Nike’s Latest DTC Retail Concept Takes Flight

The 20^th century supply chain almost entirely depended on the wholesale/retail relationship between manufactures and retailers. Now with the proliferation of online marketplaces and the advent of the direct-to-consumer movement, things have changed significantly. Additional disruption to the status quo came from the internet’s pricing transparency. This forced many retailers to focus solely on price, in the proverbial “race-to-the-bottom.”

On the way down, many of the national brands whose products were featured in multi-brand selling environments took a hit on their brand value as well as increased margin pressure. This forced many brands to implement and grow their own offline channels, while exiting long-established wholesale partnerships. These brands also quickly learned that their new offline stores lifted online sales in a given location.

Taking A Brand Stand

This trend was perhaps best exemplified by Nike’s 2017 introduction of its “Customer Direct Offense” where Nike announced cutting ties with numerous retailers in an effort to limit its exposure to “40 select retail partners.” At the same time Nike created the new Nike Direct organization, led by Heidi O’Neill, President of Nike Direct, and Adam Sussman, Chief Digital Officer, in their effort to boost DTC penetration.

Beginning in 2018, Nike’s first House of Innovation Flagship store launched in New York, with subsequent openings in Paris and Shanghai. Nike’s HoI is as much museum and interactive exhibition space as it is a store. Nike, like other leading national brands, also recognized that strategically located stores offered an opportunity to tailor both products and messaging to an ever more specialized and localized audience. So, taking design cues from the House of Innovation flagship, Nike introduced a trio of smaller, localized and niche retail concepts.

Nike Live, piloted in 2018, is more neighborhood-driven. Nike Rise, launched in 2020, is also locally-focused, but on a bigger scale and with more data and in-store events. Last summer, Nike introduced Nike Style, with a gender-agnostic product section and a studio for social media content development.

The Fourth Shoe to Drop

On the heels of the successful rollout of Nike’s DTC triad, a fourth concept store tailored to Nike’s “Air apparent” Michael Jordan, opened in Shibuya, Japan, on March 25^th, apply named World of Flight. Its launch comes just
just
months after Nike debuted the prototype store in Italy last December. The new concept, which Nike calls “the pinnacle of Jordan Brand culture at retail,” is not only a tribute to basketball’s most iconic star of our time, but a recognition of “23’s” sales supremacy within the Nike stable of stars.

In an earnings-call earlier this month, Nike EVP Matt Friend said Jordan Brand had “strong double-digit growth” and “incredible momentum.” Nike also recently revealed that Jordan Brand alone generated $5.1 billion in annual revenue for fiscal 2022, while annual revenue for the entire Nike brand in 2022 was $46.7 billion. So, the Jordan Brand essentially represents over 10-percent of Nike’s entire revenue stream.

Nike’s newest Jordan Brand store measures 9,200 square feet and has a dedicated area for customers to pick up shoes they purchased on the app, as well as an area where members can “test new offerings and experiences,” according to the company. A Flight Lounge pays homage to Michael Jordan, while the Content Studio, enables shoppers to film “unboxings” to post on their social channels. And like Nike’s other localized concepts, World of Flight features works of local artists.

“Air” Flick

While Nike has always been quite strategic in its moves, it’s a bit serendipitous that the heightened MJ attention is in sync with Amazon Studio’s April 5^th release of “Air.” The studio describes the movie storyline as the “game-changing partnership between a then rookie Michael Jordan and Nike’s fledgling basketball division which revolutionized the world of sports and contemporary culture.”

The original Nike-Jordan deal described in the movie took place in 1984 and spanned five years. It was worth a total of $2.5 million, an astronomical figure at the time. Seems unimaginable that four decades later and twenty-years after Michael retired, that the Jordan Brand would be paying off to the tune of 2,500-times that initial sponsorship deal. That’s annually!