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Case Study | Inside Nike’s Radical Direct-to-Consumer Strategy
- Chantal Fernandez
In October 2020, in the middle of a global pandemic that had infected 188 countries, causing record sales damage across the retail sector, Nike’s share price hit an all-time high.
Like other retailers, Nike had been forced to close most of its network of more than 900 stores across the world, as had its key wholesale partners like Nordstrom and Foot Locker.
But the American sportswear giant’s performance during the pandemic, when its online sales spiked, signalled to many that Nike had the competency to prosper long term, in a future that will be increasingly defined by e-commerce and digital brand connections.
It was a validation of a strategy that Nike prioritised three years ago, dubbing it “Consumer Direct Offense,” but the seeds of the approach go back almost a decade.
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Above all, Nike is a marketing company. It doesn’t just sell sneakers; it sells the brand aspiration that imbues those sneakers with meaning. But to achieve the reach required to scale its business, Nike’s distribution strategy had long-relied on third-party retailers to sell its products, even if the consumer experience offered by those partners diluted its brand.
But in a future increasingly defined by e-commerce, fast-moving trends and, above all, the rising power of branding to drive consumer preference when competitors are just a click away, Nike realised that in order to thrive, it needed to take control of its distribution to better manage its brand and deepen its connection with consumers.
It was definitely architecting a new retail, and a bold, retail vision for Nike.
Such an evolution is easier said than done, especially for a business as large as Nike in a category as competitive as sportswear. But by radically cutting back on its wholesale distribution and raising the bar for brand experience with the third-party partners that remained; expanding its focus on content, community and customisation to keep customers close; investing in its data analytics and logistics capabilities; and rethinking the role of the store as a brand stage, Nike drove a veritable direct-to-consumer revolution.
When the pandemic hit, these shifts went into overdrive.
“It was definitely architecting a new retail, and a bold, retail vision for Nike,” said Heidi O’Neill, Nike’s president of consumer and marketplace, and one of the most prominent executives leading the brand’s new strategy in recent years. “But it started with our consumer, and we knew that consumers wanted a more direct relationship with us today.”
In this case study, BoF breaks down Nike’s pioneering direct-to consumer strategy and how it has worked to the brand’s advantage, propelling its share price to new heights during the global crisis of 2020.
Click below to read the case study now.
- Mark Parker
- John Donahoe
- direct to consumer
- athletic apparel
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Op-Ed | How Macy’s Can Repel the Barbarians at Its Gate
The company, under siege from Arkhouse Management Co. and Brigade Capital Management, doesn’t need the activists when it can be its own, writes Andrea Felsted.
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The case is set in January 2020 and the case protagonist is John Donahoe, Nike's new CEO. Nike is the largest company worldwide in the athletic footwear, apparel, and equipment business. The case…
- Length: 16 page(s)
- Publication Date: Oct 26, 2019
- Discipline: Strategy
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The case is set in January 2020 and the case protagonist is John Donahoe, Nike's new CEO. Nike is the largest company worldwide in the athletic footwear, apparel, and equipment business. The case focuses on the challenges Donahoe faces as he attempts to drive Nike to the goal of $50 billion in annual revenues by 2021. The case focuses on Nike's competition, the convergence of technology with apparel and footwear, as well as the company's corporate social responsibility issues. Donahoe has to address internal as well as external challenges. Donahoe was appointed CEO at a time when the Oregon sports and apparel company faces a number of controversies, including when Nike-sponsored athletes were caught up in scandals; the ban of Alberto Salazar, Nike's top running coach amid doping allegations; as well as continued concerns about Nike's workplace culture after an internal employee survey leaked describing the company as run by a boys club that is hostile towards women. Nike faces tough competition in all of its market, as well as along the value chain. Rapid advances in mobile technology and the development of the Internet of Things (IoT) could fundamentally change the industry. Nike is also moving further into ecommerce to offset the "Amazon effect." The fast-growing Chinese market, moreover, may provide an avenue for needed future growth.
Oct 26, 2019
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MH0060-PDF-ENG
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Nike: An Innovation Journey
- First Online: 29 November 2017
Cite this chapter
- Michelle Childs 5 &
- Byoungho Jin 6
Part of the book series: Palgrave Studies in Practice: Global Fashion Brand Management ((PSP:GFBM))
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Nike is an American multinational company that has evolved to become a global leader in athletic wear with annual sales exceeding $21 billion in 2016, more than half of which is attributed to international markets. Since its inception in 1964, Nike has been an innovation leader in product development, marketing and consumer experience. Due to a dedication to continuous innovation, Nike has been able to sustain a competitive advantage within the athletic apparel and footwear marketplace. This case highlights key points in Nike’s journey of innovation and examines how Nike has successfully emerged as a global champion within the athletic wear industry. Based on these analyzed strategies, this case provides implications that are relevant for practitioners and academics.
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Michelle Childs
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Childs, M., Jin, B. (2018). Nike: An Innovation Journey. In: Jin, B., Cedrola, E. (eds) Product Innovation in the Global Fashion Industry. Palgrave Studies in Practice: Global Fashion Brand Management . Palgrave Pivot, New York. https://doi.org/10.1057/978-1-137-52349-5_4
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