DTC Case Study: Nike

David Tanaka

Published in

#ThinkAndDoBrand

11 min readOct 9, 2022

1. How is the brand performing today?

Current Problems:

The threat of entrants in the athletic category. This is due to the activewear category being desirable due to more people working from home. Companies are entering to meet the demands of the rise of athletic apparel. As a result, this poses a risk for Nike to lose some of its market shares.
Factories closure and shutdown in key markets like China. Supply chain disruptions related to COVID-19 contributed to rising inflation. Brands like Nike experienced higher transport and logistics costs. In addition, the sportswear apparel had problems with transit times and tried to buy items too early, which resulted in rising inventory levels and holding costs.
The stock fell more than 12% in October 2022.
Trade tensions specifically in China where consumers are no longer supporting Nike due to labor accusations, fierce local competition, data laws, etc.

Value:

Nike is the world’s 13th most valuable brand at an estimated $33.2 billion.

Total Users:

The number of Nike members globally is estimated at 300 million.

Financial performance:

The data above shows the revenue generated in the United States market in millions of dollars, starting from 1988 at $900.42 million to the year 2022 at $18.75 billion. The company has grown revenue for those fiscal years by $17.85 billion. This year the company has experienced continued growth in revenue from 2021 to 2022 from $17.36 billion to $18.75 billion. Which is an increase of $1.39 billion.

Nike has consistently sustained competitive advantage in their financial success and has generated over $46.71 billion in revenue worldwide sales in 2022.

Nike’s gross profit shows its profitability from 2014 at $12.45 billion to 2022 at $21.48 billion, which is an increase of $9.01 billion worldwide. In addition, from 2021 to 2022 the company generated over $1.52 billion.

Competitor Analysis:

Furthermore, when comparing Nike to its competitors. Nike outperforms Adidas and Puma in global footwear revenue in 2021 at $28.02 billion. In contrast, Adidas which is Nike’s biggest competitor, earned over $12.84 billion in revenue, followed by 3rd leading competitor Puma, at $3.58 billion in 2021. Therefore, this data shows that majority of Nike’s revenue is from their product category “footwear”. Visualization in the graph below shows the revenue share of Nike worldwide in the fiscal year of 2022, with footwear at 66%, apparel at 30%, and equipment at 4%.

Nike’s top 5 global players are Adidas, Puma, Under Armour, Skechers, and Lululemon. Its biggest competitor is Adidas, which generated $22.12 billion U.S dollars and the brand operates in over 55 different countries. In addition, Adidas is the largest sportswear brand in Europe that manufactures and designs shoes, apparel, and accessories. One of the biggest challenges Nike faces is how Adidas prioritizes quality over quantity and focuses on customer-centric approaches to their services.

Customer Reviews:

Google Play App Nike: 4.6/5 (614,000+ reviews)

A study conducted by Real Researcher showed that 41.14% of the respondents say they are highly satisfied and 23.45% say they are somewhat satisfied. However, the majority of consumer complaints were based on customer service, delivery, and product quality.

Instagram metrics (Nike vs Adidas):

Followers: Nike 240,571,136 | Adidas 34,145,397

Average likes per post: Nike 199,747 | Adidas 48,445

Average comments per post: Nike 2,979 | Adidas 873

Engagement rate: Nike 0.08% | Adidas 0.14%

2. Who is the key persona for the brand?

Brand Persona:

The target market for Nike is located worldwide and in the age range from teens through middle age. Over half of their customer segment are sports enthusiasts who are males and have higher incomes. However, Nike has made significant investments in attracting and developing relationships with women and younger athletes to build future growth.

Emma is a 25-year-old, middle-class, and white-collar professional.

About:

· She is young, attractive, and extroverted.

· Fit, energetic, and determined.

· Kind, opened minded, and confident.

· Adventurous, competitive, and clever.

· She wants to look good before, during, and after workouts.

· She is health conscious, reads food labels, and avoids eating junk food.

· She meal preps every week focusing on a plant-rich diet such as vegetables, fruits, beans, grains, and seeds.

· Occasionally she’ll incorporate complete proteins such as salmon, eggs, and grilled chicken.

Activities and Interests:

· She is interested in wearing the latest sports fashion trends.

· She chooses activewear because it fits her lifestyle and the ability to move with purpose and comfort throughout her day.

· She loves wearing her Nike workout leggings.

· She has a strong connection with sports like running, yoga, and hiking.

· She is a weekend runner who trains and enjoys staying fit.

· Her other hobbies include traveling, hanging out with friends, and long walks in nature.

· She is tech-savvy, loves her iPhone, and posts daily sporting activities of herself on Instagram and TikTok.

· She tracks her workouts with the Apple Watch.

· She uses the NikePlus app to receive the latest news, trends, and product recommendations.

· Her favorite apparel stores to shop at are Nike, Dick’s Sporting Goods, H&M, and UNIQLO.

