Can Nike’s coronavirus playbook work for others?

Discussion
Getty Images/zhaojiankang
Mar 27, 2020
Tom Ryan

On its third-quarter conference call Tuesday, Nike said its experience managing the COVID-19 pandemic in China has provided an “operational playbook” for “an expedited return to profitable, capital-efficient growth.”

In China, the company’s first steps included closing down about half its stores, significantly reducing hours in others and shifting inventory to serve digital demand.

John Donahoe, Nike’s new CEO, said, “At a time when people were confined to their homes, we moved swiftly to leverage our digital app ecosystem and Nike expert trainer network to inspire and support consumers across China to stay active and connected while at home.”

Weekly active users across Nike activity apps were up 80 percent by the end of Q3 versus at the quarter’s start. Consequently, Chinese consumers’ strong attachment to activity apps translated into strong engagement with Nike’s commerce apps.

Nike’s online sales have been accelerating in the triple-digits in recent weeks and increased more than 30 percent in the quarter, limiting its net decline in China to four percent. The company has begun reopening stores, people are returning to work, traffic is improving and inventory has come down from peak levels.

Nike is using the same playbook in Japan and Korea with both markets seen entering the normalization phase that focuses on balancing consumer demand and supply.

Yet Sam Campion, Nike CFO, cautioned that each country is addressing COVID-19 differently.

As such, the company is reducing fourth-quarter general and administrative expenses vs. the prior-year as part of increased efforts at cost management and is focusing on global demand and supply optimization on a daily basis.

Nike’s distribution will focus on digital in regions facing store closures. In the U.S., the digital push includes a “Play inside” campaign, making the Nike Training Club app accessible free of charge and offering up to 40 percent online discounts, free shipping and 60-day free returns.

Overall, Mr. Campion said year-over-year revenue, margin and the inventory growth rates over the next year “will neither be intuitive nor linear.” He added, “Our measures of success in the near term will be rooted in the amount of inventory on hand, relative to the pace of digital demand, store re-openings and traffic patterns.”

DISCUSSION QUESTIONS: What lessons does Nike’s coronavirus playbook offer to retailers and brands? Do you agree that “the amount of inventory on hand, relative to the pace of digital demand, store re-openings and traffic patterns” should be retail’s measure of success in the near-term?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Here in the U.S., most retailers can learn things from Nike but, sadly, I don’t think they have the same brand power or platform advantages."
"Retailers without the detailed inventory knowledge and distribution capability will also be disadvantaged during this time."
"In the U.S. ... the logical and very hard business decision to close a store has been made for them and the incentive to re-open has gone away."

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18 Comments on "Can Nike’s coronavirus playbook work for others?"


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Mark Ryski
BrainTrust

Nike has done a lot of things right. That said, not every retailer is in the enviable position of Nike who has a strong online presence, global coverage and a strong balance sheet. Every retailer is going to have to create their own playbook that takes into consideration their resources, capabilities and market position. For most brick-and-mortar retailers, the key will be store re-openings. When stores re-open, sales will come back.

Unfortunately, I believe they’ll come back slowly. All retailers need to settle in for a long, bumpy ride.

Gene Detroyer
BrainTrust

I believe the revenue will return, but not to the degree it was before. People are developing new habits that meet their needs now and will find that these new habits will work very well in the future.

Mark Ryski
BrainTrust

Agreed Gene. A key factor in how long the recovery will take is the unemployment rate. Retail sales are driven by consumers, but if they’re not working (or fear they might be laid-off), they won’t buy. The unemployment numbers released yesterday were truly epic in magnitude: 3.2 million jobless claims vs. 665,000 during the height of the 2009 crisis.

Craig Sundstrom
Guest

Agreed doubly; and I would caution further that even if this current situation improves by summer, fear of a reoccurrence in fall/winter may encourage people to cut spending and save instead … that “rainy day” advice that makes so much sense at the individual level, but spells “depression” at the macro level.

Art Suriano
BrainTrust

Unfortunately, no one knows when things will turn back to normal. Two weeks? A month? Two months? This makes planning for everyone difficult. I agree that Nike has the experience that they accumulated through dealing with China but, as the article points out, every country is dealing with the coronavirus differently. Retailers must be ready with inventory and be prepared for when things return to normal, and I believe we will see a massive surge in business from stores to restaurants in the beginning just because most people are going stir crazy during the quarantine. That opportunity cannot be lost by a company not being ready. Hopefully this will end soon, and businesses will get back to making sales.

Ben Ball
BrainTrust

It all depends on what business you are in. Demand for services and out-of-home dining will probably surge when restrictions are lifted. How consumers will react to other categories like soft goods and hard lines is much harder to predict. The hard part for businesses will be that the ability to stockpile inventory (services vs. hard lines) is inverse to the likelihood of demand spikes.

Neil Saunders
BrainTrust

Nike is a strong brand and it has powerful direct-to-consumer channels. On top of this, China is a very digitally enabled market with a lot of consumers used to shopping on mobile devices. The combination of these two things helped Nike. Here in the U.S., most retailers can learn things from Nike but, sadly, I don’t think they have the same brand power or platform advantages.

Lee Peterson
BrainTrust

Impressive. And really well thought out. The big lesson to me is that retail is still detail, whether it’s how you use social and apps or how many of your stores stay open even in a minor, auxiliary (BOPIS?) capacity. They deserve to come through this strong. Obviously there has been great management/decision making, both macro and micro. Of course it helps that there’s nothing else to do! Joggers in my ‘hood are at an all time high. There are literal traffic jams (a good thing in hard times).

