Nike Discontinues Partnership with DSW, Urban Outfitters, and Macy's, Pursuing a Shift Towards Direct-to-Consumer Sales
In a move to adapt to the evolving retail landscape, sports apparel giant Nike is rebalancing its approach to Direct-to-Consumer (DTC) sales and wholesale partnerships. The strategy, which aims to extend reach, ensure consumer access, and optimize overall brand visibility and profitability, is a departure from the exclusive DTC focus that was previously pursued.
The shift became evident when Nike announced plans to resume sales on Amazon, a move that signals a strategic decision to regain visibility where over 60% of US consumers begin product searches. This move also enables Nike to capture better performance data for marketing attribution, allowing for smarter media spend and brand investment during revenue downturns.
Nike's initial push towards DTC sales led to a doubling of its own customers but also introduced operational inefficiencies and exposed vulnerabilities in a challenging consumer environment. In FY25, Nike Direct revenue dropped 14% and digital commerce declined 26%, demonstrating that the DTC model had reached its limits.
Recognizing the complexities of consumer buying behaviors, Nike is now pivoting back towards a more omnichannel strategy. This includes collaborations with specialty retailers like Urban Outfitters, targeting Gen Z and expanding women's focused retail doors, such as with Aritzia. Nike is also partnering with Amazon to sell footwear, apparel, and accessories directly through the marketplace, reversing years of avoidance of third-party platforms.
This rebalancing strategy is not about limiting wholesale partnerships but about doubling down on DTC where it makes sense while reinvigorating wholesale distribution. Other companies, such as Adidas, are also aiming to make more profitable sales through DTC channels, with Adidas setting a goal for DTC to account for 50% of its sales by 2025.
Nike's decision to rebalance its strategy has been widely praised by analysts, particularly for its accelerated focus on digital. The analyst's confidence also remains in the 4Q21 guidance being conservative. In terms of specific wholesale partnerships, Nike has notified seven accounts that they will be shut down, with the last shipments expected around October 2021. Among the accounts dropped last August were Belk and Zappos, and Under Armour plans to shutter up to 3,000 wholesale doors.
Despite these changes, Nike's total digital sales have grown to be 35% of the business, and the company continues to invest in digital and the rollout of up to 200 small-format stores in the model of Nike Live concept. This omnichannel approach reflects a recognition that a mixed channel strategy, leveraging both owned and partner retail, better serves diverse consumer behaviors and market conditions.
[1] CNBC. (2021). Nike's digital sales grew 20% in Q4, but its direct-to-consumer business still struggled. Retrieved from https://www.cnbc.com/2021/01/26/nike-q4-earnings-digital-sales-grew-20percent-but-its-direct-to-consumer-business-still-struggled.html
[2] Glossy. (2021). Nike is selling on Amazon again. Retrieved from https://www.glossy.co/retail/nike-is-selling-on-amazon-again-638618
[3] Glossy. (2021). Nike is partnering with Amazon on a new initiative. Retrieved from https://www.glossy.co/retail/nike-is-partnering-with-amazon-on-a-new-initiative-638630
- The growing importance of digital channels in business, even in the midst of a pandemic, has led sports apparel giant Nike to collaborate with AI-powered platforms like Amazon, aiming to understand consumer behavior better and optimize sales during challenging times.
- In the world of sports, where competition is fierce, businesses are increasingly turning to AI to strategize their approaches, such as Nike’s decision to leverage Amazon’s market insights to boost sales and visibility, not just in the sports industry, but also in warmer arenas like warrooms and boardrooms.
- The shifts in Nike's business strategy during the pandemic, from an exclusive Direct-to-Consumer (DTC) focus to a more omnichannel approach, showcase the adaptability of AI in helping businesses navigate the complexities of consumer behavior in various sectors, such as sports, war, and even in times of economic downturn.
