Nike goes the distance with omni-channel retail transformation
Nike goes the distance with omni-channel retail transformation
Thu, 07/04/2019 – 03:37
- Nike’s spent over $1 billion on its omni-channel transformation in just one year, but the results are worth the cash.
In the race to win in omni-channel retail, sports footwear firm NikeÂ has set itself some specific goals, not the least of which is to double its direct connection to consumers by leading with digital.
From a fiscal point of view, the commitment to a digitally-led business model is paying off with digital revenue growth currently clocking in at 35% year-on-year. CEO Mark Parker says this is just the first lap:
In digital we know we’re just getting startedâ€¦Speed remains an incredible opportunity, and we’re well on our way towards cutting our product creation cycle in half and we’re investing in responsive manufacturing, connected inventory and optimizing data to capitalize on real-time consumer demand.
But itâ€™s on growing the direct connection between customers and the NikeÂ brand that is front of mind and that means some specific investment priorities for Parker:
Within direct, itâ€™s digital; within digital, it’s mobile; and within mobile, it’s our apps. And all of this leverages and builds membership. Our investments are enabling us to identify and better serve our members personally, which is driving higher consumer lifetime value. We’ve just passed 170 million total members in the NikeÂ Plus ecosystem.Â The SNEAKRSÂ app has become an incredible asset to our brand, with users checking in daily, and has acquired more new members than any other digital channel for Nikeâ€¦ doubled its number of monthly active users, and now accounts for roughly 20% of our overall digital business.
But NikeÂ hasnâ€™t lost sight of the physical side of the omni-channel retail balance, adds Parker:
The digital opportunity alone is tremendous. But just as promising is how digital and physical environments are intersecting and amplify each other. Our most effective test case thus far has been the NikeÂ App at Retail, which links features of the NikeÂ app to our physical retail experiences.
This is a mobile app that was introduced last year which can recognize shoppers as soon as they enter stores, allows them scan for product availability in their area and check out without waiting in line. It also allows shoppers reserve products that can be retrieved from a store locker to try on before buying.
The NikeÂ App at Retail is now live in over 30 stores in the US, the UK and France with plans to scale up rapidly over the next 12 months. The initial results from trials to date have been interesting, says Parker:
A few of the insights that we gained in our early pilots are that physical retail can be an exponential driver of membership. Product scans in-store often fuel online purchases later. And in-store exclusive offers through mobile tend to drive higher conversion rates and outsized spending. We’re in the early stages of this elevated way of serving the consumer in our own environments.
At the same time, we’re moving quickly to scale these features and connecting inventory with our wholesale partners. A stronger use of digital and physical retail is everyone’s opportunities. Seamless, frictionless shopping is what the consumer expects today.
Another in-store tech innovation thatâ€™s on the starting blocks for 2019 is a solution to tackle an eternal shopping bugbear – how to size footwear correctly. Parker explains:
NikeÂ Fit scans the foot either through your smartphone camera, or through an in-store experience. We believe a more accurate understanding of a consumer size will not only minimize returns, reduce costs and drive healthier growth, the insights we gain will also improve the way NikeÂ designs and manufactures product.
Supporting the â€˜front of houseâ€™ digital concepts is significant investment in enabling tech, including work around responsive and connected manufacturing to get product to market quicker. Parker says:
We also continue to build our 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. We placed RFID in nearly all NikeÂ footwear and apparel, which is hundreds of millions of products. RFID gives us the most complete view of our inventory that we have ever had. It’s quickly becoming the most precise tool in our arsenal to meet an individual consumer specific need at the exact right moment. We will go live with this capability across 20 NikeÂ Direct stores and then continue to scale across the fleet.
Our sharper understanding of what’s selling will also continue to inform our express lane, which is already driving higher full price sell through and better gross margins. In EMEA, the Express Lane now totals over 20% of their business. A smarter use of data is also providing even more value to our most engaged NikeÂ consumers. One new model we’re testing offers concept car footwear innovation from Nike’s leading designers to our most valued members in North America. This is a great opportunity to leverage member insights to serve them better and inform which products to scale.
For all the talk of speed, omni-channel transformationÂ does remain a marathon rather than a sprint. Thereâ€™s ongoing work to be done, concludes Parker:
The intersection of physical and digital is going to continue to be more and more intimate relationship. I think we’re looking at a lot of experimentation, trial and error learning from some of the tests that we’re doing. Ultimately, it’s about making the experience physically or digitally more richer, more dimensionalized experience for consumers. We are seeing where we have those digital connections through like NikeÂ App at Retail, we’re seeing the engagement from consumers rise significantly. And the actual spend per consumer in those cases actually jumps up dramatically.
It’s not just a current trend – this is the future of the fusion of digital and physical is going to continue. And this is a huge priority. It’s a source of investment for us. It’s ultimately around how do we better serve customers members. You’ll continue to see us evolve that dramatically. And our ambition is to lead in that space.
The NikeÂ omni-channel transformation is a compelling retail story. And an expensive one. The kind of tech innovation that Parker pitches doesnâ€™t come cheap. For its last fiscal year, NikeÂ splashed out over $1 billion on digital and tech. But itâ€™s money spent in pursuit of a clear goal. The firm predicts that digital commerce will make up at least 30% of overall business by 2023 and become the majority growth driver longer term.
Nike has also been able to point to ROI on its investments. The SNEAKRSÂ app is a case in point. It was part of the acquisition of Virgin Mega two years ago. In 2016, it had a run rate of $70 million per annum. Following investment and a roll out into 22 countries under the Nike brand, itâ€™s now a $750 million a year business.
Savvy acquisitions have also paid off, such as the purchase of Invertex, an Israeli computer visioning and volumetric-based data and analytics provider.Â Its capabilities are credited with enabling NIKE to create and bring to market the NikeÂ Fit footwear sizing solution cited by Parker in just one year from concept to roll out.
NikeÂ is still on track asÂ a retail use case exemplar of best practice.Â
Image credit – NIKE