From Traditional to D2C: Nike's Strategic Adjustment

In Macquarie University's Business-to-Business Marketing Strategy course, I worked with Tania Cooper , Mahek Modi , and Darshan Kaimal to conduct an in-depth study of Nike's supply chain management and digital transformation strategy. During the discussion, we identified the challenges Nike faces in global supply chain integration and direct-to-consumer (D2C) channel expansion, as well as the new opportunities brought about by digitalisation. This collaboration enabled us to identify the key factors affecting Nike's development and to consider how to respond to future industry changes. As both an observer and a practitioner with experience in the sportswear industry, I have followed Nike's development closely, particularly noting the major challenges and setbacks it has faced in recent years.

1. Nike's supply chain

Nike's supply chain is a complex and rich network of suppliers, manufacturers, distributors and retailers with strong connections in all regions of the world. It consists of design and development teams in Oregon, a network of contract manufacturers throughout Asia, e-commerce platforms, regional distribution centres, numerous retail partners and Nike shops. Suppliers provide the raw materials and components needed for production, which are sourced from products that meet Nike's quality standards and sustainable practices. After sourcing, the materials are processed into finished products by manufacturers based primarily in Asia, ensuring a high level of craftsmanship and quality. The products are then transported by Nike's multi-nodal distribution network to a global network of distributors and retailers, as well as e-commerce platforms, for sale to consumers around the world.

2. Why did Nike ‘run into trouble’?

During COVID-19, the global supply chain was disrupted, Nike's production and inventory levels were severely impacted, and Nike's marketing strategy shifted from long-term brand building to short-term performance marketing for immediate sales, weakening brand equity and failing to create and satisfy lasting consumer demand. At the same time, Nike misjudged the lasting impact of the epidemic on consumers and prioritised direct-to-consumer sales by assuming that the surge in online sales would continue indefinitely. This led to the disruption of Nike's ties with major retailers such as Foot Locker and Macy's, leaving Nike with less exposure on retail shelves. Once consumers' offline shopping habits resumed, Nike was unprepared to adapt to the changing market and did not focus on launching new and exciting products, which allowed competitors such as Adidas to grab market share.

Despite having a strong brand, a relaxed work culture shift driven by the epidemic, and a strong commitment to digital transformation, Nike encountered unexpected challenges. A major issue was the global supply chain disruption caused by the epidemic, which led to production delays and inventory shortages. In addition, the rapid growth of e-commerce led to bottlenecks in Nike's logistics network, affecting timely deliveries. In addition, the competitive landscape intensified, with competitors such as Adidas making strategic advances. These factors combined to create a ‘perfect storm’ that complicated Nike's path to sustained growth.

3. Nike D2C digital channel. Based on the reasons for channel considerations and market signals, if you were the CMO / CEO of Nike, would you have ‘Ok’-ed this plan? this plan?

I would approach this transition more cautiously, as COVID-19 has accelerated the trend of consumers shopping online, and in this context, the benefits of D2C are clear. Firstly, by selling directly to consumers and skipping third-party retailers, Nike can achieve higher margins and improve profitability; secondly, D2C allows for a more direct and comprehensive collection of customer data, allowing for a more personalised marketing strategy and better consumer service; and D2C also helps Nike to have more control over the customer experience and inventory management.

However, the risk of D2C is that it can alienate the relationship with traditional retail partners. There is also the risk of cyber threats and technological disruption if there is an over-reliance on digital infrastructure. Therefore, while the potential benefits of D2C are tantalising, it is wiser to take a balanced approach. That is, by leveraging the strengths of both channels, Nike is gradually increasing D2C sales while building teams that specialise in D2C operations and customer engagement, as well as maintaining good relationships with its retail partners, which ensures that the brand's strategy remains resilient in a rapidly changing market.