Rejecting intermediaries and developing its own chain of stores, the company expects to double its profits.
Nike is increasingly pursuing a strategy to gradually reduce the number of retailers to which it sells its products, while at the same time increasing sales directly through its own channels, especially online. So far, work is ongoing with a limited group of retailers such as Dick's Sporting Goods and Foot Locker. But cooperation with the same Amazon and a number of small companies were terminated. However, it is impossible to name the exact number of retailers with which Nike no longer works, since the company does not disclose such information.
The departure from the wholesale distribution model is actually a departure from the first decades of the company's existence. Small independent sneaker retailers have played a key role in the rise in popularity. Nike in the early period of the brand's existence - in those years it was the only reliable channel that allowed people to learn about the appearance of new models. But now Nike has said it could make more than double the profits if it sells products through its own chain of stores and website, cutting out the middleman through wholesalers.
Nike is gradually evolving from a simple footwear manufacturer to a premium brand. And the company wants the goods produced under this brand to be shown to customers in exceptionally attractive ways, and large discounts are simply unacceptable. It is also stated that small retailers are often simply not able to maintain specially trained staff who are really well versed in the brand's shoes and can provide detailed advice to consumers.
Since the company began developing this strategy in 2017, Nike has reduced the number of retailers it has partnered with in the US by 30%, according to Nike CFO Matthew Friend. brand competitors, under armor и Adidas are following Nike's lead and are also reducing the number of retail partners they previously relied on while increasing direct-to-consumer sales.
Small retailers from such development of affairs, naturally, are not delighted. So, CNN cites the words of Ed Schaen, owner of the Sneakin 'In athletic shoe store in Bellmore, New Jersey. His point of sale cooperated with Nike for more than 37 years, and now that the company has abandoned the partnership, this means virtual bankruptcy, since this brand provides more than half of sales. Against the backdrop of a pandemic, the loss of such a partner for the store is fatal. Schaen told the publisher that he hung a letter about the breakup on the wall, next to an honorary thanks received in 1992 from Nike for a long and fruitful collaboration.
Marty Nash, owner of L&L Shoes in Palestine, Texas, who has been selling Nike products for decades, told a similar story. According to him, this brand accounts for up to 70% sales, and the refusal to cooperate is a real disaster. Nash remembers with bitterness the 1970s, when Nike reps were happy with any store that agreed to sell their sneakers. According to him, the company acted "rather dirty", leaving old and time-tested partners.
Representatives of Nike declined to comment on the situation with Schaen and Nash, escaping with general phrases about "continuous market assessment" and "better customer service." Times change.