Nike Digital now accounts for 26% of revenue amid membership focus
Few companies were hit harder by the pandemic than retailers reliant on bricks-and-mortar stores. The latest earnings report from Nike this week emphasises how hard and how fast the athletic apparel and equipment company has pivoted under its “Consumer Direct Acceleration” (CDA) strategy to direct selling routes.
Nike Digital, its series of digital channels and applications, now accounts for 26% of company revenues, its Q3 earnings revealed, with digital sales in the US up 33% on the same quarter last year. Nike revenues for the quarter were $10.9 billion. Net income was $1.39 billion, down 4% on the same period in 2021.
Nike has been investing heavily in data science as it pivots away from traditional relationships with retail chains, in 2021 buying data integration startup platform, Datalogue to accelerate a strategy re-emphasised by CFO Matt Friend on an earnings call this week. Friend said: “Consumers continue to shift toward digital to find the products they love, and NIKE’s digital experience continues to build deep consumer connections and capture digital market share.ver the past four years, we have reduced the number of wholesale accounts worldwide by more than 50% while delivering strong revenue growth through NIKE Direct and our remaining wholesale partners.”
For remaining wholesale partners Nike aims to “recapture dislocated demand by elevating our partner’s retail environment and digitally connecting NIKE membership with their retail experience.” What does that mean, exactly?
See: Nike’s digital ambitions hit supply chain snags, as worlds collide
This latest move, part of the sportswear giant’s CDA strategy focussed heavily on membership. This hinges on what Nike dubs the “marketplace of the future” — one in which even physical stores will be focussed on executing a digital strategy designed to make online and in-store shopping tightly integrated, involve “new experiential technologies” and tap data from membership programs and digital storefront. Nike has also used its digital and direct platforms to deliver loyalty rewards to individual consumers.
CEO John Donahoe told analysts: “We don’t just have one mobile app.
“We have the NIKE mobile app, the SNKRS mobile app, the NTC (Nike Training Club) and NRC (Nike Run Club). And that is very scarce space to have clear digital competitive advantage [sic].
“Consumer Direct Acceleration led by Digital is what’s going to drive us.”
Other innovations the company is delivering include the “NIKE ISPA Link” which Donahoe described on the call as a “new proprietary platform where shoes are built with interlocking modules and they’re connected without any glue. From a manufacturing standpoint, ISPA link is revolutionary in its simplicity.
He added: “One pair takes about eight minutes to assemble, a fraction of the time needed for a traditional sneaker. nd it doesn’t require energy-intensive processes like heating, cooling and conveyor belt systems… The ISPA link will be available at retail in June and we can’t wait for consumers to give it a try.”
Supply chain issues remain however: “Transit times are now more than six weeks longer than pre-pandemic levels and two weeks longer than the same period in the prior year” Nike CFO Matt Friend said.
“In order to ensure the right assortment of products arrive on time for the fall selling season, we have moved forward our buying time lines to accommodate for longer transit times.”