As the retail landscape continues to shift, brands are facing a critical question: how to balance their investments in direct-to-consumer sales with their relationships with traditional retailers. A recent study sheds light on this issue, exploring the responses of retailers when brands start selling directly.
The Evolution of Retail Partnerships: How Brands Respond to Direct-to-Consumer Sales
As the retail landscape continues to shift, brands are facing a critical question: how to balance their investments in direct-to-consumer sales with their relationships with traditional retailers. A recent study by researchers Michiel Van Crombrugge, Kathleen Cleeren, and Els Breugelmans sheds light on this issue, exploring the responses of retailers when brands start selling directly.
The Rise of Direct-to-Consumer Sales
In 2017, Nike made a significant shift towards direct-to-consumer sales, launching several web shops, mobile apps, and physical stores. This move was part of a broader trend in the retail industry, as brands sought to increase control over their customer relationships and reduce dependence on third-party retailers. However, this strategy came with unintended consequences.
Nike, founded in 1964 by University of Oregon track coach Bill Bowerman and his former University of Oregon student Phil Knight, is one of the world's largest suppliers of athletic shoes and apparel.
The company's early success was fueled by the development of innovative running shoes, including the Waffle sole, which provided better traction and cushioning for athletes.
Today, Nike offers a wide range of products, from performance-driven gear to lifestyle fashion items.
The Consequences for Retail Partnerships
As Nike‘s investments in direct channels grew, many retailers began to pull back from stocking Nike products. According to data from Foot Locker, the proportion of its inventory dedicated to Nike fell from 75% to 65% over the last three years. This shift had a ripple effect throughout the retail ecosystem, as other brands and retailers also adjusted their strategies in response.
Reversing Course: A New Approach
In one of Nike‘s first earnings calls under new leadership in 2024, CFO ‘Matt Friend’ announced plans to re-engage with retail partners. This move marked a significant shift towards rebalancing the brand’s investments in direct-to-consumer sales and traditional retail partnerships. By doing so, Nike aims to restore its relationships with retailers and revitalize the brand’s presence on store shelves.
Lessons from Nike’s Experience
The story of Nike‘s foray into direct-to-consumer sales offers valuable insights for brands navigating the complex world of retail partnerships. As the study by Van Crombrugge, Cleeren, and Breugelmans highlights, a misaligned approach to direct sales can have far-reaching consequences for retailers and the broader market.
The Future of Retail Partnerships
As ‘the retail landscape continues to evolve,’ it’s essential for brands to understand the importance of balancing their investments in direct-to-consumer sales with their relationships with traditional retailers. By doing so, they can create a more sustainable and resilient business model that benefits both parties.
