Nike, a company that once owned 38% of the shoe market, a company that always focuses on athletes and innovations. But if you look at the sales for the last quarter, they are falling. It’s the lowest since the 1990’s. Because of this dip in sales and to drive innovation, Nike has fired 2% of its workforce. Nike and the analyst are looking into the reasons for this downfall and they are coming up with various reasons for this. One such reason is “digitization initiatives in Nike”. We are going to look at this factor.
John Donohoes became the president and CEO of Nike in 2020. He has been on the board since 2014. He came to Nike with the experience of leading digital product companies like eBay, Paypal, ServiceNow etc. His presence on the board and becoming the CEO were some of the major reasons for the digital focus of Nike.
This was the time when Nike started focusing heavily on digitization and digital innovation. Nike started bidding on the “Direct To Customer” strategy by leveraging their Digital innovation and products like apps, websites, etc. During the same time, Nike started investing in its Global store concepts and four mobile apps.
Soon the sales numbers started responding positively to this strategy.
By the end of 2020, the digital initiatives started paying off and the sales from the app doubled and 20% of Nike’s sales were through digital channels.
The Strategy and investment boosted during the time of the pandemic. During the pandemic time, the competitors were struggling to reach out to their customers using their below-par digital presence and products. Nike was able to capitalize on this gap and as a result, the digital sales went up 30%, and the membership of Nike apps went up to 160 million.
This became an eye-opener for its competitors and many other retailers.Suddenly all of them started investing in digital.
During this time in one of the meetings Nike claimed that “Consumers today are digitally grounded and will not reverse back” and they predicted 50 % sales through online channels. They started production based on these projections.
By this time the lockdowns were lifted globally and people started returning to the stores, the digital story slowly began to reverse the online sales started going down, not just for Nike but in general for all the retailers. As customers walked into stores they started realizing what they were missing out on while they were in the digital world. They started seeing innovation and fashion created by other brands. People started trying out new products and they started appreciating the new styles and innovations created by other brands.
No one thought this could happen nor Nike. They ran into an inventory nightmare as the products started piling up in the warehouse at the same time sales were going down.
So post-pandemic the competitors and retailers got another key takeaway from Nike, “You should always focus on your core products and never stop innovating”. Nike made this mistake with their digital-focused initiatives.
Don’t get me wrong I am not saying don’t invest in Digital. Instead what I am saying is, “Use digital strategies to innovate in your core business, and don’t try to create a new digital product”.
Never forget that the customers are sticking with you because of the product innovation, or because of the style you are bringing to the products. The experience you provide is only a wrapper. Tomorrow someone else can easily come up with a better wrapper but it is not easy for them to continually innovate like you do with your products. Hence innovative products should be the primary reason for customer acquisition and retention. Digital should be only a complementing or supporting factor for that.
The key takeaway from the pre and post-Nike story is “ Digitization is needed for all brands. While doing so, it should not become your core focus of innovation instead, use digital to drive innovation in your core business”
Trooming 