With Nike Digital revenues up 41% year-on-year in the firm’s most recent quarter, the firm firmly believes that digital is not only proving to be as transformative as predicted, but actually exceeding those expectations.
According to CEO Mark Parker, the company’s Digital Offense strategy is powering a shift from traditional operating models to a “digitally-powered” future model that builds on the firm’s heritage:
The stories of our athletes and the innovation they inspire have always been central to our brand. Today, those products and stories are being amplified even further by the power of digital. We’ve talked about how critical mobile and social experiences are to our consumer and how that’s driving change. But, really, the full digital transformation of Nike that’s taking place right now is even bigger than that. It's fundamentally shifting our entire company.
Digital is allowing us to realize our vision for smart retail to remove friction and personalize experiences through the intersection of digital and physical environments. It’s sharpening our ability to sense the market through data and analytics. It's unlocking new manufacturing tools that are more precise and drive a new esthetic. And it's opening up opportunities for new partnerships and how we develop talent in the organization.
One example of this in practice is the use of the firm’s NIke+ membership scheme which is intended to create differentiated customer experiences. Parker explains:
In our own ecosystem, Nike+ membership is the key to an elevated consumer experience. Once someone becomes a member and customizes their profile, we know what sports they like, how active they are, and the style of products they prefer. That insight allows or unlocks exclusive product, style advice from experts and rewards for their activity. It personalizes the entire experience and allows us to remove friction points for members as they move seamlessly from mobile to the in-store environment. We re-launched Nike+ membership in November and for the year, we've exceeded all of our membership targets with strong growth in new, active and buying members and improvement in engagement and in conversion.
Combining the online and offline worlds is also a key priority, he add:
We continue to explore the physical and digital intersection through our new Nike app at retail, which is beginning to scale some multiple stores. Through Smart Retail, we can aggregate consumer buying patterns to better inform localized preferences and turn those into new growth opportunities. For example, next month, we're opening a new retail concept in LA, called Nike Live. It's a small format, data-driven store with its assortment influenced by what consumers are buying from surrounding zip codes. We see great potential on this approach, and you'll see a lot more of it across our key cities.
There’s also investment in innovative tech, such as Augmented Reality:
Digital innovation also allows us to push the edges of new immersive experiences whether that's in our own channels, or through partnered retail or social media platforms. The SNKRS App has delivered some incredibly compelling experiences this quarter. For example, at venues during Kendrick Lamar’s recent tour, we triggered SNKRS stash drops to make his Cortez Kenny III shoe available exclusively to his fans who are at the show. The SNKRS App is creating incredible demand and capturing more value from that energy as one of Nike’s largest upside opportunities.
As noted previously, Nike has made a cautious step forward into working with Amazon as a retail channel. Partnering is getting to be something that the firm is more receptive to, says Parker:
Our investments in the digital experience are also creating a platform for new brand-friendly e-commerce partnerships. Our work with Tmall continues to set the bar for how we co-create shopping experiences through mobile and social. We leveraged key shopping moments for Air Max on Tmall's Super Brand Day and Young Athletes during its parent’s channel launch. We continue to expand our presence in digital marketplaces through partnerships like Zalando in EMA and ZOZO-town in Japan which became fully operational in March.
We’re also piloting and scaling Nike Consumer Experiences with key wholesale partners. For example, the Nike Certified Athletes program turned selected Foot Locker associates into Nike experts. After showing strong early results, Foot Locker will scale the program across North America. With JD Group in EMEA, we launched both a physical and digital concept to celebrate Air Max storytelling, called Undisputed Air, driving triple-digit growth of Nike Air products in JD versus last year.
As for that Amazon deal, it seems to be a case of so-far, so-good:
I would say that our partnership is progressing well. We remain focused on elevating the consumer experience on the platform, we’re learning a lot, applying [what we’ve learned from] Tmall. Tmall has been an exceptional partner for us. I think the main focus is on elevating the brand profile and experience on the platform, and that will continue to be the focus as we explore next steps with the Amazon. And I'll call out our other digital platform partners too, Zalando and Asos. This is a critical part of our digital opportunity going forward beyond what we're doing direct.
Behind the scenes, there are promising developments in revolutionising manufacturing and supply-chain, says Parker:
Digital acceleration is critical to creating an overall faster company, from consumer insight to responsive manufacturing to delivering products to the consumer when they want it. In other words, it is integral to our 2X Speed initiative.
Through digital, we’re also inventing new manufacturing tools that allow us to push the boundaries of product creation, like computational design with React or new Flyknit apparel. Automation throughout our supply chain continues to drive speed and efficiency.
But its’s early day, he cautions, talking in terms of a multi-year journey:
I'd say we're on the early stages. I mean, this is a constantly moving opportunity for us - design and product creation and the express line, the supply chain, they are all connecting digitally. It's predictive demand planning. Sensing and demand planning is absolutely a critical part of advancing this capability moving forward. I feel like we're making a tremendous progress in that respect.
Parker predicts that the next 12 months will see a ramping up of the use of data analytics to inform product design and capabilities going forward:
Then it's actually impacting how we manage our supply chain in our manufacturing flexibility in response time. You'll see a lot of scaling of the data and analytics capabilities for Nike here in the months and quarters ahead.
Nike is clearly seeing tangible results from its digital focus, setting itself achievable short term wins while also investing in longer term innovation and evolutionary tech. As noted at the start, it’s a race that firm is winning and one with no finishing line in sight.