Nike DTC led business model
From traditional channels to direct to consumer (DTC)
Every other Wednesday, h/commerce provides in-depth analysis of the most impactful trends reshaping retail.
As many retailers had to close their doors during the pandemic due to restrictions and measures, DTC has exploded. Facing uncertainty and loss of control, brands were encouraged to move to a DTC model. In fact, withdraw from multi-branded wholesale accounts means for brands to take back control of the whole customer journey.
Retailers are also currently struggling because of new consumers’ online shopping behaviors.
For that main reason this context was also an opportunity for brands to develop their digital ecosystem to directly reach their final customers.
Some of them created or enhanced their own apps, websites or even stores on social media like Tiktok and Instagram. Other retailers also discovered the powerful interactive impact of livestream shopping.
Indeed, the DTC business model shift has already started and seems to be a real business trend. So, this model is expected to be broadly adopted in the coming months or years.
One of the role model here is Nike, which gradually adopted a more DTC led strategy over the years.
Let’s look closely at Nike’s shift from traditional channels to DTC model.
For Nike, the movement toward DTC business model seems to be a great value-creation opportunity.
This movement began 10 years ago when Nike announced its direct-to-consumer acceleration. According to Emarketer, at the time DTC sales represented 14,3% of total Nike brand revenues. By the end of 2020, that revenue had grown to 33,1%.
One of the key advantages of the DTC strategy according to the brand is that you can provide a reward program, unique events as well as a personalized experience to your customers.
Nike really focuses on developing a direct and personalized relationship with the brand.
1. Cease its inconsistent partnerships with some distributors
These last years, Nike intensified its DTC strategy. In 2020, Nike decided to stop its partnerships with several retail partners to focus on its shift toward Direct to Consumer. Wholesale channels are presenting a risk for a company to lose control of its own brand. Some of these evicted partners are Belk, Dillard’s, Zappos, Boscov’s, Bob’s Stores, Fred Meyer, EBLens, VIM, and City Blue. However, there are still remaining Nike partners like Dick’s Sporting Goods, Hibbett Sports and Shoe Carnival, DSW, Foot Locker, and Famous Brands.
Nike revealed that it will continue to work with retailers sharing its vision in order to create the more consistent customer journey as possible.
In the New York Post, a Nike spokesperson told that they will now partner with “a smaller number of strategic partners who share our vision to create a consistent, connected and modern shopping experience.”
2. Open its own physical stores
In recent years, Nike created 3 new stores concepts: Nike Rise, House of Innovation, and Nike Live.
These developments are answering Nike’s ambition to build a more digital and consistent relationship with its customers and fans.
Recently, the brand launched several physical stores.
In august, the brand announced the launch of a 25,000 square foot Nike Flagship in Toronto at Yorkdale Mall.
The same month, Nike opened its second Rise retail store in Seoul. This launch is completely in line with the company’s plan to open more localized physical stores. In this store, there is the same focus on digital and technology that in the previous Rise store opened in Guangzhou China.
Through its Rise concept, Nike is gathering physical and digital experiences to provide an immersive customer journey.
What this specific store provides is Sport Pulse, a digital platform using local Nike products trends and sports updates. This service allows the brand to bring a local “signature” to that specific store.
Another new service is Inside Track, an interactive RFID-enabled digital footwear table that is able to compare various elements like products benefits, technologies, online reviews, etc. for every 2 shoes located in the store. Customers just have to choose two pairs of shoes and place them on the digital table.
Seoul customers will also be able to find in the store 3 new experiences: The Sport Hub which helps visitors to find sports opportunities in their city or to access pick up and returns service at a specific desk, The City Replay to allow visitors to find hyperlocal Seoul products and also to repair or customize pre-owned products and finally, The Huddle which connects customers to programming helping them on their sport, mindset, and nutrition journey.
Source: Nike Website
3. Invest in its digital ecosystem
Moreover, to make its DTC dream come true, Nike is heavily investing in its digital ecosystem.
Nike digital ecosystem includes its website, its apps, as well as digitally enabled stores that the brand is planning to open up across North American and Europe-Middle East-Africa countries. This strategy seems to work very well for the brand which recorded an 84% increase in online sales last year.
Recently, Nike launched a free app to accelerate its digital transformation in South Asia and in India. The app is now available in Singapore, Thailand, the Philippines, Malaysia, India, Taiwan, Vietnam and Indonesia. The app is providing members with personalized recommendations on products, special rewards and experiences.
This new addition to the Nike local ecosystem allows Asian customers to shop whether online or in-store.
Members will also have an early and exclusive access to latest products’ drops through the app.
In addition, they will be able to unlock some rewards through their personalized ‘members wallet’ which centralized promotions, events’ access, exclusive contents, tips and so on.
Source: The Indian Express
Why is it interesting?
Currently DTC seems to be a model creating value.
It allows brands to keep control on their identity and the whole customer journey but also to create a long-term relationship with their customers.
Nike shifting to DTC model isn’t an overnight change. The company gradually shifted to more DTC and saw the pandemic as an opportunity. Effectively, we are experiencing a profound acceleration of online shopping which has been a great opportunity for brands to expand their digital ecosystem.
Other actors on the market decided to go in Nike same direction as Adidas which, according to RetailDive magazine, “rolled out a four-year strategy earlier this month that emphasizes the same things that Nike is focused on: having a DTC-led business model, sticking with only strategic wholesale partners and investing heavily in digital.” The brand should invest 1 billion euros ($1.2 billion) dedicated to its digital transformation between today and 2025.
Even brands like Heinz and PepsiCo had opened new distribution channels to connect more directly wither their customers.
Source: PantryShop by PepsiCo
We should be able to notice some profound business transformations and heavy investments in digital in the near future and we expect this mutation to impact every market.