Nike’s digital future is a mobile-powered membership escapade, fueled by strategic partnerships and exclusive experiences.
Such was the picture painted by company leaders during an earnings call with investors, in which the company reported 5% growth in its fiscal third quarter as a result of strong demand in North America. Digital revenue grew 19% thanks in no small part to the company’s namesake Nike app.
Revenue from the app was up more than 50% and served as the company’s highest share of digital demand, pushing the Nike.com mobile site off this perch. App downloads also accelerated during the quarter, said Nike CFO Matt Friend, with member buying frequency and average order values improving.
Ten percent of U.S. households pay for a Nike membership service, according to Insider Intelligence, topping both InstacartExpress and Shipt in a ranking of retail membership services.
The No. 10 consumer goods company’s laborious consumer engagement efforts are working in tandem to improve conversions: Nike has begun dropping product launches within video livestreams, helping to quadruple its livestreaming audience since the streaming began last fiscal year. The company sees particular opportunities in livestreaming in the women’s category.
Nike’s foray into digital platforms is also unlocking new collaboration opportunities: The company executed its first account linking with a gaming partner during the Super Bowl in February when it teamed with EA Sports for a consumer running challenge. Nike members who ran 5 miles in the Nike Run Club received rewards and unlocks within the “Madden NFL 22” video game, but they had to link the Nike and EA accounts in order to join the challenge.
“The number of new members we acquired surpassed our expectations, and the framework we developed with EA Sports will allow future membership connects to come to life even more efficiently with new partners,” said John Donahoe, Nike president and CEO. “We expect that this, in turn, will lead to increased engagement, membership, and revenue growth down the line.”
Other digital experimentations during the quarter include a Fortnite partnership with a digital scavenger hunt, a #InMyJs Instagram activation, and Snapchat's Try On lens, and since launching the Nikeland experience on Roblox last fall, 6.7 million players from 224 countries have visited the gaming experience. The company is drawing consumers through such experiences as visits from LeBron James and virtual products. The basketball legend engaged with consumers during NBA All-Star Week, while participants received rewards and the ability to unlock virtual products.
Nike reported $10.9 billion in revenue in its fiscal third quarter, up 5% year over year. Nike Direct sales reached $4.6 billion, up 15%, while Nike Digital sales grew 19%, led by 33% growth in North America.
NIKE Digital grew 3 points to now represent 26% of total Nike brand revenue. Nike-owned stores grew 14% while whole dropped 1%.
It’s also launching exclusive virtual products in Nikeland and has planned 19 virtual LeBron styles for the experience.
As Nike moves more deeply into virtual experiences and the metaverse, it intends to build products and services on web3, a decentralized internet built on a blockchain. As part of this, it will leverage its new Virtual Studios division and recent RTFKT acquisition to enable members to more deeply engage through creations and sharing experiences.
RTFKT released the first official Nike-branded NFT during the quarter, and Donahoe said they’re pleased by the positive momentum in the space.
Wholesale and Retail Evolution
Nike continues to evolve its wholesale model and has reduced the number of global wholesale accounts by more than 50% over the last four years. Stressing that wholesale remains an integral role in go-forward strategy, the company will lean into remaining partnerships and bring them more closely into the Nike digital ecosystem to ensure seamless and premium consumer experiences — including the ability to link its membership program through wholesale channel — as well as develop unique products and experiences for specific communities.
Nike CFO Matt Friend cited the example of the exclusive Jordan silhouettes and SNKRS Live content it created in partnership with The Whitaker Group, an experiential retail company that owns the Social Status and A Ma Maniére concept stores.
“We are committed to driving growth with partners like this as they create authentic, deeply connected consumer concepts in key cities and communities around the world,” said Friend.
In physical retail, the company will also invest to address gaps in distribution to seize opportunities in women's apparel and Jordan, including increasing the number of mono-brand stores over the next several years. Its Nike Live concept stores, meanwhile, are showing “promising levels” of productivity per square foot, store profitability, and new member acquisition.
It will also test a Jordan-only concept in North America in fiscal 2023, a model said by Friend to have been “wildly successful” in Greater China, the Philippines and Korea.
Ultimately, the “main goal is to be able to have consumers almost be indifferent where and how they have a first-rate Nike experience,” said Donahoe.