Can independent retailers survive without stocking a big brand like Nike? This is a question that is being asked in various countries, as independents are finding it more and more difficult to get stock from some of the big brands.
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Strategies Nike announced last year left little doubt that independent retailers are not a priority for the brand: the Consumer Direct Offense policy was announced in June and CEO (and chairman and president) Mark Parker said end October that they were only going to concentrate on 40 key global retailers in 12 cities, its own stores and online sales direct to consumers.
Nike is, however, not the first to focus on selling to consumers directly. In the fourth quarter of 2017 Under Armour’s direct-to-consumer sales represented 42% of all its revenue from sales.
Nike brand president Trevor Edwards told an investor summit that Nike will not summarily cut off the 30 000 retailers the brand currently supplies through 110 000 distribution points worldwide, but that the brand would over the next five years phase out supplying “undifferentiated, mediocre retail”, which he claimed “won’t survive”.
The select 40 chains would, on the other hand, get special attention and they will provide a special branded space for Nike product, as well as dedicated Nike salespeople.
What the implication for South African retailers would be, is unclear. “The Nike Consumer Direct Offense was rolled out globally,” says Seruscka Naidoo of Nike in SA. “Unfortunately, we are not able to provide more information on the retail strategy.”
The idea behind Nike’s Consumer Direct Offense is to offer the restless must-have-the-latest consumer “the most personal, digitally connected, experiences” in the industry, Parker said. It includes a new NikePlus online membership programme that gives member-only access to certain products, matched to their individual preferences and buying patterns. Earlier this year the company bought artificial intelligence computer firm Invertex, which creates scan-to-fit shopping experiences that includes 3D-digitization, and consumer data analytics firm, Zodiac.
This Consumer Direct Offense “allows Nike to better serve the consumer personally, at scale” the company said in a press release. This means concentrating on consumers in 12 key cities in ten countries, namely New York, Los Angeles, London, Shanghai, Beijing, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan, which are expected to account for 80% of Nike’s growth by 2020.
As can be expected, these announcements did not inspire retailers to rush out and place future Nike orders. Between June and October 2017 futures orders were down 2% – and these included orders from Nike’s own stores and online operations. In the Q3 2018 financial report Nike didn’t include a report on future orders, because these are no longer an indication of product demand because they are now cutting out the middleman by doing business directly with the consumer, the brand indicated.
In the UK and Ireland several independent retailers have already taken stock of their Nike options and decided to rather concentrate on growing relationships with brands who are keen to supply them, Paul Sherratt of Solutions for Sport wrote on LinkedIn.
The Consumer Offense was initially driven by Trevor Edwards, who was touted as a successor to Parker, until he resigned in March. He departed shortly after the brand sent an email to employees that it was investigating improper workplace conduct related to “behaviors (sic) that did not reflect its values”. By May this year eleven very senior Nike executives had resigned under the same cloud, related to allegations of harassment and discrimination against female employees.