In common with other retailers, sporting apparel giant NIKE has seen an increase in its direct-to-consumer (D2C) focus as a result of the impact of COVID-19 on the sector.
As previously noted, the firm has done its digital spadework over the years, a trend that was already set to accelerate under the stewardship of new CEO John Donahoe, formerly head of ServiceNow. The pandemic has put additional impetus behind the digital focus. Donahoe argues:
We know that digital is the ‘new normal'. The consumer today is digitally grounded and simply will not revert back. Our NIKE Digital business is already meeting our mix goal of 30%, nearly three years ahead of schedule and we will continue to grow from here.
Building on our foundational strengths, there are three structural tailwinds that play to NIKE's advantage. The accelerated consumer shift toward digital is here to stay. The definition of sport to include all facets of health, wellness and fitness, and it's the deeply connected authentic brands with scale that will win.
Our brand continues to deeply connect. Through the power of sport, we are creating hope and inspiration at a time when the world needs it. We continue to take greater advantage of our vast digital opportunities as the shift in consumer shopping preferences accelerates…this digital focus is guiding how we create the future of retail, as we continue to launch seamless premium brick-and-mortar experiences.
Getting digital right is going to shape the future of retail, argues Donahoe:
In this world, where consumers want a seamless, digital and physical experience, they want to know who they are, they want consistent premium, modern experiences. The North America retail market today is the furthest away from that. That's what's driving our OneNike Marketplace where we lead with digital, directly connect with them. We then follow with our NIKE Direct where we have very premium experiences that are often digitally-infused and then we work with fewer strategic partners who see the world the same way we see the world.
That last comment alludes to NIKE's decision last year to break off its partnership with Amazon in a shift to focusing on taking a more D2C approach that looks prescient given the backdrop of 2020! The firm turned in its latest quarterly numbers last week, reporting that its owned digital channel is currently running at an 83% growth rate. Donahoe says:
Our engagement and membership metrics show incredible momentum. For example, we are seeing almost 200% growth in demand for our NIKE Commerce app, with triple-digit growth in monthly active users. This is significant for us, as it speaks to the increasing consumer adoption of our apps and while we have had tremendous success in digital and quickly pivoted to the accelerated consumer shift, I truly believe that NIKE is just scratching the surface of what's possible. With our breadth and depth no one has the advantage in this space that NIKE has to directly connect with consumers.
As part of the firm's Consumer Direct Acceleration, there are some immediate priorities, explains Donahoe, including scaling O2O [One-to-One], improving personalization and creating a consistent end-to-end technology platform. Getting elements like those right is crucial, says Donahoe:
We know a consumer who connects with us on two or more platforms has a lifetime value that's four times higher than those who don't. In particular, I am focused on how we will leverage consumer data and insights in our digital ecosystem to understand and serve consumers better, and ultimately, increase our competitive advantage. We will use data to stay a step ahead and help us create a better product as consumer insights power our business end-to-end toward even greater growth.
Recent months have seen a re-opening of offline stores. Digital plays a big part in this physical realm, says Donahoe:
As more consumers return to our stores, we saw impressive conversion in-store, even as our digital business accelerated even further. We continue to innovate in the retail space. We are accelerating the shift we discussed last quarter to OneNike Marketplace as part of our digital PDA acceleration. Our OneNike Marketplace approach leads with NIKE Digital and our own stores, as well as a smaller number of strategic partners who share our vision to provide a consistent and seamless consumer experience…Simply put, we are on the offense and accelerating toward this future vision and this is evident by our new and innovative retail concepts, amplified by an elevated O2O consumer journey.
He cites the example of a new store in China as an example of omni-channel retail in action:
Our new store in Guangzhou is a data powered store concept that curates a one-to-one personalized shopping journey. We are already seeing member checkout in our Guangzhou store significantly outpace the rest of the fleet. This is just one reflection of how digitally-enabled our future of retail is and how membership is a critical differentiator.
The D2C pivot isn't something that all retailers will find easy, he warns:
NIKE's digital transformation strategy is not easily replicated. Simply put, scale matters and NIKE leads and we will continue to lead in this space for all the reasons I have already mentioned. Our size, our incredible product, our brand strength and infinity, the direct consumer relationships who deepen each day and our ability to create seamless and differentiated shopping experiences, that is how we drive continued separation.
‘Continued' is a key word here as Donahoe concludes that transformation work is an ongoing process:
We are accelerating what probably would have happened in the retail environment naturally in the next four years to five years. We are going to try to drive it for our business in the next one years to two years…We want to provide these consistent experiences for our consumers, we want to provide the same level of knowledge and understanding so consumers know who they are, regardless of where they are shopping. Consumers want what they want, when they want it and how they want it - we are simply accelerating that transition.