Nike credits ‘innovation, brand strength and scale’ for DTC success

Nike has credited the increased momentum of its digital business for a 16% surge in revenue and says it expects digital to be its leading channel for growth this year.

Speaking on an investor call yesterday (23 September), CEO John Donahoe said: “Even as we saw physical retail traffic return across much of the portfolio, digital continued its momentum with 25% currency-neutral growth, led by North America at over 40%.

“Our digital success is evidence of the product innovation, brand strength and scale that drives our meaningful relationships with consumers as we continue to show momentum against our biggest growth priorities.”

Nike Digital now accounts for 21% of total revenue, an increase of two points compared to last year, even with the reopening of physical stores. The brand said it is well-positioned to reach its target of a “40% owned digital business by fiscal 2025.”

The sportswear giant noted that five years worth of change to consumer attitudes to digital has taken place in just two years due to the pandemic, a shift that has “worked in our favour” and has Nike in a “stronger position” compared to rivals said Donahoe.

Even as we saw physical retail traffic return across much of the portfolio, digital continued its momentum.

John Donahoe, Nike

“That plays to Nike’s advantage. Our ‘Consumer Direct Acceleration’ strategy is capitalising on this marketplace transformation. We know that when we get to the other side of this, we’ll be in even stronger shape. We’ll be more agile, more direct and more digital,” said Donahoe.

Nike launched its Consumer Direct Acceleration strategy in 2017 to “leverage the power of digital” by investing in its ecommerce, apps and product innovations.

Digital play

Nike says its digital growth is led by repeat customers who are members of its digital platforms such as the Nike app and trainers skewed SNKRS app. Almost three quarters (70%) of digital sales is from Nike members repeat buying.

Part of the rise in the brand’s digital sales growth comes from developing added value for Nike members, it says, such as giving exclusive early access to footwear for members of SNKRS.

“This approach sends personalised purchase offers to members based on their engagement with SNKRS, past purchase attempts and other criteria – [we are] using data science to drive digital member targeting,” said Donoahoe.

CFO Matt Friend added: “SNKRS has increasingly become an indicator and barometer of brand heat now being operational at scale in 50 countries around the world.”

Friend also said the brand has surpassed its target of having 65% of sales stemming from full-priced items, which was achieved by accelerating its consumer-led digital transformation.

Another example of the brand leveraging digital is its Nike Playlist YouTube series aimed at children, with some episodes racking up over 2 million views and featuring prominent athletes such as NBA star LeBron James, signed to the brand. Nike’s kids’ business is up 30% with sales led by digital.

Innovation

Two key areas of focus for brand innovation will be apparel and sustainability. Nike’s apparel sales have grown 16%, particularly due to yoga apparel which is driving the segment with quadruple growth. Product innovations within yoga apparel include Dri-FIT and Infinalon, both “resonating” with users for their sustainable and practical attributes.

Meanwhile, its Space Hippie trainers line launched in 2020, which is “quite literally made from trash”, is now a global line for the brand with innovations from the range scaled to Nike’s entire portfolio.

“Consumers are clearly responding to sustainability, as we’re seeing very strong full-price sell-through for this family of products with vast opportunity to drive continued consumer and business value still ahead,” says Donahoe.

Q1 results for the US apparel giant were “strong” as revenue was up 16% to $12.2bn (£8.9bn), Nike Direct sales were $4.7bn (£3.4bn), up by 28%.

Nike’s digital success comes as JD Sports hit out at the Competition and Marketing Authority for stonewalling its acquisition of rival Footasylum.

The sportswear brand said the CMA’s provisional ruling fails to take into account the “structural shift in favour of online shopping”, which has accelerated under the pandemic and benefitted brands such as Nike and Adidas which have accelerated their direct-to-consumer strategies.