Nike steps up direct-to-consumer push

August 21, 2019 12:59
Nike is striving to build closer connection with customers through digital and other initiatives. Photo: Bloomberg

Amid a paradigm shift in retail management, companies have been under growing pressure to pursue digital transformation and adopt Big Data-related business models. Among the consumer-driven firms that have embraced such path early on is global sports giant Nike.  

The US-based athletic and sportswear maker began investing several years ago on initiatives aimed at building data analytics capabilities to help the firm gauge consumer needs better. And in the recent past, strategic acquisitions formed a key element of the strategy. 

This month, Nike signaled that it is stepping up its digital effort as it unveiled another acquisition that should help put the sports brand in an even stronger position to meet its customer demands.

The company announced on August 6 that it has acquired Celect, a Boston-based startup that has made a name for itself in retail predictive analytics and "demand sensing".

Marking Nike's third major acquisition in the past two years in relation to data analytics arena, Celect brings an artificial intelligence platform that will enhance Nike's Big Data capability and strengthen its ability to predict customer needs for new products.

Founded in 2013, Celect has intellectual property portfolio spanning data science and software engineering. The startup's cloud-based analytics platform offers proprietary insights that allow retailers to "optimize inventory across an omnichannel environment through hyper-local demand predictions," Nike said in its announcement.

The acquisition of Celect will speed up Nike’s digital strategy by adding a new platform which was developed by world-class data scientists, Nike’s COO Eric Sprunk said in the press release.

"As demand for our product grows, we must be insight-driven, data-optimized and hyper-focused on consumer behavior."

Nike has been a front-runner in digital initiatives amid a goal to anticipate consumer demand as quickly as possible. Also, the aim is to serve and engage with shoppers more personally.

Traditionally, firms had focused on coming up with new products based on the technology on their hands, then sold the products through their authorized dealers. Hence, the customer engagement when it came to buying the products was with the dealers, rather than with the brands.

Nike sought to change this, realizing that it needs to build its own customer relationships in order to meet market needs better. As part of those efforts, the company established its own online store to sell its products directly to customers. 

In addition, the firm has been building a digital platform to link up with outlets in different retail channels to better understand what products customers were buying. Such move, Nike believes, will beef up its capacity to fine-tune its sales and marketing strategy and respond to market needs more quickly.

In March last year, Nike acquired a customer data analytic firm named Zodiac in a bid to speed up the digital transformation game plan. Prior to the acquisition, Nike had been working with the New York City and Philadelphia-based startup for several months, using it to gain insight on customers and how they behave.

Building a Big Data analytic platform is just a foundation. Nike is also exploring a new business model to build up long-term customer relationships through a subscription model. The company announced last week that it will launch a subscription service to tap the kids market in the US.

The Nike Adventure Club will target children aged 2 to 10 with three monthly plans of US$20, US$30 and US$50. Subscribers will receive between four and twelve pairs of shoes a year depending on the plan they choose.

Members can choose from more than 100 different sneaker styles, ranging across the spectrum of performance and sportswear. They can keep the pairs they love and send back those they didn't like, and the club will send the next pair of the subscriber’s choosing. Nike Adventure Club will either donate or recycle the returned sneakers.

Nike's motive in offering this subscription service is to improve the shopping experience for parents. The sports brand understands that shopping for kids is a difficult task for parents. The club launch aims to provide convenience to parents when shopping footwear for kids.

Also, the program can help build brand loyalty among kids and the parents, assuming it finds many takers.

While only time will tell if all of Nike's initiatives will yield the desired results, what is clear is this: the brand is stepping on the gas in its direct-to-consumer push.

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EJ Insight writer