The pace of Nike store openings is accelerating as the sportswear giant continues its shift to more direct sales.
Business Insider delivered a list of Nike store openings taking place soon. In 2020 Nike laid out a path to move closer to their consumers via additional brand doors. In 2017, however, during the Scale of Sport Investor’s Day the plan of action was detailed, and the name Consumer Direct Offense was given to their direct-to-consumer strategy which included the closing of wholesale accounts. At the time, it became clear that long-time brand partners would have to contemplate life without Nike as the brand made adjustments to their strategy by finalizing the removal of Futures and placing an emphasis on their in-app experience which drew 3 times the purchases of a visit to Nike’s dot com. This expansion of Nike locations continues an understudied trend I began documenting in 2014.
Nike’s DTC and Direct Revenue Growth and Store Growth
2014 (768 Nike stores)
2015 DTC 6.6 Billion (832 Stores)
2016 DTC 7.9 Billion (919 Stores)
2017 DTC Revenue 9.1 Billion (985 Stores)
A Nike Store leads to contraction by wholesale accounts organically. When Nike adds locations, they aren’t doing so simply to add retail doors. The plan of action is strategic and rooted in data pulled from their apps. Think of it as a singer who utilizes Spotify or YouTube data to create tour dates. If Austin, Texas is a hotspot for streams and views then Austin becomes a necessary stop on a tour. Nike is a tech driven company consistently working on ways to move closer to the consumer and every engagement in the app provides evidence of how well a Nike store could perform. Store openings in the Bronx and in Silver Spring are already being celebrated and promoted.
The first-ever Nike store in the Bronx just opened in NYC (timeout.com)
Nike Unite Store to Open November 3 in Downtown Silver Spring – Source of the Spring
Can Nike.com Japan’s New Delivery Service Catch on in the United States?
Wall Street Worries, BOPIS and Konbini
Wall Street’s worries seem a bit unwarranted when you look at the list above documenting DTC revenue growth as more Nike stores open. Sure, investments in real estate are always a burden on a business, but it appears Wall Street has failed to pay attention to Nike’s numbers and their international business strategies which have been implemented, in particular Buy Online Pick Up in Store (BOPIS) and Nike Konbini. In a recent post on Mary Dillon and Foot Locker I stated that Foot Locker’s Power Stores offer a unique opportunity for the retailer. I stated this because of BOPIS and Locker opportunities. As Nike encroaches on the territory of their remaining wholesale accounts, it can be considered a tech advantage comparable to Amazon and Whole Foods. When Amazon acquired Whole Foods, they lowered prices, but it was the ability to place Amazon Lockers within those locations that has help to improve in-store shopping times. Nike mimics tech companies. There is almost a guarantee that Nike’s pilot with Amazon provided insight to be utilized in the expansion of stores. I’ve discussed Konbini on various occasions here on the site, but only as it related to bodegas and corner groceries.
Nike retail stores are destination shopping experiences and lower-income families will hold on to their money to take family trips to the city to visit a Nike Clearance or Factory Store. This is a very seldom discussed topic by analysts as they aren’t at the street level of Nike’s business, and they can’t measure the impact of the cash customer, but it’s the BOPIS opportunity and integrating the cash customer into Nike’s digital economy that holds the most value. All neighborhoods deal with porch pirates and theft, but many neighborhoods aren’t able to participate in Nike’s digital economy and digital drops because of the issues with delivering to apartment complexes and uncovered porches. Nike has relied heavily on Shoe Palace, Foot Locker, City Gear and DTLR to cater to the cash customer. As Cash App, PayPal, Venmo and other digital wallets become more prominent it only follows those consumers will look to gain the same access to products they haven’t traditionally been able to get. If Nike introduces “Nike HOLD – Help with OnLine Delivery” (don’t look that up, I just created the name and acronym) new Unite stores become capable of being monetized in a unique and extremely profitable manner. Think about a Unite store offering customizable products Nike By You and placing your kicks in The HOLD until you can swing by and pick it up. What seems insignificant to those participating in digital economies, is only mundane because it’s accessible. Nike’s income has been shown to grow with the addition of more Nike stores and the closer Nike gets to all of their consumers, even as a full price luxury brand, the more they will grow revenue.