Nike is trying to become the next great direct-to-consumer brand

The Nike SNKRS app.
The Nike SNKRS app.
Image: Nike
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Nike rose to be the world’s biggest athletic brand in a very different retail landscape. Back then shoppers went to stores and bought things, and retail partners were frequently the conduit between brands and consumers.

This worked pretty well, but it wasn’t perfect for brands: They had little or no direct connection with their customers, and the middleman—the retailer—took a cut of their profits.

The digital age, though, has made it much easier for brands to interact directly with shoppers. A number of buzzy new companies, from Warby Parker to Everlane, have thrived by doing just that, learning from their customers and selling them what they want.

Nike may still have much of the infrastructure and wholesale accounts to show its age, but it’s working as hard as it can to be the next great direct-to-consumer brand.

Fundamental to this strategy, CEO Mark Parker said on a call yesterday (March 22) with investors, is “to be more personal at scale.” The aim is to use data to treat every one of Nike’s millions of customers as a unique individual, which is why Nike announced that it had acquired Zodiac, a consumer data and analytics company. Parker explained that Nike has been working with Zodiac for several months already, using it to gain insight on its customers and how they behave.

Nike’s digital business will be a key part of this effort. The sector has been a bright spot for the company, growing 18% in the most recent quarter versus the same period last year, and Nike now wants to get more value out of each of its digital customers. It’s focusing first on its superfans: the Nike+ loyalty program members and app users, who on average spend nearly triple what shoppers do. Nike launched its SNKRS app in China in December, boasting that it got 2 million downloads in the first month alone, and just launched it in Japan, where it became the No. 1 free downloaded app in the iOS store.

Nike’s large fleet of its own stores is still very important, both as a sales channel and as a way to communicate with shoppers, and it plans to integrate more personalization there too. The company is debuting a new functionality in its app specifically for the retail experience: When you enter a Nike store, the store recognizes you and shows you products tailored to you on the app. You can reserve products to try on, which will be held for you in a personal locker, and even check out and pay through the app, without having to wait in a line. The new program will start small, launching at select locations in Portland and Los Angeles, but Nike says it will phase in additional features and expand it to more stores.

When Nike announced in 2015 that it plans to hit $50 billion in sales by 2020, the direct-to-consumer and digital businesses were two of the key ways it intended to get there. Those efforts aren’t slowing. On yesterday’s call, CFO Andy Campion spoke about the investments Nike has planned for next fiscal year. “At the top of our list is digital, ranging from new Nike+ membership experiences to new capabilities, including data and analytics,” he said. Meanwhile, Nike has been reducing its presence at its huge number of retail partners, to focus mostly on a core group.

While Nike’s North America sales continue to struggle—a trend Nike assured investors it is turning around—it still had a solid quarter (pdf), beating analyst estimates. Overseas and digital sales led the way.

Correction: An earlier version of this article said Nike is debuting a new app for its retail stores instead of a new functionality for its current app.