Nike says goodbye to more longtime wholesale partners

Photo: Nike
Mar 30, 2021

Nike reportedly plans to stop selling to six additional wholesale accounts — DSW, Urban Outfitters, Shoe Show, Dunham’s Sports, Olympia Sports and Big Five — as it increasingly emphasizes direct-to-consumer (DTC) commerce and exits “undifferentiated” wholesale accounts.

Nike apparel will also soon no longer be found at Macy’s, although athletic footwear sales will continue through in-store shops operated by The Finish Line.

Sam Poser, equity analyst at Williams Trading, broke the news based on his proprietary checks. Nike didn’t confirm the exits but several stores have done so to the media.

Nike first announced its Consumer Direct Offense strategy in 2017 as a five-year plan to focus growth on 40 “strategic” retail partners and its own DTC.

Last year, Mr. Poser reported Nike was ending its relationship with nine accounts: Belk, Bob’s Stores, Boscov’s, City Blue, Dillard’s, EbLens, Fred Meyer, VIM and Zappos. The brand has also cut off numerous smaller independents.

The latest exits were more surprising — three sporting goods chains that helped first establish Nike in the sports space, two major off-pricers that reach families and fashion players in Macy’s and Urban Outfitters.

Since 2017, digital has become a bigger priority for Nike. Online across owned and partner sites are expected to eventually account for half of sales, up from 35 percent in its most recent quarter. The company has developed three digital-first retail concepts — Live, Rise and Unite — and is set to accelerate the store openings.

Nike officials have also regularly called out the importance of select retailers, including Dick’s Sporting Goods, Foot Locker and Nordstrom in North America, that are collaborating with the brand on unique in-store concepts or driving member engagement.

Last summer, CEO John Donahoe expressed what the strategic vision would be. “Consumers want modern, seamless experiences, online to offline, so we’re accelerating our approach,” he said. “Our OneNike marketplace strategy leads with Nike Digital in our own stores and embraces a small number of strategic partners who share our vision to provide a consistent premium shopping experience.”

On Nike’s recent third-quarter earnings call, Mr. Donahoe said, “We’ll work with a smaller number of strategic partners that see the same future we do, and that want to and are willing to share membership data so that we can, together, deliver a very seamless experience, a very personalized experience for our consumers.”

DISCUSSION QUESTIONS: Is Nike at risk of no longer reaching certain customer segments or geographies with its pivot to direct-to-consumer and select “strategic” wholesale partners? Do you think Nike may need to make adjustments (if so, what kind) along the way?

Please practice The RetailWire Golden Rule when submitting your comments.
"I think Nike has been thrashing for years. Opening very cool (and costly) stores, then deciding they didn’t really care about most of them. Now this."
"Not every company is ready to make such a bold move. However I feel Nike has much more to gain than lose with this latest pivot."
"Interesting. Is Nike strategically selecting wholesale partners or strategically re-risking retailers that are in danger of going out of business? Are they the same thing?"

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35 Comments on "Nike says goodbye to more longtime wholesale partners"

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Neil Saunders

Some Nike products are bought on impulse at department stores or through other channels and if Nike pulls out of such points of distribution it could see those sales go to rivals. This is especially so as more and more brands are ramping up their efforts in all kinds of athleisure products. However Nike is such a powerful brand that this will likely be a very small deterioration that is more than offset by gains elsewhere – and the benefits of higher margins, more control over the brand, and gathering more customer data via direct selling.

Suresh Chaganti

Nike has been transitioning from a retail model to a multi-channel model of selling in a breathtaking display of strategic finesse. It started with pushing through the retailers, opening its own stores, launching major digital initiatives, creating community, and developing gigantic brand equity. All this came together to allow Nike to virtually dictate the pace of the transformation of its sales channel mix.

It is not easily repeated for other brands. Clothing and apparel is the kind of category where the product usage, purchase frequency, lifestyle attributes, and aspirational aspects all come together to create a unique opportunity for brands to dictate the terms. But of all the clothing and apparel brands out there, Nike is one that has set the standard.

Ryan Rosche

One of the most important things you need to know is that Nike is a brand. This is built into their core vision and mission. As they continue to look for new ways to grow the brand, it has become critical for them to protect their brand. You see that in their growth of digital and DTC brick and mortar locations where they can control their brand image. They have little control over the way their brand is displayed with their wholesale partners so this move makes them stronger above all.

