Nike's D2C-membership program drove +34% digital growth last quarter.
In Nike’s most recent quarter, the US giant reported 34% digital growth (annual basis). When you study the origin of that impressive growth, it shows that a strong D2C strategy can beat the dreary post-pandemic ecommerce predictions as long as you have a convincing customer engagement strategy. Of course, there was a Black Friday and Cyber Monday in that quarter, but that didn’t explain the fundamental growth Nike achieved to deliver. If you dive in the numbers, you’ll see that their D2C strategy is effectively building a strong loyal customer base which is the driver for brand engagement beyond just online shopping. Nike just really did it.
Solving the customer management hurdle and moving away from some channels
The past few years, Nike’s focus was a consistent going direct-to-consumer, included solving its hurdles of customer management and going through many experiments of what the best experiences are for which type of customer. Now Nike seems to have found the right approach. The shoe and apparel producer is even able to scale down relationships with retailers in favor of its own direct channels, whether that be its digital assets or Nike owned stores. It might appear unnoticed to some, but this is an ‘earth-quake magnitude’ shift for Nike that used to be on shelves everywhere, and now seems to be able to successfully replace that with channels in which the brand shines as the only star-of-the-show. Heavy discounting in retail seems to be effectively battled by a value-driven membership program. Nike unique way to differentiate results in consumers repeatedly and happily buying full price products.
Growing Retention through experiences
Nike CEO John Donahoe said: “Consumers have told us they want a consistent, seamless and premium experience both digitally and physically around mono-brand and multi-brand.” This quote demonstrates that Nike understands that they should not only focus on selling items to buyers, but that what really matters is to build experiences for which customers will keep returning to Nike. Their core solution for this is the Nike Membership Program, which Donahoe flagged as a key driver of the their growth at this moment.
The Nike Member Program now has 160 million active members. Donahoe mentioned they saw double-digit growth in engagement from these members as well. Member purchases mean a lot more than a one-time sale. Donahue continued: “More importantly, our repeat buying members who are more engaged, spend more and spend more frequently. They are growing at an even faster pace of high double digits as they continue to be an important growth engine for our business”. This doesn’t only work online. Donahoe claims that 50% of store demand comes from members.
Battling discounts with content
Currently, the membership program consists not only out of shopping and discounts, but it also enables member access to free shipping, exclusive models, exclusive event invites and access to workouts. Members can use various Nike apps, like Training Club, Run Club and the SNKRS App. These apps do not only deliver functionality, but also Nike content. Nike has announced partnerships to deliver even more content soon.
One of the methods with which Nike builds this growth engine is with data. The access to data about individual customer data on purchases and preferences, made possible through the membership generates a continuous learning process, and Nike uses these insights for product development, logistics planning and to build even better experiences, amongst others through personalization of those experiences.
Beyond direct-2-consumer: chain wide strategies
To expand its reach further, Nike connected memberships with JD Sports, Dick’s Sporting Goods, TopSports and Zalando. This might seem surprising, but Nike said these members are growing traffic, conversion and mutual profitability. They share data on the joint members with the retailers that helps them personalize their own experiences, demonstrating that Nike’s program is based on a vision that goes deeper than just a D2C-strategy, but that it entails a channel design strategy as well. At this level, direct-to-consumer strategies are not about owning channels or customers. They are all about deepening customer experience across channels and beyond ‘customer ownership’, which can be beneficial to all players in the chain, not in the least to the consumer itself.
Donahue seemed excited about the future growth of this strategy for Nike: “The ability to give consumers a personalized experience across channels, fueled by data and insight opens up a whole host of opportunities for us. It positions us to empower consumers with their own choice while keeping the scalability and strengths in digital marketing, product creation, distribution and more.” Nike seems to just do it again. Very convincingly.