The Sticker Shock Effect @ Nike!
The common notion is that America is a marketers’ dream destination; with people willing to swipe their credit cards for anything they fancy irrespective of the price tag (I swear this is not about $1000 iPhone X). In fact, reams of research papers and studies have been published on consumer psychology and the holy grail of sorts among them all is the “black-box model”.
And one company that has tapped this consumer psychology well and morphed itself into the biggest brand building story of the last 50 odd years is Nike, Inc. — growing from approx. $1 billion in sales in 1986 (Air Jordan launch) to a $32 odd billion in revenue behemoth now!
Nike reported flat sales for its US business yesterday and gave a bleak outlook of further sales decline in coming quarters. Is the US consumer (millennials in particular) finally becoming smart and price conscious and getting himself/herself out of the marketing “black box”? Is Nike realizing that charging more $$ for the logo/brand might not be a sustainable business strategy with the millennials? Or is this a temporary blip while it realigns its marketing tactic to seduce this generation?
In its (marketing) earnings call on Tuesday, Mark Parker (who recently took a 71% pay cut) and his team went to great lengths explaining their new Consumer Direct Offense strategy — ditching traditional supply chains (a.k.a wholesale retailers) and targeting specific cities with custom-made/localized products derived from its analytics data. Wall St.’s on a wait and watch mode to see if this works.
The silver lining in all of this is their stellar double-digit sales growth in (communist) consumerist China and international business is now 55% of Nike’s revenue!
PS: Nike’s CFO Andy Campion, who’s from Cleveland said he’ll miss Kyrie who has moved to Celtics!
This story was part of AlphaNews newsletter that was published at 5am ET on Wednesday September 27, 2017. Subscribe to the newsletter for more such insights delivered to your inbox.
