Susquehanna Financial Group announced this week that Nike would be cutting ties with 9 major wholesale accounts, including Zappos, Belk, Dillard’s, Boscov’s, Bob’s Stores, Fred Meyer, EBLens, VIM and City Blue.
Nike had announced about a month ago that they were shaking up their leadership in order to pursue the Consumer Direct Offense- a digitally-focused business strategy.
Clearly, Nike is working on consolidating their distribution and taking greater control over their own brand. For an in-depth analysis on why cutting these wholesaler ties is a great move for Nike, read Chris Walton’s Forbes post here. His three main points are that 1) The wholesaler network is a risky bet, 2) Wholesalers water down the brand, and 3) No one owns athletic discovery online.
The only point that Chris makes, while an interesting one, that I disagree with is Nike creating their own digitally-based marketplace where they sell brands other than Nike. I think the Nike brand is strong enough in both its consumer awareness and its assortment of merchandise to not need to create a marketplace for other brands. For Nike to strengthen through consolidation, it needs to reign in its distribution and create new channels to sell its own products through.
Nike has the clout/hype/social media presence necessary to draw in the Gen Z/millennial consumers (especially with its SNKRS page), and has the pricing and reliability needed to draw in pretty much everyone else. When you Google “sneakers,” a pair of Nike’s is bound to pop up in your shopping bar, and if you Google “Nike sneakers,” you’ll probably see about five pairs of Nike’s, but 4/5 of them are being sold through sites that are not Nike.com. If Nike cuts these ties, the only way to buy new Nike’s is to go directly to Nike.com.
A concern with this consolidation could be that with Nike going direct-to-consumer, it may eliminate or greatly diminish the discounting that consumers can often find through the wholesalers. My gut tells me that Nike would continue to offer these types of discounts or outlet-tier products through a dedicated outlet tab on their website in addition to having a “sale” tab where products are first discounted. This way, on the physical side of retail, Nike is well off because it already has both mainline and outlet stores across the U.S.
Where I believe the most potential for strengthening the Nike brand sits is diving head-first into the resale market of their products (specifically shoes, for now). The mass athletic retailers have missed out on the potential for revenue in USED products ( Nike x Off-White collabs, adidas Yeezy, Reebok x Vetements, for example) and have let resale platforms such as GOAT, StockX, The RealReal, Grailed, etc., lead the way.
I love platforms such as the ones I listed above, but from a strategic mindset for Nike, why not try and create your own site or page for reselling both new or used deadstock or shoes that people would pay an arm and a leg for?
This is a bit of an extreme example and there are not many shoes that resell for this high of a price, but take a look at the 2017 Nike x Off-White Air Max 97:
This shoe sells for between $1,030 and $4,000 new on StockX and GOAT. That is A LOT more than its retail price. Even used, the lowest I can find this shoe for in an uncommon size that is beat up and stretched out is around $500. What if Nike, who probably has the connections necessary to find these shoes out in the world, could start selling them with the guarantee of authenticity from none other than the company that actually made the shoe?
I see this as a simple implementation to Nike’s core business model. Even selling a used pair of sneakers via Nike.com for $80 is $80 more than you had without selling it.
Some food for thought!
Featured image from https://news.nike.com/news/nike-nyc-house-of-innovation-000