Apparently no longer content to “Just Do It,” the folks in Beaverton have pulled the trigger on a new strategy that figures to propel the Swoosh to more than $43 billion in annual revenues over the next 36 months. Outside of key international markets such as China (which topped $4 billion in FY17 sales), a key driver of the projected growth rate of more than 7.8 percent annually will be Nike’s ability to drive innovation, introduce desired new products at a faster clip, and draw a tighter bond with its most loyal consumers wherever they shop.
The latter partly explains Nike decisions to begin selling products on the Instagram app and to initiate a pilot program with Amazon commencing with the ecommerce giant pulling the plug on third-party sellers of certain Swoosh products starting July 13. Nike senior executives dodged questions about how the Amazon alliance might alter their 2020 revenue targets of $16 billion for direct-to-consumer and $7 billion for Nike.com.
“Right now, it’s really a small pilot and we have a very tailored assortment for Amazon (footwear, apparel and accessories), so that we can actually learn as we go through this,” Trevor Edwards, president of the Nike brand told analysts last week.
But NKE investors appear to already be on board with the strategy. Some circles are predicting the Amazon, Instagram relationships will bolster Nike’s U.S. revenues $300-500 million annually. But how the brand’s other retail partners worldwide will react to the Nike-Amazon alliance has yet to be measured.
“…What’s most important to us is that we have the opportunity to elevate how the Nike brand is presented on the Amazon platform,” commented Mark Parker, Nike Chairman, President and CEO who declined to answer whether the ecommerce behemoth will have access to any brand exclusives or any Brand Jordan products. “…Our overall goal is to elevate the consumer experience by better segmenting and differentiating all of our channels,” he said.
Elsewhere, Nike sees its new 12 key cities across 10 countries approach and a simplified geographic structure as helping add more digital expertise and control in the respective markets. The strategy, forecast to slash weeks from delivery times, will provide Nike with more real-time sell-through data and the ability to more quickly change materials, color or prints on popular styles.
The ongoing promotional landscape in the North American market has contributed to the acceleration of Nike’s consumer-direct approach. The company intends to grow its online membership program, where it obtains more data about its customers, through stronger benefits and international expansion.
By the Numbers:
Nike FY17 Ended May 31, 2017
North American sales rose 3% to $15.2
Nike.com and other apps contributed $2+ billion in revenues.
Global apparel sales increased 6% to $9.65 billion.
Brand Jordan sales exceeded $3 billion.
Sales to Wholesale customers inched 2% higher to nearly $23.1 billion. · DTC Wholesale revenues rose 20% to more than $5.6 billion.
Running sales jumped 5% to nearly $5.3 billion.
North American Nike brand futures down 10%; -2% worldwide.