Nike’s ‘Connected-Inventory’ plan to help compete with Amazon’s speed

  • At an annual meeting last week, Nike CEO John Donahoe again talked about “connected inventory.”
  • Nike strives to consolidate inventory held by stores, partner retailers and warehouses.
  • The sportswear giant is optimistic about the effort, which seems to be accelerating.

Amazon has accustomed consumers to two-day deliveries. Nike would like to catch up.

While Nike has typically been silent on specifics, the term “connected inventory” is increasingly being used by Nike executives as a catch-all for online and offline sales and bringing together all Nike sales channels, including its stores and applications, as well as those of its merchant partners.

The company’s connected inventory plan is also contributing to Nike’s larger shift toward more regional shipping, including from a wider fleet of Nike stores and warehouses.

Analysts said the plan was a response to consumer demand for faster shipping, and some big box stores – including Target, Walmart and Dick’s – are already known to ship direct from stores. The broader connected inventory plan is the latest example of the pressure Amazon has put on companies, even one of the biggest companies in the world, to compete on delivery speed.

“Everybody’s gotten used to Amazon,” said Brian Yarbrough, principal research analyst at Edward Jones. “Most retailers try to reduce it to two or three days. Amazon created that. Amazon is doing the same day now. Amazon has conditioned consumers to have much higher expectations for fast delivery times.”

Nike did not respond to a request for comment for this story.

“The goal is to give consumers what they want, when they want it, how they want it.”

Nike CEO John Donahoe spoke twice about the company’s connected inventory efforts during Nike’s latest earnings call, giving the example of hypothetical customers at Dick’s.

“If they’re in a Dick’s and they see what they want, and they don’t have it in stock, we can accommodate it through our connected inventory,” Donahoe said. “And so the whole goal is to give consumers what they want, when they want it, how they want it.”

While the plan can get products to consumers faster, it also gives Nike and Dick more data.

“It’s about getting to know you better, communicating with you, and delivering the product to you when and where you want it,” said Sam Poser, equity analyst at Williams Trading. “It’s more about connection than inventory.”

At the company’s annual meeting last week, Donahoe again spoke about Nike’s connected inventory efforts, adding that all of the company’s North American stores offer at least one online service.

The phrase first appeared on October 25, 2017, when Wall Street analysts and financial journalists gathered at Nike’s 500-acre campus in the suburb of Beaverton, Oregon, for a day of investors. During his remarks, Elliott Hill, then President of Geographies and Integrated Market, introduced the term.

Hill described the work as an effort to connect all of Nike’s digital and physical shopping channels, including with its retail partners.

The term has found no place in daily news reportslikely due to Hill’s remark two minutes earlier that Nike would be moving away from 30,000 retail partners to focus on “about 40 partners” as part of a new direct-to-consumer orientation.

Around this time, Nike has also started selling directly on Amazon. (This removed its products from Amazon in 2019.)

Nike has since closed about 50% of its wholesale accounts, but its executives have suggested that the remaining retail partners could play a role in its connected inventory.

Then-CEO Mark Parker walked back the phrase during a December 2018 earnings call, saying the strategy would help the company achieve its goal of delivering products to customers twice as fast as previously.

“With twice the speed, we’re elevating the industry, creating an end-to-end consumer-centric value chain,” Parker said.

At that time, Parker said he was bullish on connected inventory, with a pilot in 19 Nike stores in South Korea and two unnamed retail partners.

In November, Nike announced an enhanced partnership with Dick’s whereby Nike and Dick’s would share member information.

As part of this, the companies said they have agreed to “work together across their respective physical and digital properties to deliver enhanced convenience, new experiences and content to customers and better anticipate and meet their evolving needs.” “.

Nike box with sound "Just do it" ribbon

Nike tries to ship its products at the speed of Amazon.

Gloria Dawson

More retail stores, more warehouses

As part of the overall effort to serve customers “when they want, how they want,” Nike is adding retail stores and distribution centers. Nike, which historically distributed most of its products from a warehouse in Memphis, Tennessee, has opened distribution centers in Los Angeles, Dallas and Bethlehem, Pennsylvaniaover the past two years.

New outlets provide sales opportunities and bring inventory closer to consumers.

In 2018, the sportswear company opened its first Nike Live store. Nike uses local data collected from its apps and website to supply Live stores with locally relevant products. The Los Angeles store, for example, stocked a lot of Nike Cortez sneakers, a popular model in Southern California. The Live concept was a success and is now being rolled out to more cities.

While most Nike stores are in major metropolitan areas, stores are increasingly popping up in second-tier cities. A Live store will open in a Salt Lake City suburb later this month, according to a LinkedIn post from a Nike executive. And two Nike Lives stores are on the way in Kentucky, including stores at Lexington and Louisvilleaccording to reports and permits obtained by Insider.

Nike has $399 million in construction work underway, according to its latest annual report, an increase of 28% from fiscal year 2021. Job openings at Nike include a specialist for real estate business development and one for development of the real estate market place.

Today, Nike has 257 stores in the United States, according to its latest annual report. But most of them, 209, are factory outlets or outlets. Only 48 are Nike stores. (The company also operates 87 Converse stores.)

Even with more stores and more trading partners, logistics experts said the big challenge remains basic inventory management.

“Stores are a big part, but ultimately it’s about being able to accurately deploy inventory as close to demand as possible,” said Nate Skiver, founder of LPF Spend Management. “It seems obvious, but that’s really what it’s all about.”

In its previous earnings report, Nike noted a 44% increase in inventory in North America. The company, like its competitors, continues to address supply chain issues caused by the pandemic.

The new stores are traditional and full-priced, and many will include new, state-of-the-art shopping features that dovetail nicely with Nike’s strategy, said Simeon Siegel, managing director of equity research. at BMO Capital Markets.

“It’s important to remember that stores are part of direct sales,” Siegel said. “If the only reason to pivot is to elevate brand and pricing power, stores need to be full price and elevate brand.”

While details remain elusive, analysts said “connected inventory” makes sense.

“Five years ago, retailers were shipping from a distribution center, and the product could have been in a store 5 miles from you,” said Edward Jones analyst Yarbrough. “Connected inventory is about getting it to you faster. If you go to Dick’s, and Dick’s doesn’t have it, and they have it at the Nike store, they ship it to you. They hope that it will prevent the consumer from walking away from the product or brand.”

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