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Nike’s Complex Relationship With Wholesale, Explained

The sportswear giant is quietly returning to third-party stores six years after it first announced a pivot toward direct channels. But this isn’t a reversal of priorities as much as it is an evolution of Nike’s distribution strategy, analysts say.
After cutting ties with major retailers as part of its radical DTC strategy, Nike will re-enter certain stores, hinting at the importance of wholesale in post-pandemic retail.
After cutting ties with major retailers as part of its radical DTC strategy, Nike has begun re-entering stores like DSW and Macy's, hinting at the importance of wholesale in the post-pandemic retail environment. (Nike)

Key insights

  • Nike has begun quietly re-entering into wholesale deals with retailers like DSW and Macy’s after pivoting to direct-to-consumer sales in 2017.
  • Wholesale still accounts for the majority of the brand’s sales, generating $25.6 billion in 2022, compared to $18.7 billion in direct sales.
  • Nike’s new partnerships with the likes of Dick’s Sporting Goods and Zalando are more collaborative, allowing the brand access to customer insights.

Since 2017, Nike has severed ties with dozens of meaningful wholesale partners in an effort to focus on its own stores and e-commerce, a strategy that was met with rapturous approval from shareholders and analysts alike.

At the time, direct-to-consumer brands were all the rage. Startups like Allbirds and Bonobos were slated to be unicorns on the single premise that they don’t need department stores or other mall chains to reach consumers, instead finding them directly via social media.

But the playbook hasn’t panned out as originally intended. Online customer acquisition has become increasingly unaffordable as the e-commerce landscape grew crowded. Brands that had pivoted to direct have not seen a relative increase in revenue or profit margin, according to Simeon Siegel, retail analyst at BMO Capital Markets.

In recent months, the tide has turned. Digitally-native startups, confronting a ceiling on digital transactions, are now exploring new channels of growth, including wholesale and physical stores. Nike, meanwhile, quietly began re-entering key wholesale relationships this year, including Macy’s after a two-year hiatus and shoe retailer DSW. Foot Locker highlighted its revitalised business with Nike in an earnings call in March, during which chief executive Mary Dillon said that she spent “a great deal of time with Nike revitalising our partnership.”

But Nike’s renewed embrace of wholesale isn’t an indication of failure on its “Consumer Direct Offense.” In fact, Nike has taken key learnings from its DTC push to inform its new partnerships with retailers, which are more strategic and collaborative than before.

Ultimately, Nike’s return to wholesale is a reflection of the reality for all brands and retailers today that diversifying distribution is key — and that reliance on a single channel, whether that’s DTC or wholesale, will result in stunted growth and profitability.

Another convincing factor for Nike to restore key wholesale accounts? Growing competition from newcomers like On and Hoka, whose soaring growth has been largely fuelled by savvy wholesale distribution.

“There is a successful way to approach retail partnerships,” said Siegel. “It does not have to be one-sided … Nike will continue to re-embrace wholesale, and I think they should because they have probably excelled the most at wholesale, and therefore they have shown an ability to optimise their partnerships with retailers.”

Is Nike abandoning its direct-to-consumer strategy in favour of wholesale?

Not quite. But the truth is, Nike never left wholesale completely in the first place.

Wholesale still comfortably accounts for the majority of the brand’s sales: Nike generated $25.6 billion from its wholesale channel in 2022, compared to $18.7 billion in direct sales.

In that regard, Nike’s re-entry to retailers like DSW and Macy’s constitutes a “re-embracing” of wholesale, rather than a return as such, said Siegel.

“What we are seeing is that there needs to be a holistic approach to distribution,” he said. “There’s a place for both direct selling and wholesale selling, but the wholesale approach must be strategic.”

Nike said it sees the shift as a natural evolution of its post-pandemic distribution strategy. To remain competitive, it has no choice but to show up everywhere its consumers are, and that means multi-brand retailers too.

“We came out of the pandemic and we’ve seen this huge rebound towards physical retail, VP of Nike Direct, Daniel Heaf, told BoF in May. “The whole point about our marketplace is that it can flex and be agile to wherever the consumer chooses to interact with Nike.”

What does Nike hope to gain from its new push toward wholesale?

There are obvious benefits to scaling any brand’s wholesale business. Retail partners provide an outlet for easing excess inventory, with which Nike had struggled last year. At the same time, wholesale is a great way to keep the brand exposed to consumers at a time when they have more options than ever for sneakers and workout attire.

One of Nike’s primary motivations for scaling its DTC business in the first place was to better understand consumer needs, collecting data through its membership programme which in turn allows the brand to personalise marketing, inform product innovation and tweak store assortments for localised merchandising based on buying trends in the location.

The sharing of these insights is not common in wholesale relationships, where it’s typically down to the retailer to inform the vendor about metrics like sell-through and average unit retail value.

But Nike’s renewed wholesale deals are intended to be more strategic and collaborative, with benefits for the brand that extend beyond wholesale relationships of the past. For example, customers shopping through Dick’s Sporting Goods are able to link their Nike membership programme, incentivising loyalty with Nike directly while simultaneously granting the retailer sales data.

When Nike and Zalando announced a new “strategic partnership” in October, one of the key features promoted by the pair was the fact that consumers could link their Nike accounts to the platform in order to access a wider selection of member-exclusive Nike products. The brand launched a similar programme with British retailer JD Sports late last year.

“One of the main reasons Nike has been so successful is leveraging data to understand exactly what their consumers need,” said Jessica Ramirez, a senior research analyst at Jane Hali & Associates. “When you look at the deals they’re doing with their retail partners at the moment, they’re clearly trying to replicate this success across their wholesale business.”

Strategic relationships with retailers also allow it to target specific underserved consumer groups. The Zalando partnership, for example, “is very much targeted at the women’s side of the business on that platform,” Heaf said.

Is it possible to win at wholesale and DTC at the same time?

Nike is clear that the goal is to achieve a symbiotic relationship between its wholesale and direct channels.

“The strategy for us has been about diversification: having the ability to operate at scale in both,” said Heaf.

Analysts agree that for Nike to remain dominant in the face of competition from fast-growing rivals, the brand must remain at scale in both channels.

“One of the ways Nike has always been able to beat its competition is its scale and size — wholesale distribution is intrinsically linked to this and helps to expand the brand’s reach,” Siegel said.

But the stakes now are higher than ever for Nike to muscle out other brands who are gaining share through hyper-specialised products and innovative marketing strategies. To stay dominant, Nike might have to do more than just reexamine wholesale.

“At the time when Nike began pulling back from wholesale, it did so to elevate the brand and make it a more premium offering,” Ramirez said. “Now you have competitors who are killing it, like On, Hoka and Salomon, who have shown that you can still have an ultra high-end product with a large distribution network.”

Further Reading

Breaking into the $384 billion sports apparel market is no easy task, but fast-growing start-ups are stealing market share by creating specialised, fashion-forward products around underserved interests.

About the authors
Daniel-Yaw  Miller
Daniel-Yaw Miller

Daniel-Yaw Miller is Senior Editorial Associate at The Business of Fashion. He is based in London and covers menswear, streetwear and sport.

Marc Bain
Marc Bain

Marc Bain is Technology Correspondent at The Business of Fashion. He is based in New York and drives BoF’s coverage of technology and innovation, from start-ups to Big Tech.

In This Article

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