Nike’s China Strategy Serving As its Retailers Playbook

Nike anticipates its digital tech investments will help it weather the storm the coronavirus is pummeling upon retail worldwide.

The company temporarily shuttered all of its U.S. stores earlier this month.

“We know in times like these that strong brands get even stronger,” Nike president/CEO John Donahoe said in an earnings call. “And I truly believe that no one is better equipped than Nike to navigate the current climate.”

Global revenue for the footwear and apparel brand and retailer rose 5% in the third quarter, to $10.1 billion, driven by strong performances of Nike Direct and digital sales. Nike Direct saw 13% currency neutral growth, while digital sales grew 36% worldwide year over year.

Revenue growth in the U.S. (up 4%) and EMEA (up 13%) helped offset the 4% decline in Greater China caused by the impact of the coronavirus. As this impact now extends into the United States, the company is using its experiences in China as a playbook to mitigate the effects of mass store closures.

Retail sales plummeted when Nike closed over 5,000 of its stores in Greater China in February, but the company was able to leverage its mobile apps and digital trainer network to increase weekly active users for all of its apps by 80% by the end of Q3.

This engagement in turn spurred e-commerce sales, and the company’s digital business grew over 30% in the region. Nearly 80% of stores have now reopened in China — with digital sales accelerating even more since they’ve done so — and Donahoe said the company is seeing the other side of the crisis in China.

“Due to the resilience and creativity of our team in China,” he said, “we now have a playbook that we can use elsewhere.”

Digital sales are the company’s fastest-growing channel and represent over 20% of the company’s overall business.

We’re leveraging select teams and tools to dynamically model demand, pricing, planning and allocation.

Andy Campion , Nike CFO

“The [digital] investments we’ve made to-date are now proving to be foundation for our resilience amidst challenge, and they will be strength as we emerge,” said Andy Campion, Nike chief financial officer. “For example, we’re leveraging select teams and tools to dynamically model demand, pricing, planning and allocation. We’re leveraging our Nike membership platform and Nike mobile app ecosystem to inspire and enable people to be active at home while also providing targeted product offers and services to consumers.”

The foundation the company has built in enterprise data and analytics is also fueling a more agile end-to-end execution.

“We’re still in the early earnings of Nike’s digital transformation, but the capabilities we’ve already been building for the future are proving to be the strongest pillars within our business today,” Campion added.

Nike is also exploring designs for personal protective equipment and prototyping face shields for doctors and nurses, based on needs identified by the teams and health professionals at Oregon Health & Science University.

“We also know that this is a moment in society where the private sector has a major role to play,” said Donohoe. “Companies like Nike need to do our part.”

Nike is the uniform supplier for the MLB, NFL and NBA, all of which have suspended operations because of the coronavirus.

Matt Powell, vice president, senior industry advisor, sports, at market research firm NPD Group, said in a note earlier this month that he expects sales of caps, jerseys, and championship gear to be affected by the postponements. “But assuming those games are eventually played,” he noted, “much of those sales will be made up at a later date.”

Source: RIS News