Nike Investor Day: Solid Game Plan, Amazon-Shaped Hole

(Bloomberg Gadfly) -- If you like to see Nike Inc. score baskets, then you probably appreciated the game plan it announced this week.

At an investor presentation on Wednesday, the athletic-apparel giant said it expects high-single-digit sales growth over the next five years, some 75 percent of which will come from overseas markets. Nike's strategy for achieving that upbeat forecast was encouraging, showing the company is serious about pulling out of its recent rough patch.

Nike Investor Day: Solid Game Plan, Amazon-Shaped Hole

As Gadfly has argued, Nike's product has not been consistently covetable lately. The company offered more detail Wednesday on how it's revamping its supply chain to address that problem, using rapid prototyping and manufacturing processes that let it make last-minute decisions about color and other attributes.

Nike will be better off when it can put finishing touches on sneakers and clothes closer to when they hit shelves. Such innovations could be especially potent when coupled with a new focus on twelve key global cities. Ideally, Nike's product assortment in Shanghai won't look quite like the one in Barcelona.

Nike Investor Day: Solid Game Plan, Amazon-Shaped Hole

Nike also plans to rev up its membership program, giving participants access to exclusive shoe styles and letting them reserve marquee sneakers before the masses. In a noisy retail environment, a stickier loyalty program will help. Members, on average, already spend three times as much at Nike as non-members.

Nike is also rethinking the kinds of stores with which it does business. Executives said that, today, some 40 percent of Nike's North American sales come from "differentiated retailers," the ones it says present its products in an elevated, curated way. Over the next five years, it plans to increase that to 80 percent.

Nike didn't offer specifics on the outlets it plans to leave, but we can take some educated guesses. For example, it's safe to assume Nike keeps working with a chain such as Nordstrom Inc., which has a "Nordstrom x Nike" shop-in-shop on its website. But discounters that dump its sneakers into cluttered rows with competing shoes seem likely to get the ax. Nike is an aspirational brand, so it's wise to avoid retail experiences that don't showcase it as such.

While much of the company's retailing strategy seemed sound, it was hard not to notice the gaping, Amazon.com Inc.-shaped hole in it. In a discussion about digital partners, executives highlighted the work Nike was doing with Alibaba Group Holding Ltd. in Asia and with Zalando SE in Europe. Amazon wasn't mentioned.

Nike is continuing a pilot it began earlier this year of selling a limited assortment of goods on Amazon's website. But it seems the athletic behemoth still hasn't quite decided if Amazon is friend or foe. That may be holding it back from developing a more-coherent strategy for dealing with the e-commerce elephant in the room.

There are good reasons for Nike to get cozier with Amazon. The site is already teeming with grey-market Nike products, and if Nike sells more of its gear directly, then it can assert more control over pricing and merchandising in that marketplace.

But there are also good reasons for Nike to stay away. Many luxury apparel and accessories lines have eschewed Amazon because they don't like the idea of their fancy wares appearing in your shopping cart next to toilet paper and dog food. And while Nike isn't hawking $5,000 handbags, it has one of the most powerful brands in the world, and it makes sense that it would be fiercely protective of it.

I wouldn't blame Nike for going in either direction. But its current "one foot in, one foot out" model doesn't seem durable. If Nike is to build its digital future, it needs a clearer strategy for this aspect of it.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

To contact the author of this story: Sarah Halzack in Washington at shalzack@bloomberg.net.

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