Nike Invests in ‘Liquid Gold’ of Direct Consumer Connection

Sports brand Nike continues to wind down its wholesale activity and focus its attention on digital, where it sees a competitive advantage as it is “one of the few brands that can directly connect with and serve consumers at scale”, according to its CEO.

Why it matters
Speaking on a Q2 earnings call, John Donahoe explained how the brand is benefiting from trends the pandemic has accelerated – health and fitness, casual dress, and the shift to digital. “Digital is the engine driving our Consumer Direct Acceleration strategy,” he said.

Takeaways
• Nike Digital grew 11% in Q2 (ending November 30) and is now 25% of total Nike brand revenue (up 3 points on the year before and more than double the 2019 figure).

• The brand claims 79 million engaged members across the Nike ecosystem and reports that 40% of total digital demand is coming from the brand’s mobile apps.

• A partnership with retail company Dick’s Sporting Goods allows shoppers to link their respective accounts with the brands to unlock exclusive offers, products and experiences. Nike sees such exclusive access as a “defining marketing mechanism” to connect with consumers.
• Selling, general and administrative expenses grew 15%, driven by normalization of spend against brand campaigns, digital marketing investments to support heightened digital demand and strategic technology investments.
• Greater China quarterly revenue dropped 24%, partly because of supply issues, but Nike increased investment in demand-creation during Q2 by more than 40% versus the prior year and expects to see improvements in Q3.

Key quote
“The liquid gold for any brand is to have a direct connection with the consumer so that you can understand that consumer, you can engage that consumer and then you can serve them in a personalized way. And if you have a leadership position, you have more information with which to do all that” – John Donahoe, president and CEO, Nike.

Credit: Seeking Alpha