On Singles’ Day 2017, ranking fifth in total sales and becoming the first apparel brand on Tmall to break the 1 billion yuan sales mark in Singles’ Day history, Nike’s performance was quite impressive.
The annual Singles’ Day is a carnival 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 specialized sportswear 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 impressive 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 released by Alibaba, Nike became the first apparel brand since the establishment of Singles’ Day in 2009 to surpass the 1 billion yuan sales threshold.
Before Singles’ Day, Nike also began to emphasize “New Retail.” Now the question is, after achieving a major victory in this tough battle, has Nike’s “New Retail” system truly taken shape?
Nike’s New Retail: Personalization + Consumer Experience
In 2016, Jack Ma, founder and then-chairman of Alibaba, first proposed the concept of New Retail, whose core lies in the organic integration of online, offline, and logistics. By the eve of Singles’ Day 2017, Alibaba CEO Daniel Zhang further elaborated on New Retail: it refers to the reconstruction of people, goods, 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, pace, and lifestyle they desire. In a rapidly evolving market, one must proactively adapt. 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.”
Put into practice, this means two key elements: personalized products and consumer experiences.
Of course, excelling at both is not easy for any brand. Over the past two or three years, Nike has certainly not had it easy. Other American sportswear brand Under Armour once emerged as a new favorite, attracting the attention of the so-called middle class, while long-time rival Adidas, after a few years of downturn, saw significant sales growth in recent years with very impressive financial statements.
But Nike is strong in Greater China: in the fiscal year 2017, Nike achieved total revenue of 34.4 billion U.S. dollars, up 6% year-on-year, with the most stable performance coming from Greater China, which recorded annual revenue of 4.237 billion U.S. dollars, a 17% year-on-year increase. By the end of September 2017, Nike released its first-quarter fiscal 2018 results showing that Greater China single-quarter sales reached 1.108 billion U.S. dollars, up 12% year-on-year excluding currency fluctuations.
Therefore, Nike has reason to believe that their path in China is the right one. When the first-quarter fiscal 2018 results were released, the industry clearly predicted that with the boost from Singles’ Day, the second-quarter results would show significant growth. The fact is, Nike did come to this Singles’ Day well-prepared—not only did most products have discounts of nearly 50%, but inventory levels were also massive, with 3.4 million pairs of sneakers alone. This even led to speculation about “clearing inventory.” However, according to official data from Tmall: in reality, Nike was the brand with the most pre-orders on Tmall during the presale period.
In terms of product offerings, Nike recognized the personalized needs of consumers, especially younger ones, launching numerous customized products tailored to the Chinese market and 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 bring so-called global trends to the Chinese market, while domestic brands have yet to achieve a perfect fusion in product design. At the same time, both online and offline, Nike offers some personalized choices. For example, the personal customization area in physical stores—Nike itself admits that equipment such as heat presses and staffing represent a significant cost, and even the corresponding customization fees may not cover costs—but it is something they must do. Online, the launch of numerous couple shoe styles during this Singles’ Day is also an attempt to appeal to younger consumers.
As for the consumer experience, one of Nike’s important efforts is exploring the path forward together with Tmall.
Partnering with Tmall: Shared Goals for New Retail
For Nike, the consumer experience is divided into online and offline, as well as their synergy. This 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, try-ons, and personalization, while the online experience is closely related to website logic, ease of purchase, and more. Of course, logistics is also a crucial part of New Retail.
Collaboration with Tmall is one of the most important venues for Nike’s consumer experience. In 2012, Nike’s flagship store on Tmall opened, offering consumers in Greater China a more convenient option than the Nike official website. The Tmall flagship store enabled Nike to provide customers with uninterrupted service 365 days a year, 24 hours a day, serving as a platform for Nike to “dialogue” with nearly 11 million consumers. On Singles’ Day 2016, Nike topped the Tmall apparel category sales leaderboard, but more importantly, no major competitor was able to replicate Nike’s success over the following year.
On Singles’ Day 2017, Adidas ranked eighth in total sales on Tmall, with sales not reaching 1 billion yuan. In addition to Tmall, the German brand also invested in JD.com. Ranked third in sports consumer goods was the domestic brand Anta, with total sales of 670 million yuan. Here, the difference in approach is evident: in Greater China, Nike’s official online channels are mainly its official website and Tmall. Nike chose to concentrate resources and deepen its partnership with Tmall. On 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 domestic brands, so Nike was clearly not worried 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 did not decline Alibaba’s invitation to participate. Now, with Singles’ Day sales reaching 168.2 billion yuan, Alibaba naturally wants to give more benefits to these loyal partners. As the saying goes, don’t forget your friends when you get rich.
