Nike's New Consumer Experience

Distribution Strategy Hits The Ground

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Pamela N. Danziger
Senior Contributor

Retail

I study the world's most powerful consumers -- The American Affluent

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 Nike could potentially edit out a massive number of distribution partners from its current
slate of 30,000 retailers to focus primarily on only 40

 It is a “warning to lackluster retailers that brands, like customers, will leave,”


 

The Nike Inc. logo is displayed in the window of the Nike by Melrose live
concept store... [+]
 © 2018 BLOOMBERG FINANCE LP

In mid-2017 Nike unveiled its plan for growth called the Triple Double
Strategy (2X). Through it, the company promised to double its “cadence
and impact of innovation,” double its speed to market and double its “direct
connections with consumers.”

The cornerstone of the Triple Double Strategy is the Nike Consumer

Experience (NCX), which includes Nike’s own direct-to-consumer network,
as well as a vastly streamlined slate of wholesale distribution partners. It is
through the NCX that the company is feeding its 2X Innovation and 2X
Speed initiatives.

At a time when most big international companies would be doubling down

on what made them successful in order to defend their turf, Nike is going
on the offense in a “disrupt yourself” way to propel the company faster and
further into the future.
PROMOTED

Michael Spillane, Nike president of products and categories, said at the

company’s October 2017 Investor Day presentation, “We’re the largest
footwear brand at $21 billion. We’re the largest athletic apparel brand at
$9.6 billion. And in footwear, we hold the #1 market share in all markets
and all major categories. It means we can amplify our brand message into a
global conversation.”

In “Just Do It” fashion, Nike recognized it must “edit to amplify” growth, so

it is putting 25% fewer styles into the market to make space in order to
amplify sales. And it also includes streamlining distribution to only those
that deliver the fastest, most profitable growth.

That means Nike could potentially edit out a massive number of

distribution partners from its current slate of 30,000 retailers to focus
primarily on only 40 that offer superior customer experiences, quality
service and storytelling that differentiates the brand. And of course, the
company’s own Nike Direct retail platform, both online and offline, is
where it can deliver all those at the highest level.

With a little over a year of executing on the Triple Double Strategy, the
results are starting to show. In fourth quarter 2018 Nike brand revenues
grew 9% on a currency-neutral basis, followed by a 10% increase in first
quarter 2019. In both quarters, the company reported double-digit growth
internationally and in Nike Direct, as well as “strong momentum” in North
America, its premier market.

Nike credits its Nike Customer Experience (NCX) platform as driving

virtually 100% of growth in 2018, according to a new study of Nike’s
distribution strategy by Euromonitor. The report provides a case study in
how big global brands and retailers must navigate in the future.

Such dramatic strategies are not for the faint of heart, but absolutely critical
to manage disruption in established businesses caused by demographic,
geographic and psychographic shifts in the market.

Empowered consumers won’t wait for brands to catch up. Nor will product
marketers wait for their retail partners either. Nike has decided to
proactively get out in front of those changes and be there whenever and
wherever the customer wants to engage with them.

Here is how Nike is doing it.

Go with retail winners, forget the losers

While Nike is placing a heavy emphasis on direct-to-consumer channels

through Nike.com and its own retail stores, wholesale distribution still
accounts for the lion’s share of sales, some 70% in 2018, though that share
has decreased from 82% in 2014.

To amplify sales through its wholesale distribution channels, Nike has

identified only 40 retail partners, both online ecommerce players and
physical retailers, that offer the best access to the customers it targets and
who can deliver best-practices customer experience for the brand.

Nike calls these best-of-the-best partners “differentiated retailers,” as

distinguished from undifferentiated retailers that don’t offer quality service
or powerful storytelling in keeping with Nike’s expectations.

These undifferentiated retailers Trevor Edwards, president of Nike brand,

describes as “mediocre,” and destined not to survive. However, over 60% of
its North American business today comes through undifferentiated
retailers. Implementing the NCX program will require a serious edit. The
goal is to generate 80% of its North American wholesale business through
differentiated retailers in 2023, up from 40% in 2017.

