‘Digital is the New Normal,’ Nike CEO Says
Nike’s latest quarter showed the athletic apparel retailer can bounce back from the pandemic, however, as president and CEO John Donahoe noted, “Nike’s digital transformation strategy is not easily replicated.”
Nike saw digital sales skyrocket 82% in its Q1, 2021 and revenue hit $10.6 billion, compared with the $9.11 billion estimate of analysts.
“We know that digital is the new normal,” Donahoe said. “The consumer today is digitally grounded and simply will not revert back.”
Nike’s digital business now represents over 30% of its total business, nearly three years ahead of schedule from its own expectations. This quarter, which ended August 31, 2020, the digital channel drove almost $900 million of incremental revenue versus the prior year, and an acceleration versus the prior quarter even as Nike’s stores reopened from closures due to the health crisis. Nike’s active members also increased nearly 60% with even higher growth in buying members.
The retailer’s investments in its app ecosystem, omnichannel fulfillment capabilities and RFID continued to fuel its digital transformation in the quarter. The retailer hit a record number of members working out in the NIKE Training Club mobile app — more than 50% of members worldwide started a workout in Q1.
The NIKE Running Club app had four consecutive months of more than 1 million downloads each month of audio-guided runs, and in Q1 women completed more of these runs than men for the first time.
“For those that have missed the comradery of group runs during the pandemic, runners are telling us they are enjoying the connection and extra push offered by this feature,” Donahoe said.
The NIKE Commerce app saw 200% growth in demand 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,” Donahoe said.
“Nike smartly uses their app strategy to integrate into their larger e-commerce vision and doesn't force users of one app to also download another,” Ms. Mousumi Behari, digital strategy practice lead at Avionos tells RIS. “They understand that each customer base has specific needs and targets messaging based on those needs. Using this data, Nike has started other services like their Nike Adventure Box which is a subscription service for kids sneakers. With all the data that Nike is gathering from purchases, customer behavior and social media, personalization is the next obvious play.”
Donahoe noted that Nike’s digital transformation strategy is tough to replicate because “scale matters,” and Nike’s size and direct consumer relationships is how it drives continued separation.
“To-date, we have done some impressive things to achieve scale, highlighted by our app ecosystem, our RFID investment and our omnichannel distribution centers,” he continued.
“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,” he continued.
One example of this is Nike’s new store in Guangzhou, China. The data-powered store concept curates a one-to-one personalized shopping journey and is already seeing member checkout 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,” Donahoe said.
In addition to data-driven stores, Nike scaled ship-from-store capabilities in North America’s Nike brand in-line stores, which will be enhanced by RFID investments. Nike continued to rollout RFID technology across its supply chain and stores and now has 100% of footwear and 75% of apparel tagged, CFO Matt Friend said.
“RFID is going to drive improved inventory holding costs and it’s also going to help us reduce our transportation costs, both in direct and in wholesale, and we believe that’s going to be a critical enabler in order for us to create a fully connected marketplace for Nike products across both our owned stores and our strategic partners,” Friend said.
Nike is also scaling robotics and automation in its logistics operations, which Friend noted is helping Nike to accelerate digital throughput and cut order cycle times by up to 50%, helpful during times of heightened safety measures due to COVID-19.
Nike has already deployed automation in North America, Japan and EMEA, and Friend said the retailer will “continue to scale these critical improvements further as delivery becomes increasingly important in consumer buying decisions.”
“In this moment, the pandemic has allowed us to accelerate where and how we will invest,” he also noted. “Ultimately, we will drive deeper consumer connections and continue to amplify our brand strength, using technology to operate more efficiently and at greater scale.”