3. How is this shopper learning about the brand?

Social Media & Endorsements:

Nike has maintained a strong social media presence. The brand sponsors several famous athletes as its marketing strategy and uses social media platforms like Instagram, Facebook, Twitter, YouTube, TikTok, etc. The success of Nike’s social media strategy is using big-name celebrities like NBA superstar LeBron James, Australian football star and pro boxer Tayla Harris, and inspirational people with disabilities like Tatyana McFadden who debuted in the Paralympics. In addition, the brand separates its social media profiles by geographic location, sports categories, gender, and lifestyle. For example, some of their profiles include Nike Yoga, Nike Basketball, Nike Women, Nike Tokyo, etc. Their social media positioning uses the brand as a lifestyle motivator, healthy living, emotional storytelling, social impact, and empowerment. Their advertisements sell an identity, establish core values in hope and inspiration, drive sales, and help in promoting new products such as new shoes and apparel.

· Property partnerships — produces all jerseys worn by the NFL, 1st official sponsor of the Los Angeles 2028 Olympic games, investments in women’s sports (Brown Girls Dream), etc.

Visual Media:

Nike sets their brand apart from its competition with product innovation by displaying an eye-catching 3-D marketing advertisement promoting “The Nike Air Max” in Tokyo’s Shinjuku station, Japan. Shinjuku station is the world’s busiest intersection. According to Steen, “approximately 3.5 million passengers pass through Shinjuku Station every day”.

Technology & Mass Customization:

Nike’s app provides convenience for customers who shop in-store or online. Customers shopping in-store can scan barcodes and pay for items. Therefore, providing Nike associates with more time for personalized interactions and engagement with its customers. In addition, the sportswear brand uses this technology to provide customizable services at in-store locations like New York and Japan. This customization includes printing, embroidery, dyeing, and lasering. They also provide exclusive access and extra services to their Nike Plus member.

NikePlus:

Customers can sign up for free and receive information about new products, and innovations, access to benefits, and more. These perks include free shipping, 30-day wear tests, exclusive products, and in-store perks.

TV & Movies:

Nike featured an estimated 3,134 product placements across TV and movies in 2021.

Top 10 most popular keywords in 2022:

1. Nike (71.1M)

2. Nike shoes (17.5M)

3. Air force 1 (17M)

4. Nike shoes men (13.2M)

5. Nike shoes women (11M)

6. Nike air max (10M)

7. Nike socks (7.4M)

8. Air force (6.3M)

9. Nike dunks (6.3M)

10. Air max (6.1M)

4. How developed is the brand in DTC distribution?

The company has retail outlets around the world called “NikeTown” that are strategically positioned in different regions. The sportswear company has over 50 distribution centers and 100,000 retail stores worldwide.

Nike uses a blended distribution consisting of direct and indirect distribution channels to ensure high market penetration. They serve 3 channels wholesalers, direct-to-consumer at their outlets and e-commerce, and their Nike branded divisions. Direct distribution is a direct-to-consumer approach where the manufacturer organizes and manages and has more control over the whole process. They’re responsible for making sure customers receive their purchases. Indirect distribution allows companies to focus on their business while outsourcing distribution to intermediaries who perform Nike’s distribution functions. Indirect distributions provide expertise, increase costs, the manufacturer has more control, and possibly slow delivery.

Wholesalers:

· Regional and worldwide: Nike sells products to wholesalers around the U.S and international markets. Wholesalers make up about 57% of Nike’s revenue. These include department stores such as Dick’s Sporting Goods, Foot Locker, Finish Line, etc. However, Nike is trying to limit selling to fewer wholesalers to allow them more control of its brand. In addition, they want consumers to shop more from its official website and outlets. Ultimately, their goal is to distribute their products rather than other channels.

Direct-to-consumers & E-commerce:

· Retail outlets and nike.com: these are Nike-owned stores, and the brand prefers this method due to higher margins in sales than wholesalers. Direct sales allow them to have better margins without having middlemen taking cuts in their sales. According to Haleem, Nike’s digital revenue grew 23% on August 31st, 2022.

5. How does this affect the brand with regard to its core shopper?

(Attention: AI-Generated Content)

1. Direct-to-Consumer (DTC)

The direct-to-consumer model is where consumers purchase products directly from the manufacturer. DTC sales are often referred to as e-commerce or online retailing. Consumers shop online at their own convenience, without having to visit brick-and-mortar stores. In addition, consumers can compare prices across various websites and make purchases at any time of day or night.

2. Customer Relationship Management (CRM)

Customer relationship management (CRM) is a strategy that helps companies manage interactions with their customers. CRM software enables businesses to track and analyze consumer behavior, including what people search for, how they navigate the site, and whether they return to the website. Companies use CRM software to create personalized experiences for each individual customer.

3. Loyalty Programs

Loyalty programs reward customers for repeat business. These loyalty programs may offer rewards points or cash-back incentives. Rewards points can then be redeemed for merchandise or gift cards. Many retailers offer discounts to loyal customers.