Nike’s fine-tuned list of 40 differentiated partners, including online as well

as physical retailers, will gain access to the most popular products,
including exclusives and more marketing dollars to draw shoppers away
from undifferentiated retailers.

While the company has not revealed the full list of its favored differentiated
retail partners, the Euromonitor report reveals that Foot Locker,
Nordstrom, Dick’s Sporting Goods, JD Sports and Finish Line made the cut
in physical retail and that Amazon, Zalando, Tmall, Stitch Fix, Asos, Zozo,
Flipart and Jet.com made it digitally.

With 30,000 retailers in its network globally and some 110,000 points of
distribution, many undifferentiated retailers will get short shrift from Nike
in the future, if they aren’t cut entirely.

While Nike does not explicitly state what criteria it used to define
differentiated partners, Nordstrom and Foot Locker provide examples of
the differentiation it is looking for. Nordstrom has an shop-in-shop
agreement where Nike operates its own space and provides the sales staff.
Foot Locker has similar separate spaces and company-trained “Nike
Experts” on staff. For its pure-play digital partners, Nike expects them to
share data.

Nike Direct puts its best foot forward

A new app to power both in-store and Nike.com sales and new store
formats are the hallmarks of Nike’s direct channels to the consumer.

The Nike App enhances the shopper experience and gives access to the
NikePlus rewards program. The loyalty program offers members exclusive
products, of which about one-third of its assortment is online and member
exclusives, access to Nike experts, personalized workouts, priority access to
events, free shipping and 30-day wear tests. Awards are accrued based on
spending and fitness app usage which unlocks even more exclusives, more
services, personalized discounts and access to VIP experiences.

A customer uses an app enabled vending machine at the Nike by Melrose.

Photographer: Patrick T.... [+]
 © 2018 BLOOMBERG FINANCE LP

While NikePlus members get the awards, Nike gets the customer data
which allows the company to drill down on their shopping habits and
product preferences in order to personalize their future engagements with
the brand.

Over 100 million Nike customers have signed on so far and the company
aims to triple that number by 2023. The app is also activated when
customers connect online or in its own stores or with its differentiated retail
partners. To date, NikePlus members spend three-times more in the app
than non-members on Nike.com.

With some 7,000 branded stores operating today, Nike is exploring new
physical store formats from the mammoth six-story New York flagship
store on Fifth Avenue and 52nd Street to a smaller format Nike Live store on
Melrose in Los Angeles that opened July 2018 and the new House of
Innovation in Shanghai which opened in October 2018.

The Nike Live store model puts all its customer data to work to streamline
the product assortment in “fast-fashion” style by swapping out 15% of
apparel and 25% of footwear every two weeks, instead of the traditional 30-
45 days.

The House of Innovation is a new experiential retail concept that will be

customized to each planned city with a Nike Arena for rotating product and
installation displays and a Center Court area to host presentations and
workshops.

What other brands and retailers can learn from Nike’s example

As important as the study of Nike’s new distribution strategy is to

sportswear marketers and retailers, it demonstrates the ways that other
brands and retailers need to think about retail distribution in this internet-
disrupted age.

For the sportswear industry, Michelle Grant, head of retailing at

Euromonitor, says, “With this new distribution strategy, Nike is opening a
new front for competition in sportswear: the best retail experience. Its
competitors will have to catch up to meet the standards that Nike is setting
when it comes to physical and digital retail through its own and partner
channels.”
But for multi-brand retailers the learning is even more compelling. It is a
“warning to lackluster retailers that brands, like customers, will leave,” the
report states. “The important lesson for retailers is that they must move fast
to innovate and differentiate themselves to offer value to both shoppers and
to the power brands that may pull back from their stores.”

The Nike strategy is the writing on the wall for retailers large and small that
have not figured out how to be collaborative and productive partners for the
brands they carry. Its not enough to just show the brands, retailers have to
sell the brands too.

If retailers don’t step up to provide superior customer experiences, quality

service and storytelling for the brands they carry, then the companies and
their customers will walk, jog or run away, like Nike is doing to its currently
undifferentiated retailers.

Note: Since publication of the Euromonitor report, a pilot test with

Farfetch has been discontinued. 

