How digital transformation is powering Nike business growth

Nike CEO John Donahoe has revealed that it depends on digital transformation for the sportswear brand’s business growth.
Nike membership
Nike recently announced its fiscal 2021 financial results for its second quarter ended November 30, 2020.

Nike’s second quarter reported revenues rose 9 percent to $11.2 billion, driven by growth across all geographies, led by 24 percent increase in Greater China, and digital business.

Nike experienced temporary door closures in geographies affected by rising COVID-19 cases; however, more than 90 percent of owned stores are open today, with some operating on reduced hours.

“We continue to experience year-over-year declines in physical retail traffic in North America, EMEA and APLA due to COVID-19 impacts and safety-related measures, partially offset by higher conversion rates,” Nike CEO John Donahoe said during an analyst call.

Digital team

Nike has a strong team to manage its digital focus.

First, Andy Campion, chief operating officer of Nike, leads technology and digital transformation, consumer demand and supply management, manufacturing, distribution and logistics, sustainability, workplace design and connectivity, and procurement.

Second, Ratnakar Lavu is the global chief digital and information officer (CDIO) at Nike.

Third, Nike recently appointed Jim Scholefield as its CIO. Jim Scholefield is responsible for leading Nike’s technology strategy to support the future growth. Jim Scholefield most recently served as chief technology officer for Coca-Cola Company, where he was responsible for creating and executing its worldwide information technology strategy, technology operations, production support and technology engineering.

Fourth, Melanie Harris, VP, Strategy & Development for Nike, leads the development of strategic planning with a focus on driving innovation, transformation and growth.

Digital growth

Nike Brand digital sales increased 84 percent, with triple-digit growth in North America and strong double-digit increases in EMEA, Greater China and APLA.

The business growth in Greater China is reflecting the progress we’ve made toward our end-to-end digital transformation, which allows us to better manage volatility and deliver strong growth,” John Donahoe said.

Nike’s success in Greater China was driven by demand during Singles’ Day. Nike was the number one sport brand, with the highest store demand and highest traffic on Tmall during Singles’ Day.

“This growth underscores how we engage with consumers on Singles’ Day, bringing more than 4 million new members to NIKE. Overall, Singles’ Day drove more than a $0.5 billion in digital demands,” John Donahoe said.

Nike had the record-setting digital sales during Black Friday week, “which has shown the power of its digital transformation.

“Digital is woven into everything we do as a company. It’s how we operate and prioritize, from how we engage with members, to how we operate our supply chain, to how we serve consumers in the marketplace.,” John Donahoe said.

In Q2, Nike generated over 7 billion brand impressions across social platforms, directly connecting with consumers on the platforms where they spend their time.

Never Too Far Down film became the number one ad that consumers chose to watch on YouTube during 2020. These touch points led to over 400 million social engagements. “We’re not just reaching our consumers, we’re creating dialogue and opportunities for action that continue to exceed our own internal benchmarks,” John Donahoe said.

This connection has a direct result on NIKE membership. Nike added more than 70 million new members since the Covid-19 pandemic began globally. Buying member growth is outpacing new and active member growth, and growth in member demand is outpacing total digital growth.

Nike used the SNKRS App to push digital retail to the next level. It has launched SNKRS live with its first-ever product drop via live streaming, resulting in a 100 percent sell-through of the Air Jordan 4 PSG in under 2 minutes.

Nike launched this live streaming capability in North America and EMEA and it has plans to expand in Japan. Live interaction creates stronger member engagement with NIKE, giving them better access to products and experiences. It opened a new live streaming studio in Greater China for Singles’ Day.

Nike exceeded its digital penetration goal of 30 percent across owned and partnered in Q1, almost three years earlier than planned. Nike has increased digital penetration by improving product availability through search optimization, moving inventory across marketplace channels and increasing digital fulfillment capacity through scale and automation.

Nike has reduced discretionary spending in non-priority areas over the course of the last six months while accelerating investment to support digital transformation.

SG&A expenses declined 6 percent in the first half of fiscal ’21 versus prior year, Nike said.

SG&A declined 2 percent in the quarter as disciplined expense management and lower marketing spend on brand and sports events was partially offset by increased investments in digital marketing.

Nike expects demand creation as a percentage of revenue will gradually increase versus recent quarters, although new capabilities and a member-focused digital marketing model will enable greater return on investment over time.

Nike aims to create a digital-first supply chain, built on a strong technology and analytics foundation, in order to optimize service, cost, convenience and sustainability.

Nike has ramped up new regional service center in Los Angeles to serve peak holiday demand, aided by capabilities from Celect acquisition. Nike delivered over 100 percent NIKE Digital revenue growth in Q2 in North America while lowering digital fulfillment cost per unit versus the prior year.

Nike said it will accelerate the technology enablement of our operating model to change the speed with which we directly engage with and serve the consumer from online to offline services, digital marketing, personalization and digital supply and demand management.

Nike North America leveraged new tools to make dynamic pricing decisions during Black Friday. It also added RFID capabilities across stores in EMEA, enabling better product allocation and replenishment. Nike began testing consumer-facing RFID capabilities like self-checkout in retail stores in Korea.

NIKE Digital now represents nearly 25 percent of our North America business.

NIKE Digital grew nearly 100 percent in EMEA driven by Cyber Week that broke records across revenue and member engagement.

Singles’ Day drove significant growth in the quarter with over $0.5 billion in digital demand in Greater China.

NIKE Digital grew more than 90 percent in APLA geography as it significantly expanded digital footprint with the local launch of in Mexico and through key digital partnerships across Mexico, Japan and Southeast Asia.

Baburajan Kizhakedath