Bob Amster

In terms of immediate sales, this will hurt Nike. In terms of collecting more customer information from DTC, and exercising more control over the brand, it may help in the long term. I would prefer for Nike to participate in a drop-ship program for their retailers.

Jeff Sward

In the future, Nike’s strategy and tactics will be taught as a prime example of not just brand building, but as exemplifying agility and adaptability within shifting market dynamics. So of course they will make adjustments in the future. That’s what they do. And if they lose a little business in the short term, it is far more important to protect the brand for the long term. Several brands and retailers could take a lesson here.

Brandon Rael

Nike has taken a bold and strategic approach to drive a more meaningful and authoritative DTC distribution. By taking control of its distribution channels, Nike will take greater ownership of the brand, marketing, pricing, and messaging strategies. This will certainly drive a greater exclusivity level, enabling Nike to drive higher margins while blending a more personalized and localized customer experience.

By limiting their wholesale partner distribution network, there is a level of convenience and accessibility that will be lost. Perhaps the most loyal Nike fans will follow the brand wherever they are. However, those who are more value-conscious may find the more affordable and accessible alternative at their favorite department or specialty shoe stores.

It will be fascinating to see how this plays out. This approach absolutely disrupts and changes what has been a working wholesaler and retailer long-term partnership.

Paula Rosenblum
I’m sure they’ve done the math on the lost gross margin dollars and revenue vs. eliminating wholesaler shipping, technology and process costs in the pivot to being a pure DTC brand. It’s not a popular opinion, but I think Nike has been thrashing for years. Opening very cool (and costly) stores, then deciding they didn’t really care about most of them. Now this. I suppose if the math works and the Street is happy with it, it’s fine. They get rid of the grey market (maybe) and hone their image. Of course, they’ve changed that (their image) a bit a few times over the past few years, so I’m not completely sure what their image is right now. I’m not sure who their target customer is, nor am I really sure what the following means: “‘Consumers want modern, seamless experiences, online to offline, so we’re accelerating our approach,’ he said. ‘Our OneNike marketplace strategy leads with Nike Digital in our own stores and embraces a small number of strategic partners who share our vision to… Read more »
Ricardo Belmar

Their statements sound to me like they are chasing absolute control – over brand, sales, and customers. And they are willing to tolerate only the retailers that play along with them. Everyone else gets shut out. So far, I’d argue it’s working for them, but my guess is they are playing a long game here and willing to take some initial losses from places like Macy’s and Urban Outfitters. Then again, my last pair of Nike shoes were purchased at Olympia Sports on a sale, otherwise, I wouldn’t have purchased them. I don’t have a Nike store near me, so are they willing to abandon me as a customer?

Paula Rosenblum

I’ll wager the company changes this strategy in around three years, and someone will lose their job. It’s fine to order online once you know how a shoe fits, but their stuff has a pretty short lifecycle. In fact, the last time I found a pair that fit well, I bought up as many as I could (mostly from the grey market) because I couldn’t deal with finding another style that works and didn’t really want to go to Lincoln Road, where their store is (which is another story for another day).

Joe Skorupa

Nike has a 27% global market share in athletic footwear and NikePlus has 140 million members. It has an app portfolio that is available in 22 countries. It has 1100 stores in a variety of formats. It has purchased a predictive analytics firm (Celect) and a computer vision/AI firm (Invertex). The Melrose store in LA, which I have visited, has too many personalized features to list here and many of them are connected to apps and in-store technology (omni-everything). Nike is becoming the Apple of retail — premium products and services, owning the customer connection, advanced tech, redefining the shopping experience.

Ricardo Belmar

Joe — excellent points. I’d dare say Nike already is the new Apple of retail when it comes to blending store experience with digital and being omni-everything. They’re chasing loyal customers and doing everything they need to do to keep creating more brand loyalty — much like Apple has done over the years, without ceding any of the control over that customer base to other parties.

With my personal example the logical question is, how badly do I want my next pair of sneakers to be Nike? If I do, I’ll seek them out, likely starting with their mobile apps (of which I have multiple Nike apps on my phone) and then see if a store is convenient for me. Does that mean I won’t look at competitors? We’ll see…. 🙂

Jeff Sward

“Nike is becoming the Apple of retail…” What a great way to say it! Perfect!

