On Singles' Day 2017, ranking fifth in total sales and becoming the first apparel brand on Tmall’s Singles' Day to break 1 billion yuan in sales, Nike delivered an impressive report card.
As an annual event, Singles' Day is a celebration for consumers and a major test for brands.
In terms of sports consumer goods, the Chinese market offers the most choices, where international sportswear giants, emerging niche sport brands, and local brands all compete fiercely, nurturing what may be the world’s most savvy and discerning consumers—making the competition extremely intense.
In the 2017 Singles' Day, the world’s top sportswear brand Nike delivered an outstanding performance: ranking fifth in total sales—just behind Suning.com, Xiaomi, Honor, and Haier, and surpassing last year’s top apparel brand Uniqlo as well as long-time rival Adidas. According to official data from Alibaba, Nike became the first apparel brand since the inception of Singles' Day in 2009 to exceed 1 billion yuan in sales.
Before Singles' Day, Nike also began emphasizing “new retail.” Now the question is, after achieving such a resounding victory in this major battle, has Nike’s “new retail” system truly taken shape?
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Nike’s New Retail: Personalization + Consumer Experience
In 2016, Jack Ma, founder and then-chairman of Alibaba, first introduced the concept of new retail, with its core being the organic integration of online, offline, and logistics. By the eve of Singles' Day 2017, Alibaba CEO Daniel Zhang further elaborated on the concept: new retail refers to the reconstruction of people, products, and places driven by big data.
For Nike, the most important aspect of new retail is the mode of communication with consumers.
Dennis Van Oossanen, Vice President of Nike Greater China Retail, said: “Today, we live in a world connected by demand. What resonates with consumers are brands that serve them in the way, rhythm, and lifestyle they desire. In a rapidly evolving market, proactive change is essential. Nike always puts consumers first and rapidly enhances its capabilities to adapt to change. Globally, we are building strong integrated capabilities between digital platforms and physical stores to provide consumers with faster, closer, and more personalized services.”
Translated into practice, these come down to two key elements: personalized products and consumer experiences.
Of course, excelling in both is not easy for any brand. Over the past two or three years, Nike has certainly not had it easy. The American sportswear brand Under Armour, also from the U.S., briefly rose as a new favorite, attracting the attention of the so-called middle class. Long-time rival Adidas, after a few years of downturn, has seen significant sales growth in recent years, with very impressive financial reports.
But Nike is strong in Greater China: in fiscal year 2017, Nike’s total revenue was 34.4 billion USD, up 6% year-on-year, with the most stable performance coming from Greater China, which achieved 4.237 billion USD in revenue for the full year, up 17% year-on-year. By the end of September 2017, Nike released its Q1 fiscal 2018 results showing that Greater China’s single-quarter sales reached 1.108 billion USD, up 12% year-on-year excluding currency fluctuations.
Therefore, Nike has reason to believe that they are on the right path in China. When the Q1 fiscal 2018 results were released, the industry clearly predicted that with the boost from Singles' Day, Q2 results would show significant growth. In fact, this Singles' Day, Nike was indeed well-prepared—not only did it offer deep discounts with most products at nearly 50% off, but it also stocked massively, preparing 3.4 million pairs of sneakers alone. This led to speculation about “inventory clearing.” However, official data from Tmall showed that, in fact, Nike was the most pre-ordered brand on Tmall during the presale period.
In terms of products, Nike recognized the personalized needs of consumers, especially younger ones, and continuously launched customized products tailored for the Chinese market, as well as classic shoe models infused with Chinese elements. The strategy of blending international and local elements proved effective in winning over consumers. In contrast, other international brands tend to introduce so-called global trends to the Chinese market, while local brands have yet to achieve perfect integration in design. At the same time, both online and offline, Nike offers some personalized options. For example, the personalization zone in physical stores—Nike itself admits that equipment like heat presses and staffing represent a significant cost, and even the corresponding customization fees may not cover costs, but it must be done. Online, the launch of numerous couple shoe styles during this Singles' Day was also an attempt to appeal to young people.
In terms of consumer experience, Nike’s efforts are particularly focused on exploring the path forward together with Tmall.
Partnering Closely with Tmall: A Shared Goal of New Retail
For Nike, consumer experience is divided into online and offline, as well as their synergy—which is what Alibaba CEO Daniel Zhang referred to as the concept of “place.” The in-store consumer experience is inseparable from products, store location, sales staff, fittings, and personalized customization, while the online experience is closely related to website logic, ease of purchase, and more. Of course, logistics is also a crucial component of new retail.
