Introduction
Recently Nike has launched its direct-to-customer campaign, which has increased its sales by 19% since its launch. The direct-to-consumer model is a supply chain system that allows a specific retail brand to eliminate wholesalers and distributors and sell their products directly to their customer base. This is a model that Nike has embraced in a gamble to improve sales and remain the number one sportswear brand. In turn, it is possible to explore the strategy so as to analyze its relevance for our company. In this analysis, we will review the purpose of the supply chain, why a brand might consider the direct-to-consumer model, and how supply chain systems can affect their customers. Finally, we will look at how Adidas can grow and improve its direct-to-consumer strategy to better compete with Nike.
Why Direct to Consumer
In contrast to the traditional business model, what Nike is doing with its direct-to-consumer strategy is removing the distributor and the retailer from the model. They can set the price low and sell more in quantity. This will result in more sales, which will result in higher profits. Because there is no distributor and no retail overhead, there is no need to mark up prices artificially to boost profits. The more elements in the supply chain for a specific brand, the higher the overall cost to the company to bring the product to market and sell to the customers.
Another reason to adopt a direct-to-consumer strategy is to expand Nike’s reach. In research from Salpini and Salpini (2021), Nike has a solid brand to command a sizable business through its channels, but the more sales Nike can get that way, the better. Another advantage to the method is that Nike has more control over how its brand is presented through DTC channels. Thus, it can be determined that Nike to acquire the DTC approach is to reduce the cost of the retailers’ help, expand its brand’s popularity, and create an ability to track customers’ experience. Hence, Nike aims to adapt its supply chain into Omnichannel: the distribution of the goods in invisible and comfortable for customers’ ways. However, it could not be said that Nike has achieved much success in planning. The company is primarily busy with the digitalization of selling and creating innovations through its products. At the same time, for DTC, it would be more beneficial to start building a stable supply chain since many technical challenges wait for a company in this area. Moreover, the success of Nike’s DTC is expressed in the number of the increasing costs of their products, which is not the best indicator of effectiveness. The rise might be caused by sales in brick & mortar stores, new investigations, and transactions with other businesses.
Finally, the Omnichannel plans through the DTC might be too idealistic since the approach has several severe disadvantages. First of all, the company that decides to create and use its supply chain without the traditional distributors risks decreasing the quality of the product delivery to the customers. The conventional retailers have more experience in this process, while Nike can be maladapted for such changes. Next, a consequence of the mentioned disadvantage is the logistics problems. Creating a new supply chain means that the connected networks of product delivery would not collaborate with the company, which raises a question of alternative paths. Finally, the speed of the delivery can be decreased because of such changes.
Internet and Social Media
Internet and social media are the primary constituents for DTC strategy. Nike Digital now accounts for 21% of total revenue, an increase of two points compared to last year, even with the reopening of physical stores. The brand said it is well-positioned to reach its target of having almost half of its business digital by the fiscal year 2025 (Pham, 2021). The reason why digital platforms are so crucial for DTC is that they replace traditional retailers as intermediaries between the producers and customers. Social media are perfect for promoting the products to reflect the company’s values and strategy. This will enable Nike to raise awareness for their products and present a more personalized presentation.
Products sold on social media also allow the customers to comment on the products purchased from Nike. Customers can tell other potential customers what they like about Nike products. At the same time, brick & mortar stores tend to act according to their interests, often selling various firms’ products the same. Moreover, social media are helpful for direct contact with the customers, which can help Nike establish a connection with the buyers and get access to their needs and feedback. Finally, data derived from the buyer’s behavior on the internet can help build better marketing goals.
Supply Chain Systems and their Effect on Customers
DTC is used primarily for the purpose of increasing the customers’ satisfaction. First of all, since Nike receives more online feedback from its clients, it can satisfy more specific needs than ever before. As such, the size of the clothes and shoes can be ordered by the customers through the firm’s app. Later, the supply chain brings additional satisfaction: the reduction in the intermediaries makes the delivery faster. Customers now value the speed of the shopping process, so the immediate or fast deliverance of the exact matches of their wishes certainly increases the pleasure from the buying.
Suggestions for DTC Growth for Nike
There are several notions that can be viewed for enhancing the DTC strategy for Nike. As such, currently, Nike is leading the market with signed names. Before Michael Jordan, Nike was being dominated in the sports apparel market by Reebok. Signing Jordan and creating the Air Jordan Nike brand catapulted Nike sales. The research from Buechel (2021) shows that Nike will expand its focus on digital and first-party data analytics. However, the company’s accelerated digital growth reflects investments to improve the company’s proprietary data, tools, and analytics prowess. These facts about the company’s current strategies help make new suggestions.
Before all, Nike needs to concentrate on improving its logistics if its future focus is DTC. Hence, it is necessary to widen the company’s technical staff to plan the supply routes and the most efficient supply chains. This would improve the cost of the DTC as well as increase the speed of the new deliverance system. Moreover, the company should enlarge its inventories since the absence of retailers means that there would not be available stocks for unsold products. Next, a strategic focus should be on growing Nike’s first-party datasets and advancing their data science capabilities to complement digital commerce growth. In the future, Nike can expand on this social media presence allowing some Nike plus customers that spend a lot of money with Nike to test new products and provide their feedback on social Nike’s social media page. Social media influencers like celebrities that Nike has already invited can also help to encourage Nike sales and specifically promote the DTC option for the customers.
Suggestions for DTC Acquisition for Adidas
For Adidas, the DTC strategy is no less relevant than for Nike; moreover, the company has an advantage in this sphere. The chief financial officer of Adidas has already highlighted that most consumers are now more interested in shopping directly with brands than at multi-brand retailers (Salpini & Salpini, 2021a). Adidas can use its existing digital platform to shape its products’ marketing to customers. Adidas also needs to update its website; the new release options are buried. Adidas can also grow its direct-to-consumer sales by offering exclusive deals to its rewards members. These time-sensitive deals would be posted on social media. The other suggestion of greater importance is building the logistics needed for the DTC deliverance. Since Adidas already has advanced technical possibilities due to the robotics involved in the production, we can use the help of the company’s engineers to create supply chains.
The other suggestion would be to target younger people for selling the products of Adidas. Younger customers tend to be the customers most interested in collecting various shoes. Moreover, they vigorously accept the new technologies and innovations in the market. They can be the primary audience for the DTC deliverance since it is innovative and satisfies their demand. Also, the reward program that Adidas has can help in promoting and broadening the use of the new type of delivery to boost the acquisition of the DTC supply chain. Thus, Adidas can compete with Nike and successfully change its sales cost.
Conclusion
The direct-to-consumer model has proven to be a successful strategy for Nike since its deployment. With this model Nike markets their products directly to their customer base. Their workout apparel line has produced enormous profits for them; these clothing items are sustainable and provide comfort to the customer. Adidas can make their new products on their website stand out more. New products always interest customers, so you want to draw them there first. Also, Adidas should consider rebranding their rewards program.
References List
Buechel, J. W. A. A. (2021). Nike Reinforces Future as a DTC Dominant Brand. McMillanDoolittle – Transforming Retail. Web.
Pham, M. (2021). Nike credits ‘innovation, brand strength and scale’ for DTC success. Marketingweek.Com.
Salpini, C., & Salpini, C. (2021a). Adidas aims for DTC to be 50% of sales by 2025. Retail Dive. Web.
Salpini, C., & Salpini, C. (2021). How Nike is using DTC and data to expand its empire. Retail Dive. Web.