What? Should Nike drop Zappos and others to focus on consumer-direct?
Nike is ending its wholesale relationships with Belk, Dillard’s, Zappo’s and other retailers as the athletic lifestyle brand continues to focus more of its attention on its own consumer-direct operations, according to a note by Susquehanna Financial Group analyst Sam Poser.
Other retailers that Nike is cutting out include Bob’s Stores, Boscov’s, City Blue, EBLens and Fred Meyer, as reported on by Footwear News. Mr. Poser cited “proprietary checks” as his source for the news, which he labeled as “positive” for the brand.
Nike has neither confirmed nor denied the plans to end its relationships with the accounts cited by Mr. Posner, saying instead that it is “doubling down” on its digital business, company-operated stores and “a small number of strategic partners” that share its approach.
John Donahoe, Nike’s CEO, told analysts in June that the company’s consumer-direct strategy would help it emerge from the COVID-19 pandemic stronger than at its outset. He announced at the time that Nike would accelerate its efforts going forward.
Nike, he said, had set a goal of conducting 30 percent of its total product sales via digital channels, both its own and trading partners, by 2023. The company expected to reach that goal this year, a full two years ahead of its previous plan. As a result, Nike is looking at half of its business being generated online in the next couple of years.
“Consumer direct acceleration is more than just the next phase of our strategy. It’s the spark that will ignite and empower our entire company to serve consumers, our business and our teams better,” said Mr. Donahoe. “As we shift our operating model to fuel this strategy, Nike’s leadership position will become even stronger in the future as sports continue to resonate with consumers amid a global shift toward health and wellness.”
Mr. Donahoe has continued to emphasize memberships as a means to drive Nike’s business to new heights. In the last quarter, Nike reported that it added 25 million new members, double what it had during the same period in 2019.
“Membership is a big word, but in my mind it breaks down three simple things,” he said. “Do we have an identified one-on-one relationship with a consumer? Can we increase our level of engagement with that consumer in value-added ways? And then does that increased engagement lead to greater retention and share of wallet if there are other purchases?”
- Nike Will No Longer Sell to Zappos, Dillard’s & These Big Retailers, Analyst Says – Footwear News
- Nike, Inc. (NKE) CEO John Donahoe on Q4 2020 Results (Earnings Call Transcript) – Seeking Alpha
- Will Nike’s digital drive build stronger ‘one-to-one’ relationships with consumers? – RetailWire
- Nike debuts member-driven concept – RetailWire
DISCUSSION QUESTIONS: What is your take on Nike’s reported plans to sever its wholesale relationship with Zappos and other retailers? Do you also see Nike emerging as a stronger company than it was before the pandemic began?