The collaboration with Tmall is one of the most important venues for Nike’s consumer experience. In 2012, Nike opened its flagship store on Tmall, which for consumers in Greater China is a more convenient option than the Nike official website. The Tmall flagship store enables Nike to provide customers with uninterrupted service 365 days a year, 24 hours a day, serving as a platform for Nike to “converse” with nearly 11 million consumers. On Singles' Day 2016, Nike topped Tmall’s apparel category sales chart, but more importantly, no major competitors were able to replicate Nike’s success over the following year.
On Singles' Day 2017, Adidas ranked eighth on Tmall’s total sales chart, with sales not reaching 1 billion yuan. In addition to Tmall, the German brand also partnered with JD.com. The third-ranked sportswear brand was the domestic brand Anta, with total sales of 670 million yuan. Here, the difference lies in strategy: in Greater China, Nike’s official online channels are mainly its own website and Tmall. Nike chose to concentrate resources and deepen its partnership with Tmall. During this Singles' Day, Nike’s Tmall store offered significant discounts and a wide range of products—after discounts, many products entered the same pricing range as local brands, making it clear that Nike had no worries about strong sales.
And clearly, Tmall holds such “exclusive” collaborations in high regard. It’s like in 2009 when Singles' Day was first launched, only 27 merchants didn’t refuse Alibaba’s invitation to participate—and now, with Singles' Day sales reaching 168.2 billion yuan, Alibaba naturally wants to give more benefits to these loyal partners. It’s a case of not forgetting one’s benefactors when one becomes wealthy.
On November 8, just before this year’s Singles' Day, two smart stores jointly operated by Nike and Tmall opened in Shanghai and Hangzhou, conducting trials in digitizing orders and foot traffic. At the same time, 50 of Nike’s directly operated stores also launched online orders with offline delivery just in time for this year’s Singles' Day. This means that during this shopping peak period, Nike can coordinate with 10 distribution centers through its stores to carry out immediate allocation and delivery.
According to Tmall data, the cancellation rate for pre-orders was less than 2%, so Nike began preparing its logistics as early as the presale period. Baosheng E-commerce is China’s largest e-commerce services provider, holding a 25% market share in the agency operations market. It is understood that Nike is this company’s largest client. According to Baosheng, Nike places great emphasis on consumer experience—all packaging materials are provided by Nike, and Singles' Day shipping includes free delivery via SF Express. At the same time, Nike also places prepaid return labels directly in the packages sent to consumers, facilitating returns or exchanges for those who need them—a practice other sellers do not follow. For presale orders, goods and shipping labels are prepared and labeled as soon as the deposit is paid, ready to be shipped the moment the final payment is completed at 1 a.m. on Singles' Day.
Facts have proven that Nike’s consumer experience this Singles' Day was well-executed. Randomly surveyed consumers and couriers revealed that among the first packages received early on Singles' Day morning were items from Tmall Supermarket’s fresh produce section and sportswear from Nike’s flagship store.
Dennis Van Oossanen said: “First and foremost, it’s about listening to what consumers are saying. This year’s Singles' Day, we adjusted and strengthened our strategy, unifying categories, inventory, brand marketing, after-sales service, and supply chain. In terms of products, we launched several key items, such as the Lebron XV ASHES, SF AF-1, and AIR JORDAN XI WIN LIKE ’82, as well as products designed specifically for the Chinese market. In addition, other seasonal products were also included in the Singles' Day promotions. At the same time, we strived to deliver goods to consumers more quickly through multiple channels.”
The emphasis on online channels has allowed Nike to accommodate personalized needs as much as possible, and the collaboration between Nike and Tmall has also seen multi-dimensional experiments. For example, fans of the JORDAN brand no longer need to “search aimlessly” in Nike’s Tmall flagship store. This summer, the JORDAN brand launched its own standalone Tmall flagship store. In 2017, the JORDAN brand participated in Singles' Day for the first time, with popular shoe models such as the AJ1 and AJ11 selling out in seconds. By the afternoon of Singles' Day, most of the JORDAN flagship store’s inventory was gone, with the store’s half-day sales exceeding the annual sales of any single JORDAN physical store. Ultimately, the JORDAN flagship store claimed the top spot in the debut of international brand official flagship stores on Singles' Day.