Follow me on Twitter or LinkedIn. Check out my website or some of my

other work here. 
Pamela N. Danziger

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I am a market researcher, speaker and author focused on the affluent consumers’ behavior and mindset,
including the HENRYs (high-earners-not-rich-yet) mass affluent. I
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Oct 1, 2021,09:45am EDT|60,070 views

Sustainable Manufacturing: Fixing The

Factory Floor

Vincent Rutgers
Brand Contributor

Deloitte
BRANDVOICE| Paid Program

Leadership

Sustainable manufacturing—the production of goods through

economically-sound processes that minimize environmental impact—will
most likely require the transformation of the entire manufacturing and
industrial system. Manufacturers will need to look at how they design,
source, manufacture, deliver, and service all their products. It’s a daunting
proposition. But it’s one manufacturers need to address as the
sustainability imperative continues to grow.

Whether it’s in response to stakeholder demands, regulatory mandates, a

concern for the environment, or plain financial gain, manufacturers can no
longer confine sustainability to aspirational targets printed in their annual
reports. To make the necessary progress, they will instead need to commit
to clear action. And that action will have to start on the factory floor.

Leveraging digital technology and renewable energy

Currently, manufacturing processes use roughly one-third of the world’s

energy.[1] Even in lower-intensity sectors—those outside of such top users
as chemicals, refining, and paper—energy often represents a significant
cost. And that only stands to rise as global energy prices increase. By
building sustainable practices into processes, manufacturers can tackle
their single largest sustainability obstacle while at the same time working to
minimize environmental impact and conserve resources. 

Through the use of digital technology, manufacturers may already have a

head start in their sustainability journey. In recent years, the
implementation of lean processes using digital capabilities have boosted
productivity, created safer workplaces, and reduced costs. What this
automation through digital technology can also provide manufacturers is
greater visibility into their production processes, equipment wear-and-tear,
and, more importantly, energy usage. Armed with this data, organizations
can then optimize production and improve predictive maintenance to
diminish energy loads as well as reduce material and water waste—all key
factors in building sustainability. 
But that may not be enough. Building a more sustainable factory floor
should also mean greater use of renewable energy—now increasingly
competitive in terms of cost. There are a few ways to do this. Many
manufacturers are taking advantage of power purchasing agreements,
which can lock in fixed prices for a supply of renewable energy, sometimes
for as long as 15 or 20 years.[2]  In other instances, manufacturers with
large campuses are even investing in on-site generation, using solar panels,
wind turbines, and geothermal pumps to power their facilities.

By reducing waste and water usage, adjusting energy loads, and tapping
into renewable resources, the factories of the future have the potential to
drive measurable sustainability outcomes as well as reduced costs. This is
particularly important as energy efficiency improvements are now being
increasingly mandated by licensing authorities at the launch of a
manufacturing operation or upon review once operational.

Making the sustainability shift more accessible

It’s true that low-carbon manufacturing and industrial systems will likely
mean changes in every sector and along nearly every step of the value
chain. While it may be intimidating to conceive of broadly, there are steps
manufacturers can take within their organizations and on their factory
floors to make the shift toward sustainability more accessible, operating
within the traditional framework of change management. These include:

 Plan: As a first step, it’s important to measure your facilities’

current carbon profile to build a baseline of your environmental
footprint. This can inform your strategy and enable you to set
clear targets and priorities. With decarbonizing an inherently
uncertain endeavor with no guarantees reduction targets will
remain steady or be achieved, any strategy should also be
underpinned with strong scenario planning. Additionally,
 companies should also be prepared for their data to be audited,
providing proof to clients as to their levels of sustainability.

 Execute: To carry out sustainability initiatives, new roles—

such as a chief sustainability officer—may need to be
developed. In turn, these leaders can help determine which
sustainability metrics the company is under pressure to deliver
on and prioritize investments, as well as build any new
capabilities needed. Just as important, to execute on priorities,
manufacturers will most likely need to bring ecosystem
partners together—including industry associations, third-party
providers, and regulators—in  a coordinated effort where all
participants up their sustainability game.

