Nike's Direct-to-Consumer Strategy: Lessons for Wholesalers and Retailers

Nike has undergone a significant transformation over the past 4 to 5 years to focus on expanding direct-to-consumer (DTC) and delivering differentiated customer experiences. The company has reduced its wholesale and reseller footprint by over 50% worldwide while accelerating its Nike Digital strategy to enable DTC channels and applications. This shift has involved strengthening partnerships with fewer traditional partners, such as Dick's Sporting Goods, which offers membership benefits to customers of both brands.

Observing Nike's strategy and the changing landscape of the distribution market, here are some takeaways for wholesalers and retailers operating consumer-facing stores, showrooms, and master distribution points:

1. The traditional wholesale model is no longer as effective. More and more manufacturers are selling direct-to-consumers online and via company-owned stores, while distributors operate similar outlets. New, technology-led businesses without legacy system constraints and complex operational burdens are entering the distribution market and disrupting traditional operators. A great example is Material Bank, which offers the largest online platform to search and acquire material samples for design professionals at no cost and represents over 450 brands. Founded in 2018, the business has raised over $300M and is valued at over $1.5 billion. Its strategic acquisitions include Clippings, an interior design procurement platform (product discovery, specification, and procurement), and Architeiz, which owns the largest online database of 86,000 architectural projects and 900,000+ users. Material Bank also operates one of the most advanced autonomous fulfillment centers globally. 
2. Exclusive and limited-edition product partnerships between complementary, high-value brands, and between brands & artists/cultural icons will become more prevalent to capture consumer attention and drive scarcity in the sea of sameness. Tiffany & Co. collaborations with Nike (Air Force 1 Low ‘1837’), Fendi (Baguette) & Pharrell (Sunglass), or Etihad Airways with Armani/Casa to offer premium travel experiences are references to what is to come in other industries. However, this may not bode well for traditional wholesalers in the long run. Since exclusivity, opulence, and scarcity are the core tenants for brand partnerships, access to new products, services, and consumer/media attention for traditional operators will be minimal. Therefore, the overarching question is 'How do distributors and resellers participate and benefit from such partnerships authentically?’
3. Major brands and manufacturers will increasingly seek distributor partners with similar digital and operational capabilities to drive customer experience and services. Nike’s partnership with Dick’s Sporting Goods is an example of this trend. If your business isn't set up to fulfill online orders from a manufacturer's website, or if your point-of-sales and order management systems aren't fully integrated, or if you do not have a 360-degree view of your customers, or if you lack an internal business champion and digital teams dedicated to driving digital capabilities, leading cybersecurity and implementing AI capabilities, your business may be lagging.

Here few ideas distributors and resellers can do to continue growing and stay relevant: 

1. People, People & People. Over-invest in sales associates and prioritize talent retention. Too often, many businesses invest millions in new store buildout, merchandising, leases, and Cap. Ex. but lack lead management tools, marketing, and PR to drive foot traffic, modern point-of-sales systems, CRM, demand-driven inventory plans, and associate development plans.  

• Do you have the best store managers leading in-store sales teams?
• Are POS, CRM, and Order Management systems for your stores/showrooms and warehouse operation integrated?
• Do sales consultants generate quotes, complete order entries, process payments, and check inventory checks on one screen? 
• Is the 'same-day' quote rate 95% or greater?
• Do associates spend less than 20% of their time on non-selling activities (order entry, order management, warranty claims, sourcing/back order, inventory management, etc.)?
• Are sales consultants commissioned for quotes generated in-store but closed online or through other channels?

If you answered no to the following, your business has room for improvement!

2.    Own your market through store saturation, convenience/location, and proximity to the core customer segments. For the foreseeable future, personal relationships with individuals, convenience, and ease of doing business will remain increasingly important to drive highly integrated and differentiated consumer and trade experiences.

•  Do you have a vetted, data-supported, strategic and capital plans to negotiate & execute real estate deals quickly; recruit, train, and hire associates; invest in digital transformation; drive store expansion and scale operation to meet increased demand?

3.    Own the customer relationships with end-consumers & key accounts: Be the ambassador for the industry, brand, and community you serve. Unlike Material Bank, most national and regional operators may not have the resources to acquire a large database of customers or a PR/marketing agency but the stores and showrooms can become content generators and platforms to promote other business partners through events, exclusive access to new product launches, design forums and community events.

4.    Distributors and retailers must find new ways to engage brands by transforming stores and showrooms into laboratories. Capturing and aggregating in-store customer interactions, shopping behaviors, identifying preferred and emerging design trends and customer sentiments into actionable information are low hanging fruits in the new age of AI and changing consumer habits. However, it will require investment in internal talent, conversational AI, display IOT, image recognition, and sensors to capture and process data, akin to social-listening intelligence tools. For manufacturers, accurate and real-time data from customers and sales associates will reshape product design & innovation and improve demand planning and services.

Message me if you would like to discuss your journey or challenges.