What Can Nike Teach Sports nutrition Brands?
It probably doesn’t need repeated, but Nike is the heavyweight champion of sports brands. There are only a few brands that achieve ubiquity in popular culture like Nike. No matter where we turn, it feels like there’s a swoosh just around the corner, right?
So, why do I think Nike is giving every sports nutrition brand a masterclass on their needed evolution over the next 5-7 years?
Yes, the basic Nike strategies listed below are still important…
Product is their most important marketing tool
Attachment to the world’s most influential athletes
Exceptional brand storytelling skills
…and yes, Nike will continue to focus on those for their entire brand life cycle, but you already know about those fundamental strategies.
I’m more interested in explaining why several current “lesser-known” Nike business strategies will be key to any sports nutrition brand looking to overcome the increasingly crowded and changing marketplace.
Control your distribution. control your destiny.
Let’s start at something that happened in June 2020. This is when Nike officially announced its Consumer Direct Acceleration plan, a strategy focused on speeding up the prioritization of direct-to-consumer (DTC) channels.
Sounds like a big ole duh and what took them so long, right? Not so fast with the judgement my friends because Nike has been working on this plan secretly since 2011. That’s when they mentioned in their annual report that they continue to see growth in revenue through DTC channels.
Nike knew that if they wanted to continue their dominance in the market, they would need to make a radical shift in their sales channel strategy. I believe the main positives of a DTC pivot is widely known so I won’t bore you with those details, but how Nike impressively guarded for the downside risk is important to expand on further.
I’ve often said that if you can control your distribution, you can control your destiny. That’s easy to say, but what about when large consumer brands like Nike create almost all their revenue through wholesale?
Channel Conflict is a Very Real Risk
Nike focusing on DTC means it’s becoming its own retailer and now more squarely competing against channel partners. This is otherwise known as channel conflict, defined as any dispute, difference or discord arising between two or more channel partners, where one partner’s activities or operations affect the business, sales, profitability, market share or similar goal accomplishment of the other channel partner.
Channel conflict is a very real risk. The stronger the brand…maybe the less worrisome, but shifting focus towards DTC operations will cause channel conflict for everyone.
Channel Conflict Game Plan
So, how did Nike minimize channel conflict beyond having a strong brand?
Firstly, just consider the timeline. The sales channel shift at Nike has been going on for more than a decade. If you really think about it, the entire business model needed to be overhauled to handle this strategic decision. Nike had the planning foresight and trust they were seeing around the corner, which allowed them to not make any hasty moves. Most consumer brands try and flip the switch too aggressively. The longer the timeline for change, the easier it is to manage any downside risk.
Secondly, Nike went through an extensive retailer rationalization process called the Consumer Direct Offense strategy, this was announced in 2017 as a five-year plan to focus growth on 40 “strategic” retail partners and its own DTC. They rated and ranked all channel partners to understand if they were value accretive or dilutive to their new strategic plan. Those that were value dilutive, Nike started editing the account portfolio. Nike has reduced wholesale accounts by more than 50% over the past four years. This includes big names like Belk, Dillard’s, Zappos, DSW, Urban Outfitters, Macy’s, and Big Five Sports just to name a few of the “undifferentiated” wholesale accounts they stopped selling to.
I intentionally left off Amazon because that decision was a bit different, and I think it will be reversed sometime in the future. If you’re interested in more depth around what happened between Nike and Amazon during late-2019, check out my YouTube video.
Now those sales channel partners that were deemed as value accretive, Nike will focus on deepening those partnerships and driving growth through them. Nike wants to work with strategic partners that see the same future as they do, and that want to and are willing to share membership data so that they can, together, deliver a very seamless and personalized experience to consumers. The biggest announcement in this area has been with Dick’s Sporting Goods. In late 2021, it was announced that Dick's Sporting Goods and Nike are tying together the loyalty programs within the Dick's sporting goods app so customers of both can receive loyalty perks from both retailers.
Nike Digital is Personalization at Scale
The other side of the OneNike marketplace strategy is Nike Digital. This is where Nike has more control over how its brand is presented and allows them to create a brand experience that’s truly special.
The family of Nike apps, including SNKRS, Nike Training Club, Nike Run Club, and others are gateways for people to get closer to the brand in ways that resonate with them. Delivering personalized content across sport and shopping, Nike’s digital presence recognizes that sport culture is a diverse, inclusive world that includes fashion, fitness, music and more, and it offers everyone a meaningful way to be engaged and involved. That brand engagement could also be through a virtual world…
Virtual Nike
In December 2021, Nike acquired RTFKT (pronounced artifact), a leading brand that leverages cutting edge innovation to deliver next generation collectibles that merge culture and gaming. This digital shoe company acquisition might have you scratching your head, but consider this…
There’s a physical world social construct that your clothing, appearance, what you eat/drink, what you buy, what car you drive, and what type of house you bought matters. Like it or not, all these things quickly give others an idea of what they should expect from you. That doesn’t stop in the virtual worlds. I argue that social currency will matter more in the metaverse.
Nike has also built a metaverse experience called Nikeland that has attracted 6.7 million people from 224 countries since its launch in November. This is an important move by Nike because audiences that are engaged in metaverse-based platforms are among the most loyal and passionate. While the metaverse is probably early for most, it does make a lot of sense for a brand that wants to serve athletes and creators at the intersection of sport, creativity, gaming and culture.
Nike Sustainability
Talking about how powerful generational changes can impact a brand, Nike is also showing a deep commitment to sustainability. The strongest brands can and should own more of their circular ecosystem. Imagine a value chain that includes product design, materials, manufacturing, shipping, retail and product take-back with no beginning or end. Waste is a main source for new materials, virgin materials are bio-based, and the manufacturing process itself creates zero carbon emissions. This is the true circular system that’s a long-term aim for Nike.
Final Thoughts
Nike has acknowledged that today’s purchase journey is fragmented, and there are multiple touch points that go into a customer's consideration process. Within this interconnected experience, Nike has a strong sense of the purpose that each of its channels serve. They’re in front of the curve and making bet on where the consumer is going. The same bets that you’ll likely need to make in your sports nutrition brand to not only thrive but simply survive.