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How Nike Slayed 2018, and Takeaways for Fashion Retailers

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2018 was a year full of wins for Nike, on the field and off. The brand’s iconic swoosh was ubiquitous at the 2018 World Cup before a television audience of nearly 3.6 billion people—the third-most-viewed television broadcast of all time. By Nike’s count, 60% of the athletes competing in the tournament’s opening round wore Nike boots. It doesn’t get much better in terms of brand exposure.

But Nike also dominated off the field, scoring with viral marketing campaigns, futuristic technology, and forward-thinking acquisitions. Most notably, the brand rolled out an aggressive new distribution and retail strategy that has quickly revolutionized the Nike customer experience. In this piece, we’ll look at some of the ways Nike slayed 2018, and what other apparel brands can take away from their success.

 

Fine-Tuning the Consumer Experience

Seismic changes to the retail industry have forced brands to re-evaluate the way they interact with consumers. The need for change is especially acute for brands, such as Nike, that have historically relied on wholesale distribution through bricks-and-mortar retailers to account for the bulk of sales—in Nike’s case, 70% as of 2018.

In order to adapt, Nike in 2018 began to implemented the first stages of its “Consumer Direct Offense,” a sweeping attempt to deepen and personalize its relationship with its customers. Underpinning this approach is Nike’s whiteboard-worthy mantra, “edit to amplify,” which calls for the brand to cull its roster of 30,000 retailers to a curated all-star list of just 40 differentiated sellers. Nike believes the remaining 40 retailers can provide delivery personalized in-store experiences that offer customers a significant value-add beyond the convenience of e-commerce.

Sacrificing retail partners might seem counterintuitive. But a brand like Nike can afford to double-down on the strength of its own brand and retail outlets, while boosting investment in direct digital sales platforms. Select stores will recognize customers as they enter the store via the Nike app, steering them to a specific pair product based on their profile—and then allow them to pay for the item within the app.

Nike’s standalone SNKRS app, where exclusive releases like the React Element 87 were sold first, has also become a must-have component of the Nike customer experience. Nike’s aggressive effort to adapt to a changing customer landscape shows that brands of all sizes must be nimble and willing to go where the customers are, whether that’s a sporting goods store, a highly personalized retail boutique or a smartphone app.

 

Bold Marketing Campaigns

Even brands as entrenched as Nike are always looking for new ways to generate conversation and visibility across multiple channels—not just the playing field. The company took a risk, and scored a huge win, with its 30th anniversary “Just Do It” campaign, fronted by the politically polarizing quarterback Colin Kaepernick.

The result: Nike scored more than $43 million in media exposure from the launch of the campaign, according to published estimates, and signaled to its customers that it was willing to take a side in heated debates. With studies showing that two-thirds of customers now buy (or refuse to buy) products based on a brand’s beliefs, it’s essential for brands to understand who their customers are and what effects any value-signaling will have on their bottom line.

Nike knew enough about its customer demographics to take a calculated risk, that aligning with a figure like Kaepernick would animate far more of its consumers than it would alienate. Even when less divisive personalities are involved, the episode shows that big brands must be willing to take calculated marketing risks—and those that do so, smartly, can reap serious rewards. The key is having a thorough understanding of who your customers—or potential customers—are, and what kinds of messages and partnerships they are likely to respond to.

 

(Fun)ctional Product Innovations

Nike co-founder Phil Knight stepped down as chairman in 2015, but the impacts of his leadership and vision for the brand continue to define its product offerings. Nike wasn’t in the footwear business, Knight realized long ago, but in the entertainment business, producing not merely footwear, but fashion. From 2015’s Yeezy Boost, designed by Kanye West, to 2018’s React Element 87, which grabbed sneaker headlines when it appeared at Paris Fashion Week as part of a collaboration with Jun Takashi of punk-and-street-influenced label UNDERCOVER, Nike understands that its sneakers can fit in equally well from the locker room to the runway. But despite avant-garde colorways such as “The Sail Light Bone” and “Anthracite Black,” the React Element 87 wasn’t solely a fashion play: it used Nike’s revolutionary “React” insole technology, underscoring that beneath every great-looking Nike sneaker is best-in-class, emerging technology.

