"Anyone who does not differentiate, will lose out”, is Nike CEO Mark Parkers’ message to retailers. The sports brand wants to focus more on its own sales channels and will therefore make cuts in its distribution network.
Nike seeks direct connection to consumer
In an attempt to increase its sluggish sales, Nike intends to embark on an enormous transformation project. It wants to have more direct sales, but also plans to speed up its supply chain and product development. “The speed to market, consumer connections and direct relationship to those consumers thanks to our digital channels and memberships are enormous”, Parker told CNBC.
“The consumer expects a premium experience nowadays, with innovative products and services that are both faster and more personal”, he clarified its new strategy. “Driven by changes in our business, we are dealing with growth opportunities through innovation, speed and digitization in order to create sustainable and profitable growth in the long term.”
Nike countered its recent profit drop revelation (profit went down nearly 20 % and turnover remained rather stagnant) with a fifty billion dollar forecast within the next five years. It also envisioned that goal in 2015, but its target year back then was 2020, meaning it has been forced to adjust its forecast already.
In order to achieve that growth, Parker wants to focus on digital sales (which should grow from 15 to 30 % in the next five years), on new products (50 % of its turnover growth should come from now product categories and innovations) and sales abroad (75 % of growth should come from outside of the United States).
“Average retailers will not survive”
A remarkable path Nike will take is that it wants to review its retail partner network. The company currently has about 30,000 retail partners, but it wants to bring that back to a mere forty. With the remaining group, the company intends to collaborate more intensely through special partnerships and with dedicated brand space in the stores.
This should help the company bring the appropriate brand experience to the consumers and this should also give retailers an improved shopping experience. Companies like Nordstrom, Footlocker and Amazon are on Nike’s list, with the latter having become a partner after years of resistance from Nike itself. Parker said its new strategy is a reaction to the retail industry’s consolidation efforts over the past two years, which has slowed down the entire market. He considers the retail world’s disruption to be an opportunity and an obligation to deal with the consumer directly.
In other words: the retail market is too unstable for us to rely on, so we will have to do it ourselves. The CEO explicitly said average retailers that do not differentiate will not survive in the future, not as Nike sellers and not even as a company in general.