New retail is something both Tmall and merchants have realized: today’s consumers are completely different from those of the past—they want personalized, high-quality products, they want to buy instantly, they want to shop via mobile devices, and they want the shopping process to be simple. Especially for the young consumer demographic that sportswear brands highly value, individuality and convenience are paramount. Dennis Van Oossanen said: “Nike’s goal is to always say ‘yes’ to consumers. In the future, we will deepen our collaboration with Tmall, jointly innovate new retail, and provide our members and online consumers with the exclusive services and experiences they love.”
As for sales performance, a natural logic applies: if you can satisfy consumers, the results will naturally be good.
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“Feeding Back” into the Global Market: Youth + 12 Key Cities
During Singles' Day, Jack Ma said in an exclusive interview with CCTV: "Actually, we don't make money from Singles' Day itself. What we value is the improvement of technology, organizational talent, logistics, payments, and the overall platform technology."
In fact, behind every year's Singles' Day and each record-breaking sales figure is international brands learning about the Chinese market. 2017 marked the ninth year of Singles' Day, and it wasn't hard to see calls for rational consumption in mainstream media, while some outlets still questioned whether merchants were sincere enough. However, the market has its own inevitabilities—consumers buy what they think is a good deal from the discounts and promotions offered by merchants, and pass if they don’t. Tmall doesn’t force merchants to offer discounts or dictate discount rates, nor does anyone force consumers to buy or buy more.
Take Nike as an example: the 1 billion yuan in sales during Singles' Day likely would have totaled 1.5 to 2 billion yuan or even more at original prices. The question is, could those original prices have achieved the same volume of sales? In the end, it’s a game between merchants and consumers. The profit per item on Singles' Day is definitely lower than usual, and to some extent, as Jack Ma said, it’s “not profitable.” But for a brand like Nike, with 1 billion yuan in total sales, the overall profit, reputation, and influence gained are immeasurable. Otherwise, this carnival wouldn’t have lasted nine years, nor would it have grown from just 27 brands testing the waters to nearly every merchant scrambling to get involved today.
Therefore, for any international powerhouse, conquering the Chinese market is enough to serve as a template for their global strategy. For Nike, the lessons learned in the Chinese market today are already sufficient to “feed back” into its home U.S. market and the global market.
Fan Ousheng, Vice President of Retail for Nike Greater China, said: "Although we often talk about consumer differences across regions, there are also many similarities. Digital shopping is one of them—consumers on both sides want greater value—product quality and innovation—while also seeking more convenience and a better shopping experience."
Today, the U.S. market still accounts for one-third of the global sportswear market share, but it is already a fairly saturated market. In fiscal 2017, Nike’s total sales in the U.S. market were $15.2 billion, with growth of only 3%. Therefore, although Greater China saw growth of 17% and Western Europe delivered 11% growth, Nike’s overall global year-on-year growth for the fiscal year was 6%. In the first quarter of fiscal 2018, the North American market saw its first decline in ten consecutive quarters, with a year-on-year drop of 3%.
The challenges facing Nike are not simple: can the nearly 20% high growth rate in Greater China be sustained? And how much more potential can the relatively mature North American market tap?
In recent years, the most important parts of Nike’s global strategy have been targeting youth and designating 12 key future cities. For the former, markets around the world can learn from China’s many experiences with “New Retail,” while for the latter, Shanghai and Beijing have already set an example, offering valuable insights for other major cities such as Tokyo, Paris, and Milan. As for the North American cities in the key city list—New York and Los Angeles—similar lessons apply, but Nike needs to think even more.
For any sports brand, product + pricing remains the fundamental key to survival. As the world’s largest sports goods company, with a brand value of $21 billion and an annual shipment volume of 1.3 billion items, Nike’s lifeblood is its products. These 1.3 billion items are Nike’s showcase to the world—far more prominent than any advertisement or celebrity endorsement.
And in fact, the competitive environment is becoming increasingly brutal, especially in the Chinese market. After all, the growing purchasing power in sports consumption is a prized target for any brand. Now, if Nike wants to maintain its leading position, it faces not only its long-time rival Adidas, not only niche-market dominators like Lululemon (firmly entrenched in yoga and related segments), not only domestic sports brands, but also players like Uniqlo and GAP, which are eager to carve out a share of the sports goods market...
“New Retail” may be the answer, but clearly, this answer needs continuous refinement and upgrading.
Source: Jiemian News