Which is why, even while people were lining up to buy the React Element 87, Nike was continuing to perfect something customers have dreamed of since Marty McFly stepped into a pair of Nike Mags in 1989’s “Back to the Future Part II”: the self-lacing sneaker. Enter the Nike BB, a mass-production Bluetooth-enabled basketball sneaker that pairs with a smartphone app, called Adapt, and senses the wearer’s foot, automatically adjusting pressure based on real-time conditions. The goal is a sneaker that feels fused to the wearer’s foot, reducing injuries and athlete wear-and-tear while delivering feedback metrics like a FitBit does.

Nike understands that the increasing ubiquity of head-to-toe smart devices has massive implications for the footwear market, especially as the technology is adapted for shoes and sports beyond the basketball court. If customers respond to this technological leap forward, Nike will forge a new frontier in footwear, doing for their feet what the Apple Watch has done for their wrist

 

Strategic Tech Partnerships

Nike has reams of data at its disposal to establish deeper relationships with customers. The brand’s ability to find new ways to use the accumulated information to its advantage is revolutionizing the Nike customer experience. Leveraging data collected by the Nike Run Club app, which runners use to track their time, distance and pace data, Nike introduced Nike On Demand. The platform paired Nike experts, coaches and trainers with runners looking to train for a goal or stick to a training regimen over WhatsApp. Nike tracked how its motivational strategies were received in real-time, and used the feedback to optimize its messaging strategies with users on the fly. Early results showed an increase in activity among Nike On Demand participants, which is a win both for the user and for the brand—and a smart way to increase personalization, retention and brand loyalty.

Nike also made serious investments in 2018 in consumer analytics and predictive technology, aimed at improving the Nike customer experience. It acquired Zodiac, a predictive analytics firm that uses proprietary tools to forecast a customer’s individual lifetime value, an essential metric for boosting retention and tailoring marketing efforts to individual customers.

The ink was barely dry on the Zodiac deal before Nike announced it had also acquired Invertex, an Israeli fashion-tech startup specializing in three-dimensional modeling and deep learning technology. The big prize: Invertex’s foot-scanning technology that lets users map every curve of their foot on a proprietary ScanMat to find the shoes that will fit them best, improving customer satisfaction and reducing returns due to ill-fitting products. As the technology matures, customers might be able to achieve an in-store fit without having to leave home. The acquisitions of both Zodiac and Invertex point back to one of the principles of Nike’s Consumer Direct Offense: finding new ways to serve athletes personally, and at scale.

 

Next Up for Nike & its Counterparts

Nike is more secretive than Bill Belichick when it comes to its plans for the future. Some early hints about 2019 show the brand will continue emphasizing the personalization and digitalization of the Nike customer experience. The company’s most recent report to shareholders identified the execution of its Consumer Direct Offense as being responsible for double-digit revenue growth during the second quarter of its FY 2019. All eyes are also on Nike’s Adapt BB sneaker, how it’s received among consumers and athletes, and whether the ‘BB’ moniker, which stands for basketball, hints at self-lacing Adapt sneaker rollouts geared toward other sports.

Not all companies looking to follow Nike’s lead will have the budgets to invest in next-gen footwear technology—or, for that matter, high-profile viral marketing campaigns and tech acquisitions. But what has most informed Nike’s transformation in 2018 is a surgical understanding of its customers: who they are, what they want, what they believe, and how (and where) to reach them. Nike is determined to meet its customers wherever they desire, whether in a differentiated bricks-and-mortar retail boutique or via a 1-to-1 exchange on WhatsApp. As the future of retail continues to disrupt the present, any brand that can deepen its understanding of its customers the way Nike did in 2018 can begin to position itself to punch well above its weight.

CB4 helps brick-and-mortar retailers drive brand loyalty and boost sales by meeting shoppers’ needs in every store in a chain. The secret? Our machine learning and predictive analytics app. Learn more now.

 

Editors note: At CB4, we’re inspired by retail industry innovations and the brands leading the way. The retailers we highlight are not necessarily CB4 partners, but simply ones we find interesting and think you will, too.

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