Nike Inc., the global sportswear conglomerate that includes renowned brands such as Nike, Jordan, and Converse, is capitalising on its burgeoning membership model to enhance customer lifetime value and attract new consumers, according to the firm’s CEO.
Financial Performance Highlights:
In the second quarter of 2023, Nike Inc’s global revenues rose by 17% and by 27% on a currency-neutral basis, evidencing robust growth across its portfolio. Nike Direct expanded by 25%, spearheaded by a 34% surge in Nike Digital and an 11% increase in sales at Nike stores. Over 85% of the demand during Cyber Week across Europe was driven by Nike members. This quarter marked the highest-ever demand from Nike members, with a double-digit rise in member engagement. Remarkably, more than half of the demand in stores was attributed to members.
Building Direct and Personal Connections:
John Donahoe, Nike’s CEO, commented during the company’s earnings call for the second quarter of 2023, “Our strategy to connect directly with consumers is based on a straightforward insight: consumers desire to acquire what they want when they want it, and in the manner they want it. They have expressed a desire for a consistent, seamless, and premium experience, both digitally and in physical mono-brand and multi-brand settings.”
He further added, “The cornerstone of Nike’s enduring success is forging meaningful, direct, lifelong relationships with our consumers. A direct connection with our consumers reduces the risk of disintermediation. Essentially, with the consumer base accessing our apps, our website, and our owned and partner stores, we and our partners can control our destiny.”
“This direct engagement allows us to better understand our consumers so we can serve them more effectively with the appropriate assortment, partners, and touchpoints.”
The Power of Membership:
Donahoe highlighted the effectiveness of this direct-to-consumer strategy, evidenced by Nike’s increasing membership base. “This quarter has seen the highest ever demand from our members, with significant double-digit growth in member engagement contributing to a 34% increase in Nike’s digital business—a leading performance in the industry.”
He continued, “Currently, we have approximately 160 million active members who interact with us regularly. More importantly, our repeat-buying members, who are more engaged and purchase more frequently, are expanding at an even more rapid pace.”
Members not only propel growth in Nike’s digital channels but also play a crucial omnichannel role: a significant route for member acquisition is through Nike’s brick-and-mortar stores. More than half of the store demand is driven by members, and cross-channel members are even more valuable, generating higher demand per member than those who interact through a single channel.
“Our growing understanding of our members, based on their engagement with the brand, enhances our capabilities in areas such as product development, line planning, and brand experiences. These insights also aid our retail partners, with engaged members boosting traffic, conversion, and mutual profitability,” Donahoe explained.
“The ability to offer a personalised experience across channels, powered by data and insights, presents a multitude of opportunities for us. It positions us to empower consumers with choice while maintaining the scalability and strengths in digital marketing, product creation, distribution, and more. Ultimately, this makes Nike a superior retailer and a better wholesale partner.”
Innovation and Newness:
Continual innovation and highlighting its array of sports stars are also crucial to success. French football star Kylian Mbappe, who sported Nike Mercurial Superfly boots during the recent FIFA World Cup and won the Golden Boot, is a prime example of Nike’s strategy that achieves a reach among football fans that advertising alone cannot.
“Nike’s boots dominated the World Cup, scoring more goals than all other brands combined. The new Mercurial achieved the highest full-price realisation of any performance product globally this quarter,” stated Donahoe.
Resilience in Challenging Times:
Donahoe reaffirmed the strength of the Nike brand to navigate through recessions and as China, one of its key markets, recovers from a prolonged COVID lockdown.
He noted, “A mantra we’ve repeated over the last 2.5 years is that strong brands become stronger in turbulent times. That remains our ultimate objective.”
“We aim to capitalise on challenges and opportunities more effectively than others, to strengthen and expand our market share. This is evident over the recent quarters and is expected to continue in the forthcoming periods.”
Donahoe concluded by asserting that the fundamentals of success rely on leveraging the unique competitive advantages of Nike Inc.’s distinctive brands, combining excellent products and innovation, like the Mercurial, with a stellar lineup of athletes and teams, and effective storytelling, brought to life during events like the Women’s Euros and Men’s Football World Cup.
“This combination, together with our distribution strategy of delivering what consumers want, when they want it, and how they want it, enables us to consistently succeed as we move beyond the COVID era.”
