Nike’s wholesale reset likely exiting “undifferentiated” retail partners or expanding direct channels? Does shrinking wholesale accounts in digital-led direct-to-consumer shifts make sense for many other brands?
“Nike controls their own destiny. Brand love, experiences, exclusivity and yes profit margin are the driving forces. “
