The move will strengthen digital capabilities within the brand’s Consumer Direct Offense.
Nike is functioning less like a marketing company that sells athletic gear and more like a tech company building a functional e-commerce platform that allows for a complete immersion into Nike culture without ever leaving your home.
Last week Saturday Night Live aired what might have been the most realistic Nike commercial and spoke to something that is common knowledge in retail: athletic gear as pajamas basically.
While I know this is a joke, it just felt like a real ad and more importantly it addressed an issue that was one of the primary reasons my successful Amazon store shut down. I’m sure you’re reading and asking where is the information on Invertex? It’s coming. One of the primary reasons I had to close my Amazon shop was returns. A few years back L2 discussed the shift in fashion as the living room was becoming the dressing room. I haven’t seen anything about this issue anywhere, but I know all to well the problem with the bedroom and living room as dressing room. As Amazon became focused on private label they also forced marketplace stores to uphold the same policies as Amazon. This meant that marketplace stores could no longer set their own policies for returns. My returns increased from about 3% per month to right at 30%. This effectively shut down my business on Amazon. (Ask me about this in detail in the comments or e-mail me.)
What does this have to do with Nike functioning like a tech company? Last month Nike acquired Zodiac:
“The acquisition of Zodiac demonstrates our commitment to further accelerating Nike’s digital transformation and enhancing our consumer data and analytics capabilities to help us serve consumers globally,” says Adam Sussman, Vice President and Chief Digital Officer of NIKE, Inc. “We’re adding world-class data-science talent and best-in-class tools to power 1:1 relationships with consumers through digital and physical consumer experiences.”
Invertex is a company that last year had a 2 million dollar funding round for their “fitting 3D” technology.
Invertex is a leading provider of scan-to-fit guided shopping experience platforms that combine advanced 3D-digitization and deep-learning technologies to deliver tailored solutions for in store, at home and online audiences. Invertex’s comprehensive platform enables retailers to significantly improve their online sales-capabilities by lowering returns by empowering customers to trust and enjoy their e-commerce experience.
Okay so here is the meaty part: the acquisition of Zodiac this year and Grabbit last year (what you didn’t hear about that one? Homework time… go to the search bar and enter Grabbit. I wrote about that almost two years ago, or something like that), means that Nike’s investment in infrastructure is catering to reducing the multitude of problems they will encounter by promoting their own sales channels first over wholesale accounts. Nike’s CDO is going to place them in the position of being the return center for everything they sell. If they are looking at getting to 80% control of their products, returns are going to skyrocket which will lead to inventory issues and a decrease in margins.
The reason Amazon is such a powerful company is because they don’t pay dividends. Amazon doesn’t show a profit because they lose so much in shipping (returns included) and acquisitions. Their huge growth comes at what is basically a break even point. This is good for them, but bad for shareholders if they don’t understand why they aren’t getting dividends. Amazon shareholders have never gotten dividends. Nike shareholders however have always enjoyed their growth. Their growth could be stunted seriously as they continue building CDO… Which leads this post into another discussion that I don’t want to get into.
What you should take from the acquisition of Invertex is that Nike is moving ahead quickly to solve many of the issues associated with e-commerce. Shareholders should be very high on Nike and if the tech is integrated quickly it will place the other brands in a tough position and they will most certainly have to respond.
Oh to tie together everything:
- I used the SNL clip to show how people lounge in their living rooms. They often order clothes while browsing on their phones in their living rooms. When they get it, it doesn’t fit so they return it.
- I talked about my store because I lost over 500,000 dollars in one year because Amazon changed policies so much it literally wiped me out… well some other things happened to but that’s a different story.
- Nike’s acquisitions are expensive and will give shareholders pause until they realize that the major investments Grabbit (improves warehouse speed), Zodiac (improves data management) and Invertex (will diminish returns), are going to make Nike much stronger.