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Translated by
Nicola Mira
Published
Mar 27, 2017
Reading time
3 minutes
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Nike’s Mark Parker reassures market after share price tumble, deploys 'triple double' strategy

Translated by
Nicola Mira
Published
Mar 27, 2017

Nike took a pummelling on the stock market in the third quarter of the 2016-17 fiscal year. The US sport giant's CEO Mark Parker, well-versed in sporting similes himself, had probably little to gloat over the referees' rating of his team's performance in the latest quarter. Nike reported a revenue of $8.432 billion, equivalent to a 5% increase, coupled with a 20% leap in net income. However, the financial community was expecting sales to be worth €8.47 billion and, crucially, orders are down 4% compared to the previous year. As a result, the Nike share price on Wall Street posted a remarkable drop, in excess of 7%.


Mark Parker wants to rely on digital tools - Nike


Well-aware of Nike's dynamics, Mark Parker has responded by flexing his corporate muscles. Adidas and Puma have undoubtedly gained influence in the USA, but Nike has clearly boosted its margin performance in the region. Parker has taken advantage of a meeting with analysts to also underline how consumer behaviour has changed. The US sport giant seems actually to be surprised by the robust rise of e-tailing and its impact on brick-and-mortar retail.

"It means that, in the short term, the environment is even more promotion-driven, said Parker. The current bubble represents a formidable opportunity for Nike. The winning brands will be those at the cutting edge in digital tools and services. We do not think the transition will be simple, but we know what needs to be done to get there. All of our fire-power is zoomed in on the customer experience."

Mark Parker has identified three development vectors his team needs to focus on: innovation, the supply chain and direct customer relationships. The strategy is labelled 'triple double', from the basketball term used when a player goes into double figures for points, assists and rebounds.
"To win today, and build for the future, we are obsessive about three objectives: double our innovation, double our speed and double direct sales," is how the CEO succinctly described Nike's strategy.
On the product innovation side, Parker highlighted three crucial areas for the coming months: the launch of the Air Max Cushioning System, featured on several shoe models; the arrival of Zoom X, at the heart of the group's project for enabling its athletes run a marathon in under two hours; and finally, before the summer, another innovation designed to energise the efforts of runners and baseball players. As for basketball, Nike will introduce an evolution of the Hyperadapt shoes and a new generation of its Flyknit footwear technology. Nike will do all it can to enhance the visibility of these launches and win the innovation game.

Nike's second growth vector relates to the group's ability to bring its new developments on the market as fast as possible, a goal embodied in the Express Lane strategy. "We move faster than ever, bringing our products to the market in a matter of weeks, and not months any longer. Through Express Lane, we respond to consumer demand with locally calibrated styles. We deliver faster to our top-performing partners. We adjust our production schedules in real time based on consumer feed-back, with lightweight inventory and an ultra-local approach. To reach this kind of speed, we are focusing on our Edit-to-Amplify method. This is something on which we have failed to be as sharp as we ought to be. Currently, 75% of our models generate 99% of our sales. By dropping the remaining 25%, heightening the productivity of our latest innovations and [focusing] on products which consumers are already keen on, we can achieve more growth with fewer models." The solution seems logical, though its implementation still needs to be realised. Many businesses would love to distribute their sales across more than 50% of their range. Yet, even if data analysis allows to better match output to customer demand, a 100% success rate on products still seems a long way off.

Finally, for its third growth vector, direct sales, Nike wants to bolster its services for and connections with customers.  "The purchases by Nike Plus app users are three times greater than average. We see consumers shifting to e-tailing, with a sizable input coming from apps." Given the positive impact digital services are having on its directly-owned stores, Nike is keen to extend them to multibrand partners. "More personal, more distinctive and more mobile: these elements will drive our future growth," said Mark Parker.

This is the 'triple double' strategy then, designed to reassure the market about Nike's ability to respond to the long-term needs of North American consumers.
 

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