4. Personalized Product Recommendations

Personalized product recommendations are based on past purchasing habits. Retailers use these recommendations to help shoppers find items they want.

5. Two-Way Conversations

Two-way conversations allow customers to interact with brands via social media platforms. Brands use these channels to engage with their customers, listen to their concerns, and answer questions.

6. Feedback

Feedback is information about a company’s performance that is provided to shareholders, managers, employees, suppliers, customers, and others who play a role in the company’s success.

7. Customization

Customization refers to the ability to customize a product to fit a particular need.

Consumers lose the Nike experience when they buy from wholesalers. Nike has a disadvantage in the ability to not build a relationship directly with its end users. The retailer serves as the middleman which cuts profit margins and controls the pricing of Nike’s goods. Therefore, potentially decreasing the brand’s image if retailers lower prices. On the other hand, wholesalers buy in large bulks and make up the majority of Nike’s revenue. Another benefit is that wholesalers help grow their market in different regions around the world.

Ultimately, Nike prefers to sell directly to their consumers with their official website and outlet stores. This allows them to have direct contact with its customers, have more control, and ultimately gather valuable data. Nike’s goal is to bring a more immersive experience to its consumers. The customer shopping experience is different than the experience with wholesalers. Customers receive added perks such as product recommendations, exclusive offers, two-way conversations to provide feedback, help with fitness regimes, customization, and personalization.

6. What should the brand do in the future with regards to the 4 P’s to reflect changing shopper behaviors?

Product:

· Research and development to innovate new products that rivals can’t match. For example, entering new markets such as high-end fashion.

· Provide more personalized customization with shoes and apparel by interacting and listening to customers.

· Use products as an incentive to increase order size.

· Extend product lines to add more revenue sources without weakening core values. People are willing to pay premiums, and therefore helps keep customers coming back.

· Limited product quantities and product drop to create scarcity and urgency.

· Partnership with health-focused technology brands.

Place:

· Expansion in emerging markets like the Middle East is a great opportunity to increase the market growth.

· Nike online store can add countdown timers on the product page showing the end date on products.

· Nike retail outlets can display older inventory by figuring out traffic frequency to decide where to place products in specific locations.

· Train sales associates in geographic locations to scale business activities, manage experiences, ensure customers receive help and show products that meet their needs (increasing sales).

· Metaverse and digital channels are a great way for Nike to learn, interact, get involved, and share information with its consumers. One of the most important things is that Nike can build relationships with the younger generations and a great way for the brand to story tell, incorporate digital and real-life goods, and bring value to their community.

· Invest in automation and increase distribution centers geographically to combat uncontrollable events.

Promotion:

· Bundle fast-moving products with slow-moving products.

· Assess key marketing activities in various regions, channels, etc. For example, sourcing goods in different regions can create new demand.

· Re-market ways to move goods for different purposes like non-profit organizations, charities, and donations. This can help build brand trust and social responsibility awareness that brings immeasurable value.

· Cross-merchandising by complementary products to help customers know what products go well together and to reduce excess inventory.

· Improve visuals to market older products and therefore attract potential customers’ attention. For example, high-quality images, fresher looks, more appealing photos, and lifestyle shots.

· Utilize key sponsorships in different regions, online ads, and billboard ads to expand reach.

· Effective marketing strategy consisting of user-based content and personalized advertising. For example, permission marketing where consumers allow marketing communications by opting in or opting out. Another example is one-to-one marketing where consumers add value by sharing information with marketers and marketers use the information gathered to provide experiences. Therefore, reward existing customers by letting them know first about special events and offers.

· Prioritize endorsements and sponsorship deal with global teams and sporting events. This keeps the brand in the spotlight and enables it to showcase new products.

· Opportunities to gain market share in women’s apparel and non-workout occasions.

Price:

· Convey value along the entire purchase journey from the beginning when you first encounter the customer and continuing into the post-purchase relationship.

· Bundle pricing for new and older products to increase higher cart value.

· Consider lowering prices for excess inventory or creating a limited-time sales event to attract customers.

· Use competitive prices on exclusive items.

· Product innovation and pricing power to help keep the company stay ahead of the competition.

Sources:

https://www.nike.com/

https://www.statista.com/statistics/632210/nike-brand-value/

https://www.nasdaq.com/articles/more-than-300-million-reasons-why-nike-is-dominating-digital

https://www.statista.com/statistics/888676/nikes-revenue-in-the-us/

https://www.statista.com/statistics/1002883/gross-profit-of-nike-worldwide/#:~:text=Global%20gross%20profit%20of%20Nike%20from%202014%20to%202022&text=In%20fiscal%202022%2C%20Nike's%20global,dollars%20in%20back%20in%202014.

https://www.statista.com/statistics/241683/nikes-sales-worldwide-since-2004/

https://www.statista.com/statistics/278834/revenue-nike-adidas-puma-footwear-segment/