Nike surpassed $2 billion in sales from its online store and its apps in the fiscal year to the end of May. Continued investments in digital development were at the center of the projects discussed by the group in an unusually insightful conference call around its quarterly results at the end of June.
Nike confirmed on this occasion that it had launched a U.S. pilot project to sell a limited range of footwear, apparel and accessories directly on Amazon, as a means to improve the presentation of its products on this platform and to keep a tight grip on the segmentation of its sales.
The move caused some concern among U.S. sports retailers when it was publicized last month. But Mark Parker, the group's chairman and chief executive, placed it in the same context as partnerships with online retailers such as Zalando in Europe and TMall in China, which have been operational for more than five years. TMall enables Nike to reach about 500 million users in China.
Parker said in the conference call with analysts that sales from Nike's online store and its apps nearly doubled in the last two years. The expansion is continuing as the Nike+ and SNKRS apps are both moving into Western Europe, Greater China and Japan.
As previously reported, Nike has launched a multi-faceted plan to accelerate its business and forge more direct connections with consumers, called Consumer Direct Offense. For this purpose, the group's digital and direct-to-consumer teams have been aligned. Parker added that Nike has opened Digital Studios, which encapsulate the group's vision of the future for sneaker culture and commerce.
The digital investments fit with multiple projects outlined by Nike earlier this year to speed up innovation and development, with stronger focus on fewer concepts. Nike is investing in faster production with initiatives such as Express Lane and its partnership with Flex, which has already produced one million pairs. Another part of the strategy that is strongly reminiscent of the plans outlined by Adidas two years ago is Nike's intention to prioritize investments in key cities by building up complete digital, creative and membership teams all based in these cities. Nike said that the realignment would lead to job cuts affecting about 2 percent of the workforce.
The Nike brand already derived about 28.2 percent of its turnover from direct-to-consumer sales in the fiscal year ended on May 31. They reached a level of nearly $9.1 billion, growing by 18 percent for the year in constant currencies, with a jump of 30 percent in online sales. But the group added that, under a broader description on which the company didn't elaborate, “direct” sales made up about 35 percent of its business on a wholesale-equivalent basis, and they drove 70 percent of its growth in the fiscal year.
Trevor Edwards, president of the Nike brand, told analysts that users of its apps spend nearly triple what other customers spend on Nike.com. In the fourth quarter, nearly three-quarters of the consumers on Nike.com were Nike app users. Their number increased by 25 percent in the quarter, and Edwards predicted further growth through geographic expansion and added member benefits.
As an example of the implementations adding value for app users, Edwards pointed to SNKRS Stash, which unlocks access to exclusive products using geolocation, and Shock Drop, which offers unannounced releases. Tying in with the group's increased focus on key cities, an interactive experience through SNKRS in New York makes a few styles available exclusively to users who unlock them through the app's new augmented reality pictures. Edwards added that Nike has begun a partnership with Instagram, allowing consumers to purchase Nike on the Instagram app.
Andy Campion, the Nike group's chief financial officer, said that the increasing share of online sales should be accretive to Nike's income as well. He told analysts that fulfilling demand through Nike.com generates nearly twice the sales and significantly higher margin on each transaction than less differentiated sales channels.
