To keep things plain and simple, Nike is gearing towards a direct-to-consumer approach. The reasons behind the move might not be so obvious. Pulling products from stores isn’t exactly new, either. So before we dive into what’s going on with Foot Locker, here are some notable things that may make Nike’s move, make sense:
Macy’s, Urban Outfitters, Olympia Sports, Dillard’s, DSW, Shoe Show & Zappos. In September of 2020, shares of Nike stock soared 13% in extended trading after the company reported an 82% increase in online sales.
If you haven’t been able to land a fresh pair of Jordans on their release date, it’s not just you. There’s a few people you can thank for your “unlucky” experience; resellers, bots & believe it or not, retailer employees. Yes, you read that correctly, retailer EMPLOYEES. There have been countless claims inside hypebeast & sneaker collector forums proving employees working at sports and footwear retailers have been purchasing the already limited releases for themselves.
When you compare the average hourly wage of a retail employee to the potential profit margin of a highly anticipated SOLD OUT pair of Jordans, it’s not as shocking and becomes almost kind of, understandable. As of late, sneakers have become somewhat of an “asset” class of their own, much like high-end watches, paintings, and designer handbags.
“From early in the global pandemic, we knew that our recovery and return to growth would neither be linear nor intuitive,” says Andrew Campion, Nike Chief Operating Officer. “We believed that the immediate and significant shifts we were seeing in consumer engagement would be systemic. So we took decisive action and began building a digital-first supply chain to power Nike’s more direct, faster and precise service of consumers, all while prioritizing sustainability.”
That was taken from Nike’s website. As you can see, the Pandemic was, for lack of a better term, a discovery. Their new sales data during the Pandemic proved that they needed to expedite their digital strategy. As the saying goes, “Pressure makes diamonds.”
Nike’s diamond came in the form of a newly proven sales strategy: direct-to-consumer. The businesses that were able to pivot or learn something during the Pandemic, did, and those that didn’t, probably did not survive.
Hopefully, the brief summary of events listed above helped to shape an understanding of Nike’s recent position. Its most recent change, pulling some of it’s merchandise out of Foot Locker. The next retailer on Nike’s growing list of ex’s. Ex distributors that is.
Following the news, Foot Locker took over a -30% dive in stock price as Nike accounted for nearly 70% of Foot Locker sales in 2021. Alas, this forced the retailer (Foot Locker) to state that it will no longer allow any single vendor to account for more than 55% of their merchandise selection. Ouch.
It may not be all bad, however, as this shift for Foot Locker can make their shelf space more valuable and probably even more desirable for its vendors. The ole’ law of supply and demand. Lack of supply and increase of demand justifies an uptick in price. One could also argue that this gives vendors somewhat of a stronger bargaining position as well. Either way, pressure makes diamonds, remember?
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