Illuminated trademark of the American athletic footwear and apparel corporation Nike, Inc. seen on the Nike Store window in Antwerp, Belgium. (Photo by Karol Serewis/SOPA Images/LightRocket via Getty Images)
Karol Serewis | Lightrocket | Getty Images
Nike CEO John Donahoe acknowledged Friday that the corporate moved too far away from wholesale partners like Macy’s and DSW in its quest to turn out to be a retailer that primarily sells merchandise to shoppers through its own stores and website.
“We recognize that in our movement toward digital, we had over-rotated away from wholesale just a little greater than we intended,” Donahoe told CNBC’s Sara Eisen from Paris. “We have corrected that. We’re investing heavily with our retail partners. They were all here during the last couple of days; they’re very excited in regards to the innovation pipeline.”
Over the past several years, Nike has worked to rework its business from a brand that primarily sold its sneakers and garments in malls and specialty athletic shops to 1 that does the majority of its sales direct to consumers.
The strategy allowed Nike to earn far more from its sales and gain higher insights about its customers through data collection. During the last 4 years, Donahoe said Nike tripled its mobile and digital business from about 10% of overall sales to 30%.
Nonetheless, it’s a tricky technique to pull off and one which can pressure margins in the short term. Shifting to a direct model is capital-intensive and saddled Nike with the headaches of returns and owned inventory, which had typically fallen on wholesale partners.
On top of that, malls and specialty shops are massive customer acquisition engines. Without them, brands need to spend more on marketing, which has turn out to be costlier and difficult to do online.
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Some analysts have said Nike’s decision to shun wholesale partners was a mistake. They argued it set the corporate back and is an element of the explanation why it fell behind on innovation and products. It also had a negative impact on Foot Locker, which has long relied on Nike to drive sales and now doesn’t receive the identical assortment of products that it once did.
In its push toward a direct model, Nike temporarily cut ties with retailers like Macy’s and DSW, but it restored those partnerships last yr as it began to shift its tone on wholesalers.
The change comes at a difficult time for Nike, which has faced criticism over its product assortment and losing market share to upstarts like On Running and Hoka. In December, it announced a broad restructuring plan to cut back costs by about $2 billion over the subsequent three years. It also cut its sales guidance as it warned of softer demand in the quarters ahead.
Two months later, Nike said it was shedding 2% of its workforce, or greater than 1,500 jobs, so it could invest in its growth areas, resembling running, the ladies’s category and the Jordan brand.
During Friday’s interview, Donahoe reiterated that customers today “wish to get what they need, once they want it, how they need it” — a refrain he has used over the past yr when discussing Nike’s shifting sales strategy.
“There’s not digital shoppers versus physical retail shoppers. There’s not shoppers who only shop in mono-brand stores versus multibrand shoppers,” Donahoe said. “Consumers wish to get what they need across multiple channels. … The buyer could have a alternative to come back to Nike directly digitally, to come back to a Nike door or to go to certainly one of our wholesale [partners].”