The economic landscape is rough, especially for products traditionally sold through retail. How do you sell your product at normal levels when many of your regular avenues of business are closed, or open only at reduced capacity? Clearly, the answer is a Direct-to-Consumer (DTC) strategy.
Doing Well In Quarantine
Everyone knows Nike, the athletic shoe and clothing manufacturer. If they had stuck to their traditional retail distribution, they would probably be feeling the pinch of quarantine. Even prior to the pandemic, though, the company had seen the writing on the wall and shifted to a DTC strategy. They began selling more through its website and company-owned stores, while still maintaining retail presence through other outlets. In doing so, Nike’s second-quarter revenues for fiscal year 2021 rose 9% to $11.2 billion, or 7% on a currency-neutral basis. Direct sales increased to $4.3 billion a whopping 24%. Digital sales increased 84%. That was nothing new, though, as the company has been making digital gains over 80% for the last three quarters. There was a net income rise of 12% to $1.3 billion.
The company also spent 2% less on selling and administrative expenses overall. Nike was also forced to draw back on 17% of its traditional marketing, with fewer sports events to be a part of. Overall, the Nike story has been one of making more money while spending less. So how can your company duplicate that success?
It helped greatly that Nike is a company that fits well with the quarantine lifestyle. As people stopped going to the office, suits and ties were traded in for athleisure wear. Sneakers and sweat pants became the working uniform of choice for white collar workers around the globe. Gym memberships have been paused, but the rise of home gym equipment sales shows there is still a desire for athletic activity.
Nike saw the tea leaves in traditional retail as far back as 2017. They started shifting to a DTC strategy, which they referred to as a Consumer Direct Offense. The key of it is capitalizing on the relationship between the company and its customers and doing everything it could to strengthen it.
“The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” Mark Parker, the executive chairman of Nike 2017, said. “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”
To that end, Nike has been communicating to their customers everywhere they can find them. This included building a livestreaming studio. Video content was created to generate buzz around merchandise as they previously had with in-person “shoe drops.” Long in-store lines were replaced with internet queues. Taking this approach created a sell-out of the new Air Jordan 4 PSG in under two minutes, according to Nike CEO and President John Donahoe in remarks prepared for investors.
The key takeaways here — find where your customers are. Create a personal relationship with them through marketing and sell to them directly so that their relationship is with your company not the retailer. This is a pivot Nike figured out three years ago. It is a pivot your company can still do now.