Ken Morris
BrainTrust

Nike made some very smart plays over the last year with the biggest being their acquisition of Celect. They have seen the convergence of digital and the store coming for some time. They have been at the forefront of disintermediating sporting goods for some time by selling direct to consumers and opening their own stores and eliminating the middle man. These strategies have, rather unconsciously, equipped them with the tools to navigate this pandemic. The Celect acquisition was brilliant, as with their unmatched supply chain analytics they have a tool that turns this plague into a solvable math problem that will secure their emergence from this stronger than ever.

Stephen Rector
BrainTrust

Being a global company is an advantage during this type of crisis for a couple of reasons – Nike can learn from how the business in China changed as stores closed, people shifted to online, etc. and apply those lessons to the business they conduct in other countries. With China open, they also have revenue coming in while the rest of the world is basically closed. Companies must continue to think globally as we move forward once this ends.

Shep Hyken
BrainTrust

Nobody could have predicted the coronavirus would ever happen. However, smart companies have plans for all types of different crises. We can now add a pandemic to that list. Watching companies like Nike and other major brands will help other companies, large and small, manage what they can through this crisis and provide a playbook (to use Nike’s term) for future crises. One of my favorite quotes is “Noah built the Ark before the flood.” We need to be as prepared as possible for any type of problem or crisis.

Richard Hernandez
BrainTrust

I don’t think there is anything wrong with having a go-to plan for now and a hope to be proactive when the entire world gets back to normal. I would think that every business has this already drafted or written up with plenty of input from senior leadership. Observations on the state of things thus far: Online shopping and pickup have increased during the epidemic. Supply chain and other pertinent areas of each company all have to play into how to proceed with business now and moving forward.

Gene Detroyer
BrainTrust

Every retailer should study the playbook and adapt it to their own business. There are valuable nuggets in what Nike did.

Let’s also understand that store closings in China and now in NYC weren’t a choice for the retailer. Staying open was not an option. We also should understand that the retail landscape in China is different than the U.S. The U.S. is still on the up-curve for digital demand. In China, online is the primary go-to source for shopping.

In China, most of the stores will re-open. Based on the population, there really aren’t that many. In the U.S., we will find that for retailers, having been forced to close, the logical and very hard business decision to close a store has been made for them and the incentive to re-open has gone away.

Jeff Sward
BrainTrust

Seems to me that Nike made it a point, first and foremost, to listen, study and learn. And then adapt. Real problems, real opportunities, real solutions — be they macro or micro. They embraced the reality and the magnitude of the problem and gave themselves a lot of leeway to execute as the circumstances suggested or demanded, not as they wished the circumstances would be. Sure they have the resources to do all this. But if it wasn’t for their listen/study/learn/adapt thinking they wouldn’t know how to leverage those resources. I can think of a government or two that would benefit from that approach, never mind a brand or two.

Ricardo Belmar
BrainTrust
Knowledge is power, and Nike knows its customers. Nike’s strong digital relationship with customers, coupled with the detailed knowledge of inventory allowed them to make the adjustments they needed to serve a rapidly changing market in China during the outbreak. Yes, Nike learned quite a lot during this period which they can now adapt to other countries, but it’s hard to see this being something other retailers can apply if they don’t have the same deep digital relationship and platform available to them. Retailers without the detailed inventory knowledge and distribution capability will also be disadvantaged during this time. Now more than ever retailers are understanding the importance of having a solid infrastructure in technology, logistics, and customer data. Without those key elements, it is very difficult for any retailer to adapt to these times and that will have an impact on their ability to emerge on the other side of it however many months from now that is. Nike is in a rather unique position because they were wise enough to enable these capabilities… Read more »
DennistheProf
Guest

Avoid defeatism.

Follow in Nike’s footsteps and offer your products online. Leverage your physical location as a warehouse, photography studio, and shipping hub. Manufacture demand by leveraging social media, engage with the people that already love your product, and ask them to introduce more.

Count on your strengths.
Nike can’t write a handwritten note filled with kind words with every package it sends, you can. Nike can’t respond directly to a question as the face of the business, you can. Nike can’t say that by supporting it you support your local economy, you can.

Borrow the strategy, apply your strengths, and come out ahead.

Craig Sundstrom
Guest

Wow! TMI for a sleepy Friday morning. Anyway, Nike is obviously a large company with (apparently) substantial operations/market in China (but I’m thinking that market share is still single digit percentages of their total), so for companies similarly situated, I would suggest taking a look. Though some of the advice, like focus on digital, seems self evident.
Sadly, however, for the overwhelming bulk of retailers, if maybe in raw numbers more than volume, who are dependent on physical stores or are dealing with a customer base that has little or no income at present, it’s all wishful thinking.

Cynthia Holcomb
BrainTrust

In the time of COVID-19, every retailer has many stories of employees sacrificing themselves to care for their customers. Stories of humanity, retailers can and should share with their customers. Honoring the risk employees face every day during the virus on behalf of their customers.

wpDiscuz
Braintrust
"Here in the U.S., most retailers can learn things from Nike but, sadly, I don’t think they have the same brand power or platform advantages."
"Retailers without the detailed inventory knowledge and distribution capability will also be disadvantaged during this time."
"In the U.S. ... the logical and very hard business decision to close a store has been made for them and the incentive to re-open has gone away."

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