‘Nike’s D2C woes highlight the perils of overlooking retailers and their strengths’

There was no Michael Jordan-style jump in sports giant Nike’s recent update, which showed that adopting a direct-to-consumer (D2C) model is no slam dunk even for the biggest of brands.

Nike Direct’s sales slid 8% in the fourth quarter. Digital revenues fell 10%, while in Nike’s own shops they were down 2%. Nike also cut forecasts for the current year, including pencilling in a 10% decline in sales in the first quarter.

Nike originally prioritised its D2C business back in 2020. You can see why that made sense. The surge in ecommerce during the pandemic looked as if it would be a permanent shift, while the power of the Nike brand made it easily searchable and its own site was an obvious destination.

“Nike has been a little bit slow in terms of bringing innovation. Consumers get bored very quickly”

JD Sports chief exectuive Régis Schultz

However, strengths such as brand appeal are diminished when, as seems to be the case with Nike, the product lacked innovation – something flagged by JD Sports chief executive Régis Schultz in March.

He maintained that “new product, new innovation, new colour” was missing and said: “Nike has been a little bit slow in terms of bringing innovation. Consumers get bored very quickly.”

Coupled with that, another factor has impacted Nike. Its decision to limit supply to wholesalers and retailers in favour of D2C affected everyone from mom-and-pop stores on America’s main streets, where customers might prize the advice and service that came with product, through to big names such as Foot Locker, where shoppers would expect choice from all the big names in sneakers.

“Now Nike has made an about-turn. Instead of focusing on its own direct business, it aims to extend its wider retail reach once again”

Now Nike has made an about-turn. Instead of focusing simply on its own direct business, it aims to extend its wider retail reach once again. President and chief executive John Donohoe said, as he revealed the fourth-quarter numbers: “We’re… elevating the entire marketplace to fuel brand distinction and be in the path of the consumer.”

Nike has also brought back Tom Peddie as VP of marketplace partners to lead the new approach. He had retired in 2020 after three decades at the brand.

Nike president of geographies and marketplace Craig Williams told staff in a memo reported by Bloomberg: “As we continue to focus and improve capabilities in our wholesale business, I am confident that Tom will bring both vision and bold leadership to accelerate the marketplace strategy.”

The falling out, and now the kiss-and-make-up, is a testament to the crucial role retailers play in shifting brand product, no matter how global the name.

“Retailers’ skills and strengths include accessibility, advice, range editing and display. The importance of good retail partners is starkly evident”

Nike’s direct model ignored the way that people actually shop. Plenty will be happy to purchase online from the brand’s site, but many like to peruse its product and others’ in-store. While Nike was in shorter retail supply, its more fleet-of-foot rivals all grew and retailers found new partners that are now growing, too.

Retailers’ skills and strengths include accessibility, advice, range editing and display. To cut them out of the supply chain was a classic case of Nike cutting off its nose to spite its face.

For example, John Lewis isn’t a Nike stockist but its traditional appeal, whether in technology or fashion, has rested on characteristics such as well-curated ranges of the latest and most innovative product from the best brands, skilfully presented and sold by experts.

As it undergoes a turnaround, John Lewis can take heart that reactivating what made it great could still underpin its success and ensure it remains a key partner for brands.

The fact that the importance of good retail partners has been made so starkly evident will provide encouragement to others, especially those, like John Lewis, who are seeking to reinvigorate their businesses.