Nike CEO John Donahoe has admitted that the company focused too much on its own website and stores, neglecting its wholesale partners like Macy’s and DSW. In an interview with CNBC, Donahoe acknowledged that Nike had “over-rotated away from wholesale” in its pursuit of becoming a retailer that primarily sells merchandise through its own channels.
Over the past few years, Nike has worked to transform its business model, shifting from selling its products primarily in department stores and specialty athletic shops to selling directly to consumers. This strategy has allowed Nike to increase its sales revenue and gain valuable insights about its customers through data collection. Donahoe stated that Nike tripled its mobile and digital business from 10% to 30% of overall sales in the last four years.
However, this shift to a direct model has its challenges. It requires heavy investment and puts pressure on margins in the short term. Nike has also had to deal with the issues of returns and owned inventory, which were traditionally handled by wholesale partners. Moreover, department stores and specialty shops serve as important customer acquisition channels, and without them, brands like Nike have to spend more on marketing, which is expensive and challenging to do online.
Critics argue that Nike’s decision to move away from wholesale partners was a mistake that set the company back in terms of innovation and product development. It also had a negative impact on Foot Locker, which relied on Nike to drive sales but no longer receives the same assortment of products. As a result, Nike restored its partnerships with retailers like Macy’s and DSW last year, signaling a change in its approach to wholesalers.
This renewed commitment to wholesale comes at a difficult time for Nike. The company has faced criticism for falling behind on innovation and losing market share to competitors like On Running and Hoka. In response, Nike announced a broad restructuring plan in December, aimed at reducing costs by $2 billion over the next three years. It also cut its sales guidance, citing softer demand in the coming quarters. Additionally, Nike recently announced job cuts of over 1,500 positions to invest in growth areas such as running, the women’s category, and the Jordan brand.
Donahoe emphasized that consumers today want convenience and choice. They expect to be able to shop across multiple channels, whether it’s digitally, in a Nike store, or through wholesale partners. He believes that there is no dichotomy between digital shoppers and physical retail shoppers or between mono-brand and multi-brand shoppers. Nike aims to cater to these consumer preferences by offering multiple avenues for customers to access its products.
In conclusion, Nike’s CEO John Donahoe has acknowledged the company’s overemphasis on its own website and stores at the expense of its wholesale partners. Recognizing the importance of wholesale in customer acquisition and innovation, Nike has restored its partnerships with retailers like Macy’s and DSW. This shift in strategy comes as Nike faces challenges in terms of falling behind on innovation and market share. However, Donahoe believes that by offering consumers choice and convenience across multiple channels, Nike can meet their evolving expectations.
