Nike Supply Chain Bets Supporting Flexible Channel Strategy
Nike is letting its consumers take the reins, poised to capitalize on a customer-driven omnichannel approach that’s backed by ongoing supply chain strengthening and increased digital capabilities.
In a recent call with investors, John Donahue, Nike’s CEO, said the company is “confident” and ready to “kick it into a new gear,” as a response to recent accelerated digital approaches that “fuel engagement with our brands and deepen direct consumer connections around the world.”
The earnings call highlighted Nike’s growth, which is driven primarily by its direct-to-consumer business (up 6% compared to last year).
“As we deliver on our strategy to elevate the marketplace through premium physical and digital retail experiences, we continue to see that consumers want to connect directly and personally with our brands,” said Matt Friend, Nike CFO, during the call.
Member engagement is up double digits year-over-year within its direct business, but how are the majority of consumers interacting with Nike? While physical shopping is growing, the journey largely begins online for the company. “We are seeing consumers spending more time in brick-and-mortar locations, but 90% of their shopping journeys are starting with digital,” said Friend.
[Read more: Why Nike’s Web3 Foray Includes Consumer-Designed Virtual Products]
There’s “sustained momentum” from the Nike mobile app, which saw high, single-digit growth in traffic, with member activity increasing across both engagement, buying behavior, and a higher basket size.
That’s why the company is zoning in on a channel mix that’s flexible.
“The ultimate landing spot of digital and direct isn't as clear,” said Friend. “We have shifted our channel mix, and that's been a consumer-led and a consumer-driven shift based on the consumers' desire to want to connect with NIKE, both through our digital apps and through our stores.”
Digital Add-Ons: Nike’s Social Strategy
Amplifying brand voice is a part of Nike’s overall digital effort. The company reports that its priority channel for Gen Z consumers is TikTok, where it has found engagement increasing 172%. The company boasts 4.8 million followers on the platform.
Just a few weeks ago, social media platform TikTok introduced the full launch of TikTok Shop in the U.S. The platform, which touts over 150 million U.S. users, gives Nike another selling avenue for catering to this demographic.
Foundational Pillars: How Supply Chain Works as the Support Structure
These initiatives require a firm backbone forged by an elevated IT infrastructure and streamlined supply chain processes. Recent investments include reducing digital switch shipments, a new transportation management system, and regional service centers that help lower digital fulfillment costs.
“We are turning the corner in driving more profitable growth while also recovering on transitory cost headwinds," said Friend. "We've increased the size of our supply chain in the last few years to be able to address the growth that we've seen in our business, both overall and in digital. And now our teams are very focused on driving greater efficiency in the way that we serve consumer demand across channels.”
By reducing digital split shipments, consumers don’t get two boxes for the same order, for example, and this results in lower outbound fulfillment costs as the goods are shipped out from regional service centers where demand is highest.
Additionally, it boosts Nike’s sustainability efforts, removing the need to put products on airplanes.
“We started investing a couple of years ago in regional service centers in North America and in Europe and in pickup points closer to the consumer in Europe, all with the intention of building a supply chain that enables us to serve demand closer to consumers,” said Friend.
These new efficiencies are being driven by bolstered ERP strategies in North America, following testing in China, enabling Nike to operate more like a retailer, said Friend.
“We've been investing for a few years in developing and scaling those capabilities to be able to serve consumer demand. We're learning to operationalize and take advantage of these capabilities,” he added.
