Illuminated trademark of American sports footwear and clothing company Nike, Inc. in the Nike store window in Antwerp, Belgium. (Photo by Karol Serewis/SOPA Images/LightRocket via Getty Images)
Karol Serewis | Light rocket | Getty Images
Nike CEO John Donahoe acknowledged Friday that the company has strayed too far from wholesale partners Macy’s And DSW in its quest to become a retailer that sells goods to shoppers primarily through its own stores and website.
“We recognize that in our transition to digital, we’ve moved a little more away from wholesale than we intended,” Donahoe told CNBC’s Sara Eisen from Paris. “We corrected that. We invest heavily in our retail partners. They have all been here in the last few days and are very excited about the innovation pipeline.”
In recent years, Nike has worked to transform its business from a brand that sells its sneakers and clothing primarily in department stores and sporting goods stores to one that makes the majority of its sales directly to consumers.
The strategy enabled Nike to earn significantly more from its sales and gain better insights about its customers through data collection. Donahoe said Nike has tripled its mobile and digital business from about 10% of total revenue to 30% over the past four years.
However, it is a difficult strategy that may put pressure on margins in the short term. Switching to a direct model is capital intensive and burdens Nike with the problems of returns and inventory that are typically incurred by wholesale partners.
In addition, department stores and specialty stores are major drivers of customer acquisition. Without it, brands have to spend more on marketing, which has become more expensive and difficult online.
Some analysts believe Nike’s decision to avoid wholesale partners was a mistake. They argued that this has set the company back and is one of the reasons it has fallen behind in innovation and products. It also negatively impacted Foot Locker, which has long relied on Nike to boost sales and now doesn’t get the same product assortment it once did.
Nike temporarily cut ties with retailers as part of its push toward a direct-to-consumer model Macy’s And DSWbut it restored those partnerships last year as it began changing its tone toward wholesalers.
The move comes at a difficult time for Nike, which has faced criticism over its product range and lost market share to upstarts like these While running and Hoka. In December, the company announced a major restructuring plan that would cut costs by about $2 billion over the next three years. The company also lowered its revenue forecast as it warned of weaker demand in the coming quarters.
Two months later, Nike announced that it would cut 2% of its workforce, or more than 1,500 jobs, to invest in its growth areas such as running, the women’s category and the Jordan brand.
During Friday’s interview, Donahoe reiterated that consumers today “want to get what they want, when they want it, how they want it” – a refrain he used last year when discussing the company’s changing sales strategy Nike spoke.
“There are no digital buyers as opposed to physical retail buyers. There are no shoppers who only shop in mono-brand stores as opposed to multi-brand shoppers,” Donahoe said. “Consumers want to get what they want through multiple channels. … The consumer will have the choice to come to Nike directly digitally, walk into a Nike door or walk into one of our wholesale outlets.” [partners].”
Don’t miss these exclusives from CNBC PRO
Source link
2024-04-12 18:55:19
www.cnbc.com
