Nike improves sales growth powered by digital transformation

Nike has achieved significant business growth by pursuing a digital-first, direct-to-customer (D2C) strategy since 2020.
Nike and digital transformation
The US company has made significant investment in digital technologies to create a digital marketplace of the future with its partners. Nike does not reveal its specific investment in information technology.

Nike recently said its operating overhead expense increased 10 percent to $3 billion in its recent quarter, primarily due to wage related expenses, strategic technology investments and higher NIKE Direct costs.

Nike’s strategy focuses on delivering a consistent, seamless, and premium experience, both digitally and physically around model brand and multi-brand. To enable this, Nike has tailored a suite of apps. The company is also focusing on strategic partnerships to build meaningful, direct, lifelong relationships with consumer.

Nike’s revenues rose 17 percent to $13.3 billion in its second quarter ended November 30, 2022. Nike Direct sales rose 16 percent to $5.4 billion. Nike Brand Digital sales increased 25 percent, when leading global e-commerce businesses grew in single digits. This growth was primarily driven by the record membership they achieved during the period. Member engagement grew in double digits. Nike had 160 million active members. In fact, more than 50 percent of store demand came from members.

Nike, as a technology-focused company, has strong focus on data and analytics. Their data science team builds next generation science capabilities to create authentic consumer interactions around the globe. It helps them optimize and personalize consumer engagement across Nike.com, Nike app, and SNKRS app. Analytics across the membership helps them gain insights in areas such as product creation, line planning, and the experiences.

The company also has strong focus on predictive analytics, especially since the acquisition of Zodiac and Celect – in 2018 and 2019, respectively. These apps collect data from user devices like Fitbits and turn them into useful information to analyze purchase behavior and customer demands.

The active member community is driving improved traffic conversion and profitability among Nike’s partners as well. “The ability to give consumers a personalized experience across channels, fuelled by data and insight, opens up a whole host of opportunity for us,” said John Donahoe, president and CEO during the earnings call.

“It positions us to empower consumers with their own choice while keeping the scalability and strengths in digital marketing, product creation, distribution, and more, which results from knowing them so well. If there’s one dimension that I would say is kind of a fourth source of competitive advantage from our historical ones, it’s this digital advantage,” John Donahoe said.

Nike expanded apps to Chinese market. In addition to launching the China-specific versions of the apps, the company created a China-specific member journey with Tmall, which saw a significant uplift in new member recruitment and demand per member. Nike’s IT team has enhanced China-for-China capabilities, like delivering hyper-local product design and localizing marketing content creation.

In Korea, one of the fastest-growing marketplaces for Nike, the company integrated their digital business onto NIKE’s global platform, enabling them to serve Korean consumers through the Nike SNKRS app.

Nike is among the first to experiment metaverse platform for brand visibility and customer engagement. In November 2022, Nike also announced the launch of a metaverse marketplace platform called Swoosh, to create an “inclusive digital community” for athletes and Nike consumers. Powered by blockchain, the platform allows users to connect with other community members, obtain virtual products and engage in immersive interaction. In some cases, users can also access real products or events. Nike also leverages Roblox video game platform for “Nikeland,” a digital world for Nike fans to play games, connect, and dress their avatars in virtual apparel via a digital showroom.

In April 2022, the company also appointed Twitter’s former chief designer officer Dantley Davis as the company’s VP of digital design.  Davis is responsible for all consumer app and web experiences at Nike. He leads the cross disciplinary team of designers whose work spans Nike.com, Nike app, SNKRS, NRC/NTC (fitness apps), and well as digital experiences in Nike’s physical retail store.

Rajani Baburajan

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