Illuminated brand of American sports footwear and apparel company Nike, Inc. It appears in the window of a Nike store in Antwerp, Belgium. (Photo by Carol Sirius/SOPA Images/LightRocket via Getty Images)
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Nike CEO John Donahue acknowledged Friday that the company has moved too far away from wholesale partners such as… Messi And dso It seeks to become a retailer that sells merchandise to shoppers primarily through its stores and website.
“We realize that in our move toward digital, we've gone a little further away from wholesale than we intended,” Donahue told CNBC's Sarah Eisen from Paris. “We've corrected that. We're investing heavily with our retail partners. They've all been here over the last couple of days; they're very excited about the innovation pipeline.”
Over the past several years, Nike has been transforming its business from a brand that primarily sells its athletic shoes and apparel in department stores and specialty sports stores to a brand that directs the bulk of its sales directly to consumers.
This strategy allowed Nike to gain much more from its sales and gain better insights into its customers through data collection. Over the past four years, Donahue said Nike has tripled its mobile and digital businesses from about 10% of total sales to 30%.
However, it is a difficult strategy to implement and can put pressure on margins in the short term. Switching to a direct model is capital-intensive and burdens Nike with revenue headaches and owned inventory, which traditionally fell to wholesale partners.
Furthermore, department stores and specialty stores are huge drivers of customer acquisition. Without it, brands have to spend more on marketing, which is becoming more expensive and difficult to do online.
Some analysts said Nike's decision to avoid wholesale partners was a mistake. They argued that this set the company back and is part of the reason it fell behind in innovation and products. It has also had a negative impact on Foot Locker, which has long relied on Nike to drive sales and now does not receive the same range of products it did before.
In its pursuit of a direct model, Nike temporarily cut ties with retailers such as Messi And dsoBut it regained those partnerships last year when it began to change its tune toward wholesalers.
This change comes at a difficult time for Nike, which has faced criticism over its product lineup and the loss of market share to emerging companies such as… On running And Hoka. In December, it announced a broad restructuring plan to cut costs by about $2 billion over the next three years. It also lowered its sales guidance as it warned of weak demand in the coming quarters.
Two months later, Nike said it would cut 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas, such as running, the women's category and Jordan Brand.
During an interview on Friday, Donahue reiterated that today's consumers “want to get what they want, when they want it, and how they want it” — a refrain he has used over the past year when discussing Nike's changing sales strategy.
“There are no digital shoppers versus physical retail shoppers. There are no shoppers who only shop at single-brand stores versus multi-brand shoppers,” Donahue said. “Consumers want to get what they want across multiple channels…. The consumer will have the option of coming to Nike directly digitally, coming to Nike's door or going to one of our wholesale (partners).”
