Nike uses its website and apps to release limited-edition product

Nike uses its website and apps to release limited-edition product

US sporting giant Nike says the shift to online sales could be a permanent trend after it revealed an 82% increase in digital sales in the first quarter.

Speaking on the firm's earnings call yesterday (22 September), chief executive John Donahoe said the accelerated consumer shift toward digital is one of three structural tailwinds that play to Nike's advantage. The others are the definition of sport to include all facets of health, wellness and fitness; and deeply connected authentic brands with scale.

"I continue to be excited by the opportunity I see for Nike in digital. We know digital is a new normal. The consumer today is digitally grounded and simply will not revert back. Our Nike digital business is already meeting our mix goal of 30%, nearly three years ahead of schedule and we will continue to grow from here. This quarter, our owned digital channel grew 83% on a currency neutral basis, driving almost $900m of incremental revenue versus the prior year, and an acceleration versus the prior quarter even as our doors at retail reopened."

The Nike brand recorded double-digit increases in digital sales across North America, Greater China, and APLA, and triple-digit growth in EMEA. Digital across owned and partner now represents over 30% of Nike's total business, up more than 10 points of share versus the prior year.

Nike direct sales, meanwhile, were up 13% on a currency-neutral basis, while first-quarter reported revenues for the period ended 31 August were down 1% to US$10.6bn.

Gross margin decreased 90 basis points to 44.8%, primarily as a result of impacts from Covid-19, including higher promotions to reduce excess inventory across the marketplace and higher supply chain costs.

Net income, however, was up 11% to $1.5bn thanks to lower selling and administrative expense more than offsetting lower gross margin and revenue.

Donahoe said Nike will continue to take advantage of the digital opportunity to increase its competitive advantage.

"I'm focused on how we will leverage consumer data and insights in our digital ecosystem to understand and serve consumers better. We will use data to stay a step ahead and help us create a better product as consumer insights power our business end-to-end toward even greater growth."

The chief executive said this digital focus will guide how Nike creates "the future of retail", particularly for premium brick-and-mortar experiences.

The company is accelerating the shift to OneNike marketplace; an approach that leads with Nike digital in its own stores, as well as a smaller number of strategic partners.

In the first quarter, Nike opened a data-powered store concept in Guangzhou, China, that curates a one-to-one personalised shopping journey.

"We're already seeing member checkout in our Guangzhou store significantly outpace the rest of the fleet," Donahoe told analysts. "This is just one reflection of how digitally enabled our future of retail is and how membership is a critical differentiator.

"While we've had tremendous success in digital and quickly pivoted to the accelerated consumer shift, I truly believe that Nike is just scratching the surface of what's possible."

Elliott Jacobs, EMEA commerce consulting director at LiveArea, believes the comments from Nike are yet another sign of the unstoppable rise of e-commerce.

"The pandemic shifted the balance of shopping – in the age of 'at-home retail,' digital is simply more resilient, more agile and more effective. With high demand for athleisure wear during lockdown, Nike took a direct-to-consumer approach, using its website and shopping apps to build close relationships with customers no longer visiting its stores. Not only this, but the sportswear brand also pulled back from online retailers last year, such as Amazon, to dial down on delivering outstanding digital experiences and personalised content to its loyal customers, and this is now reaping rewards. Brands like Nike, that have shown digital understanding, have been able to grow their customer base effectively, even during a pandemic."