Nike CEO on business gains from digital transformation

Nike CEO Mark Parker has revealed the sports and fashion brand’s achievements from digital transformation.
Nike CEO on digital transformationNIKE has recently appointed Ratnakar Lavu as the company’s first global chief digital information officer. The development follows the resignation of Jim Scholefield as Nike’s global CIO in October 2018.

Nike is expecting that the appointment of Ratnakar Lavu will enhance the contribution of digital business to its revenue. Nike says its gross margin expanded 80 basis points in Q4 and 90 basis points in full year driven by full price sales, enhanced product profitability and Nike Digital growth.

Nike CEO Mark Parker, during the fourth quarter earnings call, said the tech savvy company accelerated its digital advantage and that focus led to 35 percent digital revenue growth.

The sportswear brand is cutting its product creation cycle in half. Nike is also investing in responsive manufacturing. Nike focused on connected inventory and optimizing data to capitalize on real-time consumer demand.

“Our investments are enabling us to identify and better serve our members personally, which is driving higher consumer lifetime value. We’ve passed 170 million members in the Nike Plus ecosystem,” Mark Parker said.

The sneakers app has acquired more new members than any other digital channel for Nike. Sneakers more than doubled his business, doubled its number of monthly active users, and now accounts for roughly 20 percent of overall digital business, for the fiscal year.

Nike app is expanding with triple digit revenue growth in Q4. Nike will launch the NIKE app in China and in 13 new markets in EMEA in the first half of fiscal year 2020 targeting to add hundreds of millions of new members.

The Nike app at retail is live in over 30 doors across the U.S., the UK and France. It will be scaling considerably throughout fiscal year 2020, including in select factory stores.

Nike acquired Virgin Mega two years ago and invested organically in the team, digital tools, content creation and the geographic rollout of sneakers into 22 countries. The revenue of sneakers app has accelerated from less than $70 million in revenue in fiscal year 2016 to an annual run rate of over $750 million based on Q4 fiscal year 2019 performance.

Data and analytics

Nike CEO said the company will build capabilities in data and analytics, digital demand sensing and connected inventory to create a supply chain that anticipates and response to shifts in consumers demand quickly.

Nike has placed RFID in hundreds of millions of Nike footwear and apparel products. RFID gives the most complete view of inventory. Nike will expand the RFID capability across 20 Nike Direct stores and will scale across the fleet.

Nike Direct drove roughly 50 percent of incremental revenue growth in fiscal year 2019, with Nike digital growing 35 percent for the full year. Digital commerce own and partnered is on track to comprise at least 30 percent of the business by 2023.

The company is shifting wholesale customers to NIKE.net, a digital platform for buying at wholesale. It is also testing new digital business models with respect to off price sales and optimizing Nike factory store fleet.

Rajani Baburajan