Is Nike adopting a luxury model for its distribution?
The appeal of luxury fashion is embedded in exclusivity. Even as globalization of luxury has made scarcity less of a factor, true luxury is rarely mass-produced in available-to-all quantities and retail outlets. Limited distribution models see carefully selected retail partners, usually a mix of high-end multi-brand stores and strategic department stores in addition to a brand’s own sales channels.
Nike cuts traditional wholesale ties
Nike may be taking a similar path of luxury distribution after the company has severed wholesale ties with hundreds of stores. In the summer Nike dropped accounts including Dillard’s, Zappos and Boscov’s, all mid-market retail giants with wide-reaching store portfolios but without the cachet of luxury. Nike continued the trend by exiting smaller, local stores too, like Frank’s Sport Shop in the Bronx, New York.
Direct to consumer strategy
In August a Nike spokesperson told Footwear News: “Nike has a bold vision to create the marketplace of the future, one closely aligned with what consumers want and need. As part of our recently announced Consumer Direct Acceleration strategy, we are doubling down on our approach with Nike digital and our owned stores, as well as a smaller number of strategic partners who share our vision to create a consistent, connected and modern shopping experience.”
As far back as three years ago Nike began scaling back its wholesale network and investing in director to consumer channels. The strategy is akin to luxury giants like Kering, which last month in an earnings call said it would “proactively reduce” wholesale footprints of its brands. Gucci, for example, decreased its wholesale accounts from 110 to 38, reported FashionMagazine.it. The Italian luxury house said the stores they “spared” needed to meet its high standards of innovation and strategic retailing.
“Whether it’s Levi’s, Nike, Under Armour, or Gucci, the aims are generally the same. They want to elevate the images of their brands and maintain a tighter grip on them by selling in fewer, better stores. If they don’t, they risk losing the cachet that helps make a brand desirable and motivates shoppers to buy its products, especially at full price,” reported Quartz.
A premium shopping experience
“Over the past few years, we have shifted from a legacy, wholesale distribution model to investment in a model that gives our consumers a more premium shopping experience,” Nike CEO John Donahoe said in an earnings call in August.
The first move will see the company open 150-200 smaller format stores across the U.S., Europe, Middle East and Africa.
Image Nike via Pexels