3 reasons to love Nike’s reported decision to cut ties with wholesalers


Nike is smart, one of the smartest brands out there, and they know how to play for the long haul. While the famous brand’s sales have been slow amid the pandemic, Nike remains fearless and doesn’t seem afraid to take the bold steps needed to ensure future success. Last week’s rumor from the Susquehanna Financial Group that Nike plans to cut ties with many of its wholesalers, including chains like Belk, Dillard’s, Zappos, Boscov’s, Bob’s Stores, Fred Meyer, EBLens, VIM and City Blue , is just another example of what makes Nike so great.

Nike is a manufacturer. He’s a retailer. It’s a media powerhouse, but, more importantly, it’s a brand – pure and simple. And brands are the way people think in the world of omnichannel retail.

People don’t say, “Let’s go to Gap or J.Crew” anymore, with the mind set entirely on the ideas of brick-and-mortar retail. They’re either captivated by something brands have to offer in the media they consume, or they just go to Amazon or Google to find what they know they want at the best price.

Data on early product searches support the validity of this last claim. According to Survataover 85% of the time consumers know what they want to buy, they go to Amazon or Google to find it.

But it’s not the 85% that counts. It’s the remaining 15% that does the trick.

Only 15% of the time do consumers go to retailer or brand websites to find what they want, and that number also continues to drop over time. Essentially, Google and Amazon are making search a contest over price and convenience, while most retailers have to fight like rabid dogs over the table scraps of the remaining 15% they can still find.

That’s why Nike’s decision, if true, to sever ties with its network of wholesalers is brilliant. It shows that Nike is going to do whatever it takes to keep its fair share of the pie in this dichotomy.

Overall, there are three things to like about Nike’s potential move:

#1 – The wholesale network is a risky bet

If the above search stats weren’t a leading indicator that department stores, sporting goods stores, and other specialty retail outlets weren’t already the safest long-term bets in the world, so try a pandemic for size.

The coronavirus is separating the haves from the have-nots in retail at a rapid pace. Department stores are struggling, specialty stores are struggling, and as a result, retail bankruptcies are so rampant mall operators love Simon Properties is even starting to buy brands at low prices.

Relying on a network of wholesalers therefore only puts more risk on Nike’s plate.

By cutting its losses and responding to Wall Street’s shortfall during the pandemic, when most stores are still measuring traffic at 25% to 50% capacity, Nike is getting the chance to reset its base amid the chaos. , a decision that would be far more difficult before or after the pandemic.

#2 — Wholesalers dilute the brand

Coming back to the above points, the more wholesalers Nike has reselling its products online, the harder it is for Nike to control the price and prestige of its brand.

When people search for “Nike shoes” online on Amazon or Google, it’s often a mix or even a dog’s breakfast of all shapes and sizes of products offered by many different retailers – again once all compete on two aspects, price and convenience, following the search moment.

Nike is right to want to own all or at least as much of this consumer traffic as possible.

Last year, Nike gave Amazon its best major in history by pulling its own direct distribution from the Seattle giant. Then, in June, Nike also announced that it plans to open 200 additional smaller-footprint stores worldwide.

Partners like Belk, Dillard’s, Zappos, Boscov’s, Bob’s Stores, Fred Meyer, EBLens, VIM, City Blue, etc. – i.e. chains that Nike can eliminate from the mix – once made sense, when physical stores where the default method of consumer convenience, but, in a world where the financial calculus of these relationships is difficult to control third-party experiences online, ultra-cheap post-pandemic real estate, and the potential for own-brand Nike stores that are much cooler, way fancier, and much hipper, it’s easy to see why Nike decided to continue on the path he has taken.

Cutting distribution is just a logical step in the strategy.

#3 – No one owns online sports discovery

Search, as consumer behavior, is one thing, but discovery is an entirely different concept. Nobody owns the discovery yet in the digital world, let alone in sportswear.

From an innovation perspective, the idea of ​​research to buy versus research to discover is in vogue. Amazon and Google are great for the former but not so hot for the latter. Discovery is currently the domain of social media for the most part, which is why google and Amazon have each launched their own live streaming platforms over the past month, why online apps like The Shopify Store app and The yes have grown, and also why Instagram and Facebook continue to build their own in-app purchase capabilities.

Nike, however, is a brand that has the ability to stand out above all else. Nike has the athletes, celebrities, and influencers built-in. He has the products. He has cachet.

What Nike doesn’t have yet is the platform and the partnerships. Of course, if budding athletes want to “Just Do It” they can go browse Nike, but the experience is limited to Nike. Flip the wholesale partner relationship, however, and different responses emerge.

What if Nike instead created its own marketplace, similar to Amazon, not with wholesale partners, but with other brands or retail partners, all aligned with the Nike brand and selling categories of products in addition to Nike? Would consumers turn to Nike as the discovery authority then in a way they don’t today?

This is entirely plausible, especially since the idea already exists in the physical world as well.

It’s called Dick’s Sporting Goods. Only then does the idea start online, get supercharged by Nike’s reach through social media, have a much bigger cool factor, and the option value of reverse engineering to physical stores. (see point #2 above) is also still there for the long haul. -Course.

Only a handful of brands can follow this idea.

Amazon cannot. Google can’t. But Nike can.

And, as always, it would be great to see them do it.


Comments are closed.