 Reflect: Manufacturers can do more than simply measure the

progress of their sustainability initiatives. They can also use
that progress to create a clear market narrative around the
positive impacts they are driving and paint a powerful picture
for investors and consumers alike—all the while improving
transparency. While those manufacturers that lag in
sustainable activity risk public opinion turning against them,
those who do take sustainability seriously need to get the word
out.

Ultimately, sustainable manufacturing can only be achieved by setting the

right tone from the top, gaining buy-in, and considering all the change
management implications.

Reaping the rewards

When it comes to sustainable manufacturing, significant change is afoot

and it necessitates bigger thinking—especially on the factory floor.
Manufacturers prepared to embrace the change will discover opportunities
for innovation—with sustainability targets inspiring inventive green design
and novel applications of technology.  Those who are unprepared may find
themselves left behind.

But by focusing on long-term outcomes, working collaboratively with

industry stakeholders, and adopting a deliberate and coordinated approach,
manufacturers have the capacity to realize significant benefits on the road
to sustainability. These range from improved competitiveness and
efficiency to reduced costs and risks. Yet the true measures of success will
extend well beyond the shop floor. By driving measurable sustainability
outcomes, manufacturers also have the power to create lasting social value.

[1] Geospatial World, July 17, 2018. “Factory automation and

environmental benefits,” by Teresa Tomas. Accessed at

on May 18, 2021.

[2] Deloitte. Sustainable manufacturing a profitable business case.

Accessed at
https://www2.deloitte.com/ch/en/pages/risk/articles/sustainable-
manufacturing.html on June 18, 2021.

GEOSPATIAL WORLDFactory automation and environmental benefits

Vincent Rutgers

Vincent Rutgers is the Global Industrial Products & Construction (IP&C) Sector leader with Deloitte
Touche Tohmatsu Limited (Deloitte Global) and a Consulting partner…
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Apr 27, 2020,06:28am EDT|16,776 views
Rapid Evolution: Three Ways The
Pandemic Will Revolutionize Retail

Jon Bird
Contributor

Retail

I'm a retail passionate who lives in Sydney, Australia but covers the world.


24 April 2020, Hamburg: ILLUSTRATION - A young woman wears a
mouth and nose protector in a clothing ... [+]
 DPA/PICTURE ALLIANCE VIA GETTY IMAGES

The outbreak of COVID-19 is causing a step change—online, in stores and

in shopper behavior. It’s not just evolution, but a retail revolution.

Charles Darwin, the famous 19th-century English naturalist, believed that

evolutionary change in species was gradual and continuous. In the modern
era, Harvard’s Stephen Jay Gould proposed a different theory: that
evolution happens in disruptive “fits and starts,” what Gould
termed “punctuated equilibrium.”

In a retail sense, that’s what we are witnessing right now – a sudden shock
to the system caused by the spread of the coronavirus, which signals a
punctuation or inflection point for the entire industry. 

The first and most obvious shift is to online retail, particularly in grocery
shopping. As reported in the Atlantic, prior to COVID-19, Instacart had
forecast that 20% of U.S. households would be shopping for groceries
online in five years’ time. In recent weeks, numbers of orders have rocketed
up 150%, turbo-charging that movement. The same article purports that
Amazon’s grocery orders have increased “50-fold since the lockdowns
began.” In the U.K., the Guardian notes “a near doubling” of online sales
since the start of the quarantine period. It quotes retail analyst Richard Lim
as saying that half of all U.K. non-food spending will move online (up from
30% today), as shoppers are “forced to go on a customer journey they
wouldn’t otherwise have embarked on.” In Australia, KPMG anticipates two
e-commerce waves: the current “shock switch from physical to online
channels,” and then a second wave post the pandemic which will start in e-
commerce and likely stick online.  

In a second and corresponding trend, we are seeing a major jolt to physical

retail, with a critical effect on legacy formats. Last week the New York
Times reported on the “Death of the Department Store,” which is hardly a
new story, but the “shock” of the coronavirus pandemic is speeding up the
category’s potential demise. In the U.S., one troubled chain’s entire
executive team was dismissed this month. Like the asteroid that brought
dinosaurs to extinction, the impact of COVID-19 has rocked department
stores around the world. At the same time, consumer expectations of what
brick-and-mortar retail should deliver is altering all of a sudden. Post the
pandemic, we may well see fewer stores, with more automation and less
physical interaction, the disappearance of cash in favor of contactless
payment, heightened hygiene and safety measures (such as anti-microbial
surfaces), and far greater integration with online retail. Zero contact
curbside pick-up is just one example spurred on by the current crisis.

