It’s all change at the top for sportswear giant Nike Inc as John Donahoe yesterday (13 January) took over the reins as the company’s fourth CEO in its 55-year history. But with a background in technology rather than retail and sportswear, what changes are likely under his leadership?
Nike Inc announced late last year that CEO Mark Parker would step down after nearly 14 years at the helm of the company. John Donahoe, the CEO of cloud computing company ServiceNow and president and CEO of eBay between 2008 and 2015 steps into his shoes.
Parker is not exiting the company completely and will continue to lead the board of directors and work closely with Donahoe and the senior management team. By the same token, Donahoe has been on the board of Nike since 2014, so already has knowledge of Nike and the company culture, and has worked with Parker over the last couple of years..
But with the company looking to bolster its digital presence, Donahoe’s expertise is likely to be key in driving the business forward.
Growth in digital is already proving to be delivering results for Nike, and is at the heart of its Consumer Direct Offense fuelled by the brand’s ‘Triple Double’ strategy: 2X Innovation, 2X Speed and 2X Direct connections with consumers. In its most recent set of financials, the company booked a 32% jump in second-quarter profit to 30 November, and while attributing the growth in part to higher prices, it also noted its two apps – the Nike app and the SNKRS app – were “outperforming all other channels” driving digital growth of 38% during the quarter.
just-style caught up with Honor Strachan, lead retail analyst at data and analytics firm GlobalData, to find out what the biggest changes might be at Nike under Donahoe’s leadership.
Nike is looking to interact with its customers more directly and has already taken steps to cut ties with third-party retailers such as Amazon. Reducing its wholesale distribution list and getting more customers to shop directly with Nike is something Donahoe will look to double-down on, believes Strachan. Part of this is going to involve investments to incorporate new technologies, making the digital proposition – the website and apps – so great that people don’t need to go via a third-party retailer. A big focus for Nike is building communities and being a pillar or a discussion hub when it comes to fitness and wellness. Again, direct links with customers enable it to do this on a wider scale.
Upping digital capabilities
Over the last couple of years, Nike has invested significantly in incorporating online and its apps within the store experience to try and engage shoppers across all channels. It has made significant headway. One example is the Nike app at retail, which sees personalisation and convenience move to another level. Inside the store, members can unlock tailored offers based on their past engagement with Nike and shop at their pace on the retail floor, scanning products for information and checking out on their own. Investments in RFID also enable customers to track a product they want when in-store.
All this has made a massive difference in terms of how consumers can shop and engage with Nike online and has made it a serious player when it comes to a multichannel proposition. “We can definitely expect to see more of this: whether using more augmented reality, so customers can put shoes on remotely and see how they look; or foot scanners taking a photo of your foot and the app recommending the right fit for you. All these things I’d expect to see more of to create greater convenience for the shopper and grow its presence as an online retailer.”
Leveraging its digital capabilities are also key to delivering what consumers want. In August Nike acquired Celect, a predictive analytics platform that helps it anticipate consumer needs and optimise inventory across multiple channels. The company says it is applying and and developing new unique algorithms to make it better attuned to its consumers, leveraging data that includes past and present consumer interest in products and purchasing signals to better predict supply and demand, enabling more accurate positioning of inventory in stores, online and in its distribution centres.
Continued product development
Parker will remain on the sidelines of the business and his expertise will continue to be crucial in terms of innovation, product design and development. Donahoe, meanwhile, is likely to focus more on strategy and growth and new markets to target and the evolution of digital within the business. Parker has already said the two working together would be a “win-win situation.”
Lowering sourcing reliance on China
Nike is likely to continue to reduce its sourcing leverage on China, building on momentum already seen as US tariff effects have taken hold. In July the company said it was expanding its US manufacturing footprint with a US$184m investment in a new Nike Air Manufacturing Innovation facility in Arizona. And according to AT Kearney’s sixth Reshoring Index, sportswear brands including Nike are diversifying away from China and toward lower-cost countries, such as Vietnam. Nike may also benefit from improved turnaround and lead times if it looks to manufacture closer to home.
In August, Nike joined more than 200 footwear brands and retailers urging President Trump to cancel the proposed tariff hikes on shoes imported from China. The additional 15% tariff kicked in on 1 September but is set to fall to 7.5% under the yet-to-be-signed ‘Phase One’ trade agreement between the US and China.