Nike, like many online present international brands had a good Covid. It was so good, in fact, that they have made some decisions as to future sales channels, a reported recently by CNN:
Nikes are getting harder to find at stores. Here’s why
New York (CNN Business)Struggling to find Nike sneakers at your neighborhood shoe store? That’s by design.
Nike wants customers to buy more of its shoes, clothing and gear at Nike stores and on Nike.com and its apps, as well as at a more limited group of retailers like Dick’s Sporting Goods (DKS) and Foot Locker (FL). So the company in recent years has slashed the number of traditional retailers it sells its goods to while shifting to grow directly through its own channels, especially online. That has affected big and small retailers. In addition to pulling out of some independently owned stores, Nike (NKE) also ended a partnership selling on Amazon (AMZN) in 2019. Nike has not disclosed which retailers specifically it has cut ties with.
The company’s move away from a primarily wholesale distribution model is a departure from the early decades of Nike. Small, independent sneaker retailers were key to growing Nike’s popularity in the company’s early days, when people found out about upcoming shoe releases from visiting the local shop. But Nike has said it can make more than double the profit selling goods through its own website and physical stores than it can through wholesale partners.
Nike gets to control the shopper experience more tightly and the prices at which products are sold when it goes directly to consumers. That’s a big deal for Nike, a premium brand that wants to ensure merchandise is showcased to customers in enticing ways and prevent products from being discounted too heavily.
Is this a trend in our channel? Not yet as far as I can tell. Sure, there are some supplier who sell direct, but not many and not a high volume. Often, their execution is less than ideal.
Is this a trend we are likely to see in our channel? I think so. We should plan for it, expect it. If I was a supplier it is what I would do. The less steps between a manufacturer and the consumer of what they manufacture the better for the manufacturer.
What should we small business retailers do? Be aware. Source locally. Favour suppliers that are clear in stating they will not go direct.
I think it will be another year or two before we understand the extent of disruption to high street retail wrought by Covid. The Nike story is but one example. My advice is don’t blame Nike. They are doing what they need to do for their business, for their shareholders. That is their obligation. It is the obligation of major suppliers, too. hence my suggestion to be aware.