A funny thing happened on Wall Street in June: the chief executives of two massive US retail chains, Macy’s and DSW, quietly told investors they would be bringing back Nike products to their stores later this year.
Nike is “one of the most important brands for our customer”, said Macy’s CEO Jeffrey Gennette on June 1. “We had lots of customers that were disappointed that we didn’t carry it over the past year.”
The announcement was something of a surprise, and seemed to contradict Nike’s prolonged, much-publicised, and controversial strategy of focusing on selling directly to the consumer.
In 2017, Nike said it would begin trimming its network of retail partners from some 30,000 accounts to just 40. At the time, the sneaker giant was hoping to drive higher-margin sales on its website, through proprietary apps such as SNKRS, and in Nike-owned stores.
The strategy, initially called the Consumer Direct Offense, has been successful: Nike’s direct sales have grown from about 15 per cent of annual revenues in 2017 to more than 40 per cent in its fiscal 2023, which ended in May.
Some $21.3bn in Nike sales came from consumer transactions directly through the company’s own stores, apps, or website in the financial year just ended.
But the pivot has not been so kind to other retailers, some of which had relied on Nike goods for their own success. It put several independent, “mom and pop” stores out of business, while others said Nike’s sales switch had compromised sneaker culture hubs that had fostered the brand for decades.
That’s why some retail analysts were curious about the Macy’s and DSW announcements. Beth Goldstein, a footwear industry analyst at Circana, told Scoreboard that in the US, family footwear retailers (like DSW) and major department stores (like Macy’s) have been losing market share for several years as consumer preferences shifted during the pandemic.
When quizzed why Nike was reviving its relationship with Macy’s and DSW, and what that said about the brand’s retail strategy, chief executive John Donahoe insisted it was an “evolution of the same marketplace strategy . . . driven by the consumer”. He noted that “multi-brand” chains “help us serve distinct consumers or price points”.
Nike’s direct to consumer push isn’t without its own challenges: freight costs, foreign currency exchange rates, and product markdowns have all weighed on margins, despite its overall success at selling directly to consumers.
Donahoe told analysts on the company’s earnings call this week that it still intends to focus first and foremost on its own direct selling channels, followed by “neighbourhood authenticators” — local stores in select districts that lend Nike credibility in sport or culture, and lastly chain retailers.
Even so, big chain stores will be hoping the return of Nike goods can help lift their floundering fortunes.