Nike currently makes just over a billion dollars annually through its ecommerce channels and expects upcoming investments over the next four years to push it to $7bn.
It’s an ambitious target for the world’s largest sportswear business but by no means unrealistic. Not when considering Nike’s broader bid to more than double its direct-to-consumer (DTC) sales by 2020, from $6.6bn to $16bn. The reason is mainly an economical one; DTC revenues earn higher margins than those sales made through wholesale partners like JD Sports and Footlocker.
And Nike’s early gambles on DTC and ecommerce over the last several years are paying off. Sales on Nike.com rose more than 50 per cent in the three months to November. It also launched online sales in Canada Switzerland and Norway in the period with plans to do the same in Mexico, Turkey and Chile in the next quarter.
There’s going to be four billion people with a mobile device and disposable income in an area where there is a Nike store by 2020, according to the business. It’s reflective of Nike’s aggressive expansion that’s predicated on how successfully its stores better link up with online inventory, alongside a larger web sales offering in more markets.
“Driving the connection of Nike.com to our broader digital strategy continues to be, without a doubt, one of our greatest opportunities as a company,” Nike’s chief executive Mark Parker told analysts on the conference call for its third quarter yesterday evening (23 December).
Nike marketers describe that opportunity as “seamless commerce”. It's essentially the sportswear maker’s interpretation of omnichannel marketing and how it limits the number of times people leave its stores because they can’t find what they’re looking for. Over the last 18 months Nike has connected all its stores in the US to its mobile checkout and in-store digital commerce platform so that customers can shop online and in-store at the same time in a single transaction. This has recently launched in the UK and is being rapidly introduced across Europe.
To spur the shift, Nike is incentivising shoppers to complete their buys in-store. Nike+ members are encouraged to login in-store to pick up loyalty points, while those that do go on to buy while they’re there get free returns – the idea being that people are nudged to buy more virtually in-store because they can always return for free what they don’t want. Consequently, staff are being trained on how to use mobile devices.
Nike’s ecommerce transformation has been at play since 2012 when it pulled all is shopping sites under one platform. Earlier this year, it sealed is status as a mobile-first retailer when it revealed mobile traffic to its ecommerce site exceeded desktop for the first time, and it has also made moves to generate sales via platforms Instagram and Twitter.
A burgeoning DTC business was one of many brightspots in a quarter that saw revenue jump 4 per cent to $7,7bn. Growth in its sportswear, running and basketball categories combined with gains in China made 2015 the “single greatest calendar year ever for the Nike brand”, claimed Trevor Edwards, president of the Nike Brand business, on the same call.
Revenue for the Nike Brand rose 13 per cent in the quarter, with double-digit growth across every geography and most key categories. DTC revenue climbed 26 per cent, while new store expansion was up by nearly half (49 per cent).
Looking forward, the business said it was primed for major sporting moments over the next six months, including Super Bowl 50, the NBA All Star Weekend, March Madness, COPA America, Euro 16 and the Rio Olympics.