DTC Nike Case Study
Brand Performance
(WARNING: Some of this section was AI-Generated using https://rytr.me/)
To measure the performance of a brand you need to look at various metrics. These brand metrics are Financial Performance, Social Media Sentiment and Engagement, and Competitor comparisons. In order to see how well Nike is doing, we need to go back to 1964 when it all started. Nike was first developed under Blue Ribbon Sports. Bill Bowerman and Phil Knight were the dream team that started it all. Bowerman and Knight created a new, cheaper but still high-quality shoe which they sold out of their car. After seeing the success of their sales they pitched the new shoe to the Tiger shoe company a partner of Blue Ribbon Sports. Tiger took it in and it became a huge success. While both companies were profiting from it they had some complications and they both decided to split in 1971. Following the split Blue ribbon Sports fully rebranded into the company we know and love today as Nike. Their success after the rebranding came from their innovative approach to marketing and advertising. They created a unique campaign called “Just Do It”. This campaign emphasized the idea that if you put in the hard work, anything is possible.
Financial Performance
Over the past 17 years, Nike has been on the rise when it comes to net income.
Nike is now at just over six billion U.S Dollars this year worldwide. Nike has been on a steady increase all throughout its life besides the dips seen in the years 2018–2020 which were caused by Tax Cuts, The Jobs Act, and Covid-19. As we can see they made a successful Comeback in 2021 and continues to rise.
Here we see the revenue within just the United States. Nike Generated millions of dollars from the U.S through the years 1988 to 2022. They Generated $900.42 million in 1988. While this year 2022, they are now at $18.75 billion. This year Nike has seen continued growth in revenue by about $1.39 billion dollars compared to 2021
Competitor Analysis
Compared to its competitors Nike is outperforming them on a global scale.
In the graph shown above, we can see Nike is soaring above its competition when it comes to its main product which is footwear. Nike is making $28.02 billion in revenue while its biggest competitor Adidas is behind at $12.84 billion. Considering Adidas is Nike's number-one competitor, Nike is doing a great job with a $15.18 billion dollar lead on them.
Social Media
Nike runs over 300 Social media profiles on almost every platform. While having an exorbitant number of accounts might seem like a lot Nike somehow finds a way to “just do it”. The true question is what platforms do they see the highest engagement rates?
- Instagram — They have 196 million followers with an average of 234k like and 5.7k comments which is close to a 0.12% engagement rate.
- Twitter — They have 8.9 million followers with an average number of retweets at 1.9k which is a 0.13% engagement rate.
- TikTok — They have 2 million followers with 2.1k likes, 22.58 shares, and 201 comments which is around an 0.11% engagement rate.
- Youtube — They have 1.67 million followers, they see the lowest engagement rate on youtube at 0.06% with an average of 323 likes and 499k views.
Brand Persona
The target market for Nike is worldwide but they primarily focus on individuals in the age ranges of 10–35.
One of these individuals could be William, a 20-year-old college student.
About William
- He is young and outgoing
- Very active: Participates in 3 intermural sports and rock climbs
- He has a very large friend group and several smaller friend groups
- He’s always on the move and only stops to sleep and study
- He usually eats on campus and at fast-food restaurants
- He uses an iPhone but does not own any other Apple product
- He uses a variety of social media but not TikTok, He is mostly on Instagram.
- He loves sports and tries to watch almost every football and basketball game.
- While he isn't the biggest Nike fanatic he owns a lot of shoes and clothes by them.
- Because he plays a lot of sports he owns a lot of shoes, the majority of them being Nike.
- When he shops for shoes he usually goes to the mall and browses around all the shops until he finds the shoes he likes.
- He rarely shops online and only likes to try his clothes and shoes on in-store.
How is William learning about the brand?
(WARNING: Some of this section was AI-Generated using https://rytr.me/)
Nike makes good use of social media, sponsorship, advertisement, and marketing to target its customers. They use social media as a way to connect with their consumers, by engaging with them and allowing them to inspire the design process. Nike uses Instagram, Twitter, Snapchat, and YouTube as a way to advertise products heavily through pictures that are appealing and connect with people while also using hashtags to create trends on these platforms. They have made use of sponsorship such as being an official sponsor for FIFA World Cup tournaments since 1978 in Mexico. In 2014 they sponsored major sporting events including Wimbledon Tennis Championships, and NCAA Basketball Tournament (March Madness) in addition to some other sports they sponsor such as football (NFL), basketball (NBA), and golf. Through all of these things, William is almost constantly seeing advertisements and sponsorships in his everyday life.
Developing its DTC Distribution
Nike has a store called “NikeTown” that sells its sportswear in strategically located locations all around the world. These locations are large direct-to-consumer locations that focus on allowing the customer to try out different types of shoes and clothes. When Nike is setting up shop in these locations they make sure that you can try the shoe on before you buy it — like a sports area or running track. These stores are specifically set up so you can have these things. This setup is really valuable because it gives people the opportunity to test drive their purchase, so they know if the shoe fits well before making their purchase. Alongside these stores, they also have regular store locations where almost all of their products are sold. While they aren't the same experience as “NikeTown” it is still a good place to go if you are looking for Nike. While on the subject of direct to consumers Nike also utilizes E-Commerce. You can order their products directly to your house using the Nike.com website.
As you can see from the graph above their profits from Direct to Consumer have been very good with their 2022 standing at $18.73 billion
Wholesale
Nike is cutting back on selling to wholesalers in order to boost its main channels of distribution. These channels are the physical Nike stores and their website. As of now, Nike wants to focus on selling in stores that will promote them properly. These stores are Dick’s Sporting Goods, Foot Locker, and Nordstrom. For the time being their revenue in wholesale stores is around $25.6 billion as seen in the chart below
How Does this Affect the Brand and Its Core Shopper?
While making the move to Direct consumer misses out on a good amount of revenue from retailers I believe it is the best choice. Nike has made a very smart move by doing this because now the customer experience will be solely catered to by them. Shoppers like William will also love it because now their stores are focused on the experience of trying the product rather than the experience of buying one. Not only are they improving customer experience they are also increasing revenue because there are no middlemen to deal with.
What should the brand do in the future with regards to the 4 P’s to reflect changing shopper behaviors?
Product
- Nike should constantly research and develop new products in order to stay competitive.
- Listen to the customer and provide them with a more personal experience by allowing customization of the products.
- Expand your product line while maintaining core values. This increases revenue sources and keeps customers coming back.
- Produce limited lines, these lines create scarcity which urges consumers to buy them
Place
- Expanding to more places around the world and replacing areas where wholesalers Nike used to sell.
- The Metaverse is always a great option for the future because it is predicted to be the new and upcoming age of technology.
- Ensure employees at Nike's new locations have proper training and are properly treating the customers right.
Promotion
- Cross merchandise is always effective to let customers know what other brands go well with Nike.
- Sales on the slow-moving product or potential bundles with fast-moving ones incentivize selling the slower product.
- Having a crossover is also great, these are limited-produced products in which Nike could team up with a T.V. Show or movie to boost sales in both.
Price
- Utilize competitive pricing in order to compete with their competitors. Nike used to be known as an affordable but high-quality brand so go back to your roots.
- Produce innovative footwear that is both cheap and high quality. This will allow all manner of people to purchase your products.
- Lowering prices on excess inventory will also help to boost sales and also increase revenue while getting rid of excess.
Sources:
https://insideretail.com.au/news/nikes-income-halved-by-tax-201806
AI: https://rytr.me/
Note: This article is a class assignment for BUS 465 — integrated brand promotion and advertising at NCSU Poole College of Management.
