Nike Treads New Sales Path -- WSJ
July 06 2017 - 3:02AM
Dow Jones News
By Sara Germano
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 6, 2017).
With the retail sector in flux, Nike Inc. is looking for new
ways to sell sneakers and shirts, but some industry watchers worry
that the company's efforts to broaden its reach could damage its
cultural cachet.
The world's largest sportswear maker has begun selling goods
through Amazon.com Inc. and increasingly is using its mobile apps
as sales tools, attempting to connect with consumers who are buying
more online. Already, sales on Nike.com and the company's apps have
doubled to more than $2 billion since 2015, the company said last
month.
Those initiatives mark a shift away from how Nike has
traditionally released its most desirable products. Five years ago,
the company had to tell longtime sales partners Foot Locker Inc.
and Dick's Sporting Goods Inc. to move limited-shoe releases to the
morning hours from midnight because shoppers who camped outside
stores were getting out of hand. Frequent online releases of
coveted Jordan shoes could make them less rare and not as much in
demand anymore, some industry watchers say.
By making certain shoes available only through Nike channels or
big chains such as Foot Locker, the company is diminishing the
mom-and-pop shops that have served as community stewards of
cool.
"They're putting their foot on the gas in terms of releases,"
said Matt Halfhill, founder of sneaker-news site Nice Kicks, which
chronicles new releases across major shoe brands. Mr. Halfhill, who
said he has been involved in sneaker culture since the 1990s,
believes the push toward direct sales actually hurts Nike's
connection with consumers.
"It's a great way to sell commoditized shoes, but most boutiques
even discourage you from buying on the phone. They only sell shoes
in stores to customers, where you see everyone in line waiting for
shoes talking to each other," he said.
A Nike spokesman said the company is focused on "disrupting the
sneaker shopping experience" by offering different types of
releases, some in nontraditional places. Last month, the company
released a limited edition sneaker in collaboration with acclaimed
chef David Chang. Users of the Nike SNKRS app could purchase the
shoe at Mr. Chang's Fuku restaurant in New York through
augmented-reality technology by taking a photo of the menu within
the app, which unlocked a sales portal.
Wall Street has taken note of the choppy waters for Nike, which
has to navigate North America's retail downturn, in particular the
troubles facing sporting-goods stores. "The big picture concerns
are competition is gaining on Nike, 'athleisure' is slowing, and
the shift to online spending is proving highly disruptive to Nike's
wholesale business," Morgan Stanley analyst Jay Sole wrote in a
research note.
Nike's share of the U.S. retail sneaker market fell 1 percentage
point to 50% this year through May, according to industry tracker
NPD Group, while rival Adidas AG climbed to 11% from 7% over the
same period. Adidas's gains come about two years after the company
changed its leadership and refocused on sales in the U.S., where
the German company has struggled for years.
Adidas's resurgence includes new "franchises" -- such as the NMD
and Kanye West's Yeezy line -- that have gained a youthful
following and made inroads on Nike's cultural dominance.
Nick Santora, a former sneaker-store owner and editor of online
sneaker magazine Classic Kicks, said Adidas is more on point with
youth culture of late.
"It took them a while, but things are coming together the right
way," Mr. Santora said. "Kanye, for some people, for certain kids,
that brand is now acceptable," he said. "Nike was always 'sports,
sports, sports,' but if you're over 11 years old right now,
musicians are where it's at."
Nike has released collaborations with hip-hop artists such as
Drake and A$AP Bari among others, and a training shoe with actor
and comedian Kevin Hart. The company says it has relationships with
entertainers as well as thousands of athletes, and it develops
signature sneaker lines for only a select few.
Although Mr. Santora, 39, said he is a lifelong Nike fan, he
admits to some brand fatigue.
"I haven't bought a pair of Nikes in a couple of years," he
said. "I don't need to be that cool anymore."
Write to Sara Germano at sara.germano@wsj.com
Corrections & Amplifications Matt Halfhill said he has been
involved in sneaker culture since the 1990s. An earlier version of
this article incorrectly said he has been involved since the 1980s.
(July 5)
(END) Dow Jones Newswires
July 06, 2017 02:47 ET (06:47 GMT)
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