Nike continues its march towards more direct-to-consumer (DTC) sales, notifying seven more distributors that they will no longer be selling its products.
The last shipments to DSW, Macy’s, Urban Outfitters, Big Five, and several others are likely to go out in October 2021. The move follows Nike’s cut of nine wholesalers last fall, and continues a push towards more digital sales.
Its DTC model that began about a decade ago has been accelerated and positively affected by the pandemic.
- Nike executive: ‘Our digital business is on fire’ (Nov 15, 2020, Yahoo Finance)
This post is based on the Retail Dive article, Nike drops DSW, Urban Outfitters, Macy’s in quest for more DTC sales , by Cara Salpini, March 26, 2021; the Retail Dive article, How Nike is using DTC and data to expand its empire, by Cara Salpini, March 23, 2021; and the YouTube video in the Spotlight. Image source: Paulaphoto/Shutterstock
1. How will Nike reach consumers if it bypasses the many wholesalers and retailers on which it has traditionally relied?
Guidance: Nike plans to use more digital sales in its app-driven stores, and it plans to open about 200 smaller format stores. Thus, rather than placing its merchandise with big mall retailers, stores will be smaller, community-based locations.
DTC sales already make up about $12.4 million, or 35 percent, of Nike’s business. This strategy has worked well during the pandemic when many customers had no choice but to shop from home.
2. What are the key benefits of the DTC strategy?
Guidance: Profit margins are higher for Nike with this model, and it also gives Nike greater control of its brand presentation. Having its own branded stores provides an opportunity for customers to build community loyalty and have a place to see the merchandise while allowing Nike to avoid paying supply chain middlemen.
3. To what extent is this reshaping of the supply chain taking place in other companies in the fashion and footwear industry?
Guidance: Both Under Armour and Adidas are aggressively pursuing DTC strategies. Under Armour plans to close 3,000 store distribution points, and Adidas has a goal of selling 50 percent of its merchandise via the DTC model by 2025.
Monitoring the external environment, including customer preferences, technological advances, and the actions of competitors, is a key part of creating operations strategy to stay viable in the long run and craft plans that will help a business avoid entropy.