Scott Norris

I’m more than happy with the selections available at the DSW just down the street, and even with the vaccine I just don’t care enough to make a special trip to a Nike standalone store. If it works for them, great, but meanwhile NB, Sketchers, etc will be pleased to take my money.

Phil Chang

Interesting. Is Nike strategically selecting wholesale partners or strategically re-risking retailers that are in danger of going out of business? Are they the same thing?

In this case, they might be the same thing. Perhaps the only question is, how elite does Nike get? When does the brand become inaccessible to those that made it popular?

Gene Detroyer

Phil, an interesting observation.

Rodger Buyvoets

Nike has such a large and loyal consumer base (with unparalleled brand power) that this seems a good move, especially with the move to digital personalization. There are more people shopping online than ever before, meaning personalized efforts should refocus on what the brand can offer to online shoppers rather than through wholesalers. They will have to, of course, make sure they understand who these customers are on a deeper level, but I don’t see that being a problem for a brand like Nike, who are already personalizing the e-commerce space and omnichannel.

Ben Ball

One of the biggest profitability mistakes manufacturers make is not cutting off the long tail — both product line and customers. The drag they create on productivity and focus is underestimated. The surge in online access makes cutting the customer roster much easier but it can also encourage maintaining the slower sellers in the product line. Nike has no doubt done the analysis to understand the implications of the long tail customers and most likely has reached the right conclusions.

Georganne Bender

“Consumers want modern, seamless experiences, online to offline…” Speaking purely from consumer point of view, it will be hard to have a seamless experience with the brand when the number of places to purchase product is limited.

Nike has a cult following so it will be relatively easy to retrain those customers on where and how to buy its products. It’s the consumers who shop at retailers like DSW and Macy’s who will be out of luck.

Lisa Goller

Yes, streamlining its collaborations means Nike may reach fewer consumers. Yet Nike is relying on partners who can deliver seamless service to optimize omnichannel success.

Concentrating on fewer retail partners will boost Nike’s efficiency and agility. Shortening the supply chain with direct-to-consumer sales gives Nike access to data to make its marketing more personalized and competitive.

If the wholesaler cuts upset certain communities, Nike will need contingency plans to reconnect with consumers who feel abandoned. Using its core retail partners and DTC sales can help Nike reestablish its reach among those shoppers.

DeAnn Campbell

Nike is in the enviable position of having the brand strength to reach customers directly, and the existing brick-and-mortar support system to stand on their own. Culling their sellers is something they have needed to do for some time. When your products are sold through so many different partners you water down your brand appeal and lose control of the relationship you have with your customers. By pulling back and regaining some of their original exclusivity, they are ensuring a longer and better life for the Nike brand.

Di Di Chan

Nike came to fame by focusing on making the best shoes, and later attire, for athletes. Nike outcompeted first on performance. Their running shoes were unmatched for a while. They were part of the athletic community and participated in all of the relevant competitive sporting events. Then their marketing efforts popularized their brand and products for mass commercial consumption too. In the process of becoming one of the top global athletic brands, the quality of their product for the best athletic performances has gone down. It did not impact their bottom line because more and more people wanted Nike’s inspiring stories. Eventually, the past excellence stories will run out as a new generation of athletes bring their own stories to light. The most important strategic move that Nike can make is to renew its reputation in being the top quality athletic performance brand with a new generation of athletes.

Dave Wendland

Let me begin by suggesting that Nike will undoubtedly make adjustments as they go, but as Tina Fey said, “Say yes and you’ll figure it out afterwards.” Taking that first step is often the most difficult — but for Nike they have been taking short strides in this direction for quite some time and this broader commitment pushes them farther toward DTC without the safety net of more traditional retail.

Will the company potentially make it more difficult for some to be reached? Yes — in the short term. But the Nike brand is ubiquitous enough to shore up the gaps quickly and recover strongly.

Not every company is ready to make such a bold move. However I feel Nike has much more to gain than lose with this latest pivot.

Venky Ramesh

Strategy is all about making choices – where to play and how to win. They seem to have made the choice that they want to focus on digital-savvy customers, move closer to them and create a more intimate relationship with them. They are eliminating distractions to focus on the most profitable segment and seem confident about seeing higher growth.