Illuminated trademark of the American sports shoe and apparel company Nike, Inc., on display in the window of the Nike Store in Antwerp, Belgium. (Photo by Karol Serewis/SOPA Images/LightRocket via Getty Images)
Karol Serewis | Light rocket | Getty Images
Nike CEO John Donahoe acknowledged Friday that the company has moved too far away from wholesale partners Macy's And DSW in its quest to become a retailer that primarily sells merchandise to shoppers through its own stores and website.
“We recognize that in our move to digital we have moved away from wholesale a little more than we intended,” Donahoe told CNBC's Sara Eisen from Paris. “We have corrected that. We are investing heavily together with our retail partners. They were all here the last few days; they are very excited about the innovation pipeline.”
In recent years, Nike has been working to transform its business from a brand that sold its sneakers and apparel primarily in department stores and sporting goods stores to one that does the majority of its sales directly to consumers.
The strategy allowed Nike to earn much more on its sales and gain better insights about its customers through data collection. Donahoe said that over the past four years, Nike has tripled its mobile and digital business from about 10% of total sales to 30%.
However, it is a difficult strategy to achieve and could put pressure on margins in the short term. The move to a direct model is capital intensive and has saddled Nike with the headaches of returns and proprietary inventory that would normally have fallen on the shoulders of wholesale partners.
Moreover, department stores and specialty stores are huge drivers of customer acquisition. Without them, brands have to spend more on marketing, which has become more expensive and challenging online.
Some analysts have said Nike's decision to avoid wholesale partners was a mistake. They argued that this set the company back and was part of the reason why it fell behind in innovation and products. It also had a negative effect on Foot Locker, which has long relied on Nike to drive sales and now no longer receives the same range of products as before.
In its pursuit of a direct model, Nike temporarily cut ties with retailers such as Macy's And DSWbut last year it restored those partnerships as it began shifting its tone on wholesale.
The change comes at a difficult time for Nike, which has faced criticism for falling behind in innovation and losing market share to startups like About running and Hoka. In December, it announced a broad restructuring plan to cut costs by about $2 billion over the next three years. It also lowered its sales forecasts as it warned of weaker demand in coming quarters.
Two months later, Nike said it would shed 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas such as running, the women's category and the Jordan brand.
During Friday's interview, Donahoe reiterated that consumers today “want to get what they want, when they want it, how they want it” — a refrain he has used over the past year when discussing Nike's changing sales strategy.
“There are no digital shoppers versus physical retail shoppers. There are no shoppers who only shop in mono-brand stores versus multi-brand shoppers,” Donahoe said. “Consumers want to get what they want through multiple channels. … Consumers will have the choice to come to Nike digitally directly, come to a Nike door or go to one of our wholesalers.” [partners].”