Nike’s latest triumph in the retail market once again proves how aptly the company is named.
Per a recent article in Business of Fashion, the forward-looking company was able to grow their share price and re-establish the exclusivity and covetability of their brand by implementing a digital-first strategy.
The Radical Strategy That Drove Nike’s Pandemic Success traces the development of this strategy back to 2017 and before, when former Nike CEO Mark Parker announced that the brand would cut their roster of distribution partners from 30,000+ to just 40.
“With a big unveiling on October 25th, 2017, with his company’s stock trading at roughly $51, then chief executive Mark Parker committed corporate suicide… Where most CEOs are reticent to fire even a single customer, Parker had just pink-slipped thousands in a single day." Business of Fashion
Nike’s leadership team had taken stock of their identity as a brand: At their best, their footwear is highly desirable, aspirational, and collectable, associated with the lifestyles of celebrity athletes and performers. They quickly realized the worst thing they could do was to allow their merchandise to be sold in department stores or other retail locations where they’d be stacked on a shelf along with all the other brands in their category, undifferentiated and not linked to their powerhouse experiential marketing efforts.
With this vision of their brand in mind, Nike didn’t just reduce their footprint in partner stores—they went all-in on digital first strategy that linked their ecommerce with their in-store experiences, and focused on a data-driven model that would leave most CTOs and CSOs drooling.
A concept store is nothing new in retail, but Nike’s purpose for their Melrose Avenue, LA retail location is nothing short of genius. Selling shoes and clothing was almost secondary—the intention of the store was to be a customer-data-collecting engine, with information about which products were selling, and to whom, fed back into Nike’s strategic decisions for the brand as a whole. The most impressive data point of all? The highly customer-focused experience Nike created at this store allowed them to convert shoppers into Nike Plus members six times faster than any other retail location in their network. These shoppers also spent 30% more on their next online purchase with the brand than those who hadn’t visited the store, proving the value of creating the high concept experience.
Making this strategy work for you
The Nike leadership dubbed their digital transformation plan the “triple double strategy”. In 2017, they planned to double their 1) innovation; 2) speed to market; and 3) direct connection points to customers over the next five years. In fact, they outperformed their targets: With a plan to achieve a 33% lift in direct-to-consumer sales by 2022, they hit that target and kept growing by 2019.
The focus here is twofold: 1) Understanding what makes your brand salient with your audience; and 2) Understanding that digital transformation has become a must-have, not a nice-to-have.
It’s easy for companies to unintentionally dilute their brand. Nike themselves had been doing it for years by growing their wholesale business in an effort to grow their bottom line. But in the world of fashion especially, ubiquity is not a plus. The more exclusive a product is, the more consumers will want to buy. (The steady success of Hermès is all the proof one needs.)
If your company is suffering from this kind of identity crisis, it’s time to make some hard decisions about who you partner with and why, who you sell your products or services to, and the gap between where you are and where you want to be.
It’s also time to focus on your digital transformation as the center of your company strategy, and move swiftly to create the kind of culture that supports such a shift. I wrote recently about the importance of incentivizing a digital transformation at the executive level in your company, by setting goals that could not be achieved in the absence of a digital transformation. This is exactly what Nike did with their triple double plan. You can read more about it in Business of Fashion’s case study (available by subscription). If you’re ready to learn more about digitally transforming your business, contact us here.