Nike, the renowned global sportswear giant, is undergoing a strategic revamp by reducing its number of retail partners. The company aims to prioritize marketing its flagship products through its own network and select major partners worldwide. This decision is part of Nike’s broader plan, announced in 2017, to transform its business model and streamline distribution.

Recently, Foot Locker, one of Nike’s long-term partners, opened a flagship store on the prestigious Champs-Elysées in Paris. Interestingly, the store prominently featured rival brands like Adidas, New Balance, Puma, and Converse, with only a few Nike models on display. Foot Locker’s CEO, Richard Johnson, expressed disappointment with Nike’s performance in the last quarter, highlighting a decline in overall sales but significant growth in non-Nike brands.

Foot Locker’s experience is reflective of a larger trend within the American retail industry. The company has been implementing its own “Nike Direct” strategy for several months now, diversifying its brand portfolio and reducing reliance on a single supplier. Foot Locker aims to ensure that no single supplier accounts for more than 55% of its product spend, thereby decreasing Nike’s domination from 75% in 2020 to approximately 60% in 2022. This move aligns with Nike’s own strategy of transitioning to direct sales.

One significant driver behind Nike’s direct sales strategy is the success of its SNKRS app. This app has allowed Nike to engage directly with customers through their smartphones, particularly through its limited edition product releases. Since the start of the COVID-19 pandemic, the app has contributed to Nike’s digital business growth of over $10 billion annually, more than doubling its previous figures. Matthew Friend, Nike’s CFO, emphasized the brand’s commitment to building direct relationships with consumers and leveraging its digital advantage.

Buoyed by the success of Nike Direct, the company has expedited its plan to reduce the number of retailers it partners with. Nike has formed strategic alliances with major players such as Dick’s Sporting Goods in the United States and Zalando and JD in Europe. While exclusive retailers still receive access to limited-edition releases, independent stores and many major retailers have experienced restricted access to Nike’s full catalog. This constraint is a result of Nike’s distribution strategy and the challenges it faced in sourcing products from Asia amid the closure of factories in Vietnam.

Nike’s strategic shift has created opportunities for competing brands to gain traction in the market. New Balance and Puma, in particular, have witnessed significant growth as they fulfill the demand and expand their offerings across various product categories. These brands possess the resources and marketing investments to support wholesale distribution.

Furthermore, independent retailers have capitalized on the changing landscape prompted by Nike’s tightened distribution. These retailers have sought alternatives and forged partnerships with emerging and responsible brands that emphasize ethical production and sustainability. By diversifying their offerings, these retailers are positioning themselves to cater to evolving consumer preferences.

While Nike maintains a dominant position in the sportswear industry, its shift towards direct sales and selective distribution has opened doors for other brands to capture market share. As the industry undergoes reshuffling, it will be intriguing to witness which players emerge as frontrunners. Brands and retailers that adapt to changing trends, embrace responsible practices, and cater to niche segments are best positioned for success in the evolving sportswear market.

Useful Links:
1. Forbes: Nike Neck-in-Neck With Adidas, Under Armour May Fall Behind in Bite for Market Share
2. Business of Fashion: Can New Balance Become the Beautiful Chaos of Sneaker Culture?