For most of the company’s history, Nike has worked primarily with wholesalers. The brand had a fairly typical business model. They sold the products to wholesalers, who then displayed the products in their stores and sold them to customers. Wholesale partners included department stores, sporting goods stores, mom-and-pop shops, and more.

Now, it is incredibly difficult for wholesalers to work with Nike. The brand has gone all-in on a direct-to-consumer strategy which means that even wholesalers who worked with them for years can no longer buy the products. This has led to a significant shift in how people buy Nike shoes. Now, Nike primarily sells shoes to consumers via digital channels, such as its various apps and website. The company also has branded immersive stores.

Nike Combines DTC Experiences

Examining Nike’s DTC approaches shows a significant amount of overlap. Like most brands, there are both digital solutions, like the website and apps, and physical locations. But Nike has taken the integration of technology and the digital experience in stores to the next level.

Specifically, Nike gives in-store shoppers multiple ways to use their phones to improve the shopping experience. They can start a dressing room or pull up products on their phones. To streamline the new customer experience, Nike also has signs throughout its stores highlighting the various smartphone-connected in-store features.

How Wholesalers and Stores Are Adapting

Stores that used to rely on Nike for a significant amount of their income had to think quickly to determine a way to keep selling the products or fill the gap. For many stores, the only option to stock Nikes became doing so “on consignment.” With this model, the stores themselves do not own the shoes. They are owned by someone else who consigns the shoes to the store. When sold, the store takes a cut of the profit, but the owner of the shoes makes the bulk of the money.
There are obvious complications with this new consignment option. For one, it makes it much more challenging for stores to offer Nikes at all, let alone a variety of them. Stores may have to work with multiple people who want to consign their shoes and those people can’t buy the shoes wholesale either.

On top of that, the process cuts into the profit margins of the stores. They can still ultimately control their profits via the price of the shoes, but they have to increase the prices to make the same profit they had previously made as wholesalers. The owner of the shoes who consigns them to the store is essentially another middleman in the process, meaning another cut of the profit is taken out.

The Role of Influencers

With the new DTC approach, social media influencers play a larger role in Nike’s overall approach. They become a key part of the brand’s marketing as influencer-created content reaches consumers. On top of that, Nike works with some social media influencers like they previously worked with wholesale retailers. For that part of the relationship, Nike largely determines which influencers to sell to based on audience size and reach.

The Effect on Prices

For consumers who buy shoes directly from Nike, as is the brand’s goal, there is not necessarily a dramatic change in the prices. However, many shoes are now in high demand. This lets Nike sell them for more, but it also means that shoppers must act fast if they want a particular shoe.

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