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 customer traffic. At the same time, 50 Nike directly operated stores also launched online orders with offline delivery just in time for this year’s Singles’ Day, meaning that during this peak shopping period, Nike could coordinate with 10 distribution centers through its stores to allocate and ship goods immediately.
According to Tmall data, the cancellation rate for pre-orders was less than 2%, so Nike began preparing for logistics from the presale period. Baosheng E-commerce is China’s largest e-commerce operation service provider, with a 25% market share in the operation market. It is understood that Nike is this company’s largest client. According to Baosheng E-commerce, Nike places great emphasis on the consumer experience—all packaging materials are provided by Nike, and Singles’ Day shipping includes free SF Express delivery. At the same time, Nike also includes a pre-printed return address label in the package sent to consumers, facilitating returns or exchanges for those who need them, which is something other retailers do not do. Orders during the presale period had goods and shipping labels prepared and affixed as soon as the deposit was paid, waiting only for the final payment at 1 a.m. on Singles’ Day to be shipped.
The fact proves that Nike’s consumer experience this Singles’ Day was well executed. Consumers and couriers randomly interviewed revealed that among the first packages received early on Singles’ Day were fresh produce from Tmall Supermarket and sports goods 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 categorization, 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 specifically designed for the Chinese market. In addition, other seasonal products were also included in the Singles’ Day promotions. At the same time, we strive to deliver goods to consumers faster through multiple channels.”
The emphasis on online channels has allowed Nike to accommodate personalized needs as much as possible, and Nike and Tmall’s collaboration has also seen more multi-dimensional attempts. For example, fans of the JORDAN brand no longer need to “search aimlessly” in Nike’s Tmall flagship store. This summer, the independent JORDAN brand Tmall flagship store opened. 2017 was the first time the JORDAN brand participated in Singles’ Day, with multiple popular shoe models such as the AJ1 and AJ11 selling out within seconds. By the afternoon of Singles’ Day, most of the JORDAN flagship store’s inventory was sold out, with the store’s half-day sales exceeding the annual sales of any JORDAN physical store. In the end, 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 in the past—they want personalized, exquisite products, want to buy instantly, want to buy via mobile devices, and want shopping to be simple. Especially for the young consumer group that sportswear brands highly value, personality 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 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.
“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 the record-breaking sales figures of each year's Singles' Day is international brands' effort to understand the Chinese market. The ninth Singles' Day in 2017 saw widespread calls for rational consumption in mainstream media, along with continued skepticism about whether merchants were offering genuine discounts. However, the market follows its own logic — if consumers find the discounts and promotions worthwhile, they buy; if not, they don’t. Tmall doesn’t force merchants to offer discounts or dictate discount rates, nor does anyone compel consumers to buy or buy more.
Take Nike as an example: the 1 billion yuan in sales during Singles' Day likely corresponds to a retail value of 1.5 to 2 billion yuan or even more at original prices. The question is, could those original prices have achieved the same sales volume? In the end, it’s a game between merchants and consumers. The profit margin per item on Singles' Day is definitely lower than usual, and to some extent, as Jack Ma said, "not profitable." But for Nike, with 1 billion yuan in total sales, the overall profits, brand reputation, and influence gained are immeasurable. Otherwise, this shopping 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 participate.
Therefore, for any international brand, conquering the Chinese market can serve as a template for the global market. 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 differences among consumers in various regions, there are also many similarities. Digital shopping is one of them — consumers on both sides want greater value — product quality and innovation — as well as 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 highly saturated market. In the 2017 fiscal year, Nike’s total sales in the U.S. market were 15.2 billion U.S. dollars, with growth of only 3%. Therefore, although Greater China grew by as much as 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 the 2018 fiscal year, 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, Nike’s global strategy has focused on two key aspects: targeting youth and identifying 12 key future cities. For the former, markets worldwide can learn from China’s "New Retail" experiences, 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 key North American cities like New York and Los Angeles, while the lessons may also apply, Nike needs to think even deeper.
For any sportswear brand, product and pricing remain the fundamental keys to survival. As the world’s largest sportswear company, with a brand value of 21 billion U.S. dollars 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 visible than any advertisement or celebrity endorsement.
And in fact, the competitive environment is becoming increasingly fierce, especially in the Chinese market. The growing purchasing power in sports consumption is a tempting prize for any brand. Now, for Nike to maintain its leading position, it faces not only its long-time rival Adidas, not only niche market leaders like Lululemon that dominate segments such as yoga, not only domestic sportswear brands, but also players like Uniqlo and GAP, which are eager to carve out a share of the sportswear market.
"New Retail" may be the answer, but clearly, this answer needs continuous refinement and upgrading.
Source: Jiemian News