Nike Inc. continues its big growth curve on the web. The footwear giant says it reached $2 billion in annual online sales in its most recent fiscal year, or 30% more than the year prior and double the amount of two years ago.
Nike executives also provided more detail on a program it recently launched quietly to sell its products via Amazon.com Inc.’s marketplace, although the retailer did not provide specifics in terms of results. Nike is beginning with a small assortment of footwear, apparel and accessories products with an eye to “elevate how the Nike brand is presented on the Amazon platform,” CEO Mike Parker told analysts on a conference call, transcribed by SeekingAlpha, for results of fiscal 2017 ended May 31.
To reach its goal of $7 billion in online sales by 2020, Nike is working on several companywide initiatives in Nike stores, via its mobile apps and through other channels to reach consumers with its products in a more direct and personalized way. Nike is No. 37 in the Internet Retailer 2017 Top 500; Amazon is No. 1.
The brand is focused, for example, on building customer retention through personalized features of its mobile apps, increasing membership to its Nike+ loyalty program (most of whom interact with Nike via its mobile apps), and providing those members with perks that keep them coming back to purchase Nike products from Nike directly. Users of its mobile apps spend three times as much as what other consumers spend on Nike.com, Nike brand president Trevor Edwards said on the call Thursday.
“In Q4, nearly three quarters of our Nike.com consumers were members, up 25% and growing, with plans to accelerate through stronger member benefits and international expansion,” Edwards said.
During the quarter, for example, it used geolocation technology to give members of its SNKRS app exclusive access to new sneaker styles depending on their location.
In May, it also tested what it calls “shock drop,” an unannounced launch of a new shoe to a select group of members via its SNKRS app. The sneaker-focused app, previously only available in North America, is now open to consumers in Europe, greater China and Japan. “With our mobile apps, we’re disrupting the sneaker shopping experience,” Edwards said.
Nike also is working with Instagram to allow users to purchase Nike products directly through the Instagram app.
Nike executives say the brand is focused on digital initiatives because when it serves its customers directly, as opposed to the wholesale model in which it sells products to a reseller like Macy’s Inc. (No. 6 in the Top 500) or Foot Locker Inc. (No. 53), these sales are more profitable.
“Fulfilling demand through Nike.com generates nearly twice the revenue and significantly higher margin on each transaction, and over time, we see the growth of digital as accretive to Nike’s bottom-line profitability,” chief financial offer Andy Campion said on the call. “So we will continue to prioritize and drive a more immediate shift toward more direct service of the consumer.”
For fiscal 2017 ended May 31, Nike reported:
- Total sales of $34.35 billion, a 6.2% increase compared with $32.34 billion last year.
- Net income of $4.24 billion, a 12.8% increase over $3.76 billion.
For the fourth quarter, Nike also reported:
- Total sales of $8.68 billion, up 5.3% from $8.24 billion in the fourth quarter of the prior year.
- Net income of $1.01 billion, an 18.8% jump from $0.85 billion.