Finally, shoppers have had their lives put on pause during the COVID-19
crisis; a very real “punctuation point” in the evolution of purchase behavior.
Consumers have had to stop and consider what they can really afford (with
widespread job losses and salary cuts), and what really matters, which
could lead to a new era of mindful consumption. Just as with the Great
Depression of the 1930s and the Great Recession of 2008, what’s important
to shoppers will change post COVID-19. From a retailer’s perspective, it’s
time to consider both “value” (in what you offer) and “values” (in what you
stand for). In terms of category growth, health and wellness will be top of
mind.

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Holiday 2020: A Mixed Bag For Retailers

Previous moments of “punctuation” in retail have given rise to whole new

“species.” China’s Alibaba launched its Taobao online shopping
website during the height of the SARS pandemic, at a time when founder
Jack Ma’s entire staff were quarantined at home. JD.com was also born out
of the SARS era — when CEO Richard Liu was forced to close his fledgling
chain of electronics stores and pursue e-commerce.

How retail copes with the current crisis will be fascinating and potentially
set the agenda for generations to come. Evolution? Perhaps we are in for a
retail revolution.

Follow me on Twitter or LinkedIn. 
Jon Bird

Jon Bird is CEO of leading marketing communications agency VMLY&R in Australia and New Zealand,
and is also a global advisor to VMLY&R's retail and commerce practice. 
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Apr 26, 2020,01:31pm EDT|3,433 views

Under Starters Orders, Retailers Are
Chomping At The Bit But Need
Guidance On How Lockdown Will Be
Lifted

Andrew Busby
Former Contributor

Retail

I write about consumer and tech trends & the challenges in retail


Like the start of the Grand National, retailers in lockdown are raring to go
(Photo by Michael ... [+]
 GETTY IMAGES

There's been more column inches and more radio airtime (to both of which
I have added my input over the last couple of weeks) on what exactly
constitutes an essential item. However, a swift look at the government
guidelines and legislation makes it perfectly clear; as mud.

Amazon has attempted to answer the question, this from their website;
"Our role serving customers and the community during this time is a
critical one. At every level of our company, we’re working to provide the
products and services that our customers and communities need most at
this time".

Well, that clears that one up then. But of course, while the list of the types
of retail outlets allowed to remain open is unambiguous, there has been
much debate as to what they should be allowed to sell. With even over-
zealous police forces saying that they would patrol the aisles for non-
essential purchases. Thankfully, it never came to that.
PROMOTED

But what is clear, is that those retailers currently prevented from opening,
such as fashion and general merchandise, are chomping at the bit to reopen
and get the customers coming through their doors once more.

Dixons Carphone, John Lewis and Homebase are all gearing up to reopen,
the latter already doing so in a handful of stores as they witness the success
of B&Q which has seen queues a quarter of a mile long at its trial stores
which have reopened.

MORE FOR YOU

Holiday 2020: A Mixed Bag For Retailers

And you can bet your mortgage holiday on the fact that every other retailer
in possession of a store estate will be planning for exactly the same
eventuality. The British Retail Consortium have published guidelines for
reopening, based on the governments guidelines, but that can only go so
far.

What retail needs is clear guidance from government of what any releasing
of the lockdown will mean in real terms and how it will be managed. The
sustained prevarication we are witnessing from the government, is in itself
likely to inflict even further harm on a sector, already severely bruised
before we ever encountered this pandemic.
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Social distancing, two metres, one member of each family, less time in
store, drive thru' collection points, regulating the flow of customers into the
store are all necessary and part and parcel of the new normal which we will
all find ourselves in for quite some time to come.
But what is urgently needed now, is for retailers and the hospitality sector
to know just what the timetable for lifting the lockdown - not the absolute
date of commencement - will look like.

The route back will be difficult enough, but without that visibility, retail will
be flying blind, and that usually doesn't end well.