TABLE OF CONTENTS

Sr. No. Title Page No.

1 Introduction
2 Does Nike follow Universal Pricing Strategy?
3 Channels of Distribution
4 Sales Force & Compensation System
5 Sales Goal
6 Sales Strategy
7 Key Competitors
8 Porter’s Five Forces
9 Promotional Strategies
10 Conclusion
11 References

INTRODUCTION
Nike, Inc. is an American multinational corporation that is engaged in the design,
development, manufacturing, and worldwide marketing and sales of footwear,
apparel, equipment, accessories, and services. The company is headquartered
near Beaverton, Oregon, in the Portland metropolitan area. It is the world's
largest supplier of athletic shoes and apparel and a major manufacturer of sports
equipment, with revenue in excess of US$37.4 billion in its fiscal year 2020
(ending May 31, 2020). As of 2020, it employed 76,700 people worldwide. In
2020 the brand alone was valued in excess of $32 billion, making it the most
valuable brand among sports businesses. Previously in 2017, the Nike brand was
valued at $29.6 billion. Nike ranked No. 89 in the 2018 Fortune 500 list of the
largest United States corporations by total revenue.
The company was founded on January 25, 1964, as "Blue Ribbon Sports", by Bill
Bowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1971. The
company takes its name from Nike, the Greek goddess of victory. Nike markets
its products under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air
Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nike
Skateboarding, Nike CR7, and subsidiaries including Jordan Brand and Converse.
Nike also owned Bauer Hockey (later renamed Nike Bauer) from 1995 to 2008,
and previously owned Cole Haan, Umbro, and Hurley International. In addition
to manufacturing sportswear and equipment, the company operates retail stores
under the Niketown name. Nike sponsors many high-profile athletes and sports
teams around the world, with the highly recognized trademarks of "Just Do It"
and the Swoosh logo.
 4

6
Nike Skimming Pricing Strategy

Nike applies a price skimming type strategy whenever it produces expensive

products especially which are limited editions. When the company brings out new
design products into the market, Nike uses this strategy to set high initial prices.
By implementing this strategy, Nike tries to skim money from the customers who
want the product and are willing to purchase it at that price. After a newly
designed product has been out in the market for a while, Nike lowers the price of
those products. According to the Principles and Practice of Marketing (David
Jobber), Nike executes a rapid skimming pricing strategy of setting high prices in
the products and investing heavily in promoting the newly designed products.
Normally, Nike shoes last for a period of 3 to 6 months when the company sells
those at peak prices. After that period, there comes an activity called closeout
where Nike reduces the prices gradually.

In addition, there are few other pricing strategies that Nike follows
besides these. Such as,

• Penetration Pricing
• Psychological Pricing
• Segmented Pricing
Nike utilizes its pricing strategies successfully both to maximize its profits and
emphasize high value in promoting its products. From Nike’s pricing strategies,
we can understand that Nike upholds its position as the market leader in the
athletic footwear market and it has shown that this company is a true force to be
reckoned with.
 7

CHANNELS OF DISTRIBUTION
At the end of fiscal 2019, Nike operated 384 retail stores in the United States. Of
these, 217 were Nike brand factory stores, while 29 were Nike brand inline
stores. Among the remaining stores were 109 Converse and 29 Hurley stores.
Nike had six major distribution channels across the United States at the end of
fiscal 2019.

Looking at Nike’s international distribution channels, the company operated 768

stores outside the United States at the end of fiscal 2019. Of these, 648 were
Nike factory stores, while 57 were Nike brand inline stores. The remaining 63
stores were Converse stores. Meanwhile, online sales have emerged as a key
distribution channel for Nike.

Nike’s distribution channels can be primarily divided into two categories.

• Selling products to wholesalers in the US and international markets. This

is Nike’s biggest distribution channel.
• Direct-to-consumer (or DTC) sales, which include inline and factory retail
outlets and e-commerce sales through its website. Nike also distributes its
products through e-commerce companies like Amazon. Online sales through
Nike Direct is the company’s fastest-growing distribution channel.

The company also creates category-specific retail destinations by partnering with

footwear retailers such as Foot Locker , JD Sports, and Intersport but this is not
a major distribution channel for the company.

Sales to Wholesalers
Sales to wholesalers are Nike’s largest revenue category. However, this
category’s contribution to the sales mix contracted from 83% in fiscal 2012 to
68% of revenues in fiscal 2019.
Nike’s fiscal year ends on May 31, but DTC sales increased from 16% to 32%
during the same period. This is significantly lower than the ratio of DTC revenues
for Nike’s rivals in this space. Meanwhile, both Wholesale and DTC are important
distribution channels for Nike.

Nike Direct
Nike’s DTC approach is two-pronged—the Nike-owned retail stores, which are
the brick-and-mortar stores, and its digital platform. Nike’s factory stores
provide a premium product to consumers shopping for value. Due to the value
proposition involved, they tend to attract higher shopper volumes.

In its distribution channels, Nike focuses on direct selling to the consumer with
Nike Direct. Comparing Nike’s distribution channels, direct sales to the consumer
 8
provide higher margins than do sales to wholesalers. Nike’s DTC sales have
increased considerably, as has its contribution to its overall sales mix. On a
constant-currency basis, Nike’s sales to wholesale customers increased by 6%
in fiscal 2019 compared to fiscal 2018. The company’s sales through Nike
Direct expanded 13% over this period. The company’s DTC sales rose to $11.7
billion in fiscal 2019, up from $5.3 billion in fiscal 2014. That’s a CAGR
(compound annual growth rate) of 17.2%.

Nike’s Digital Distribution

Nike’s focus on digital distribution is paying off. In fiscal 2019, the company’s
digital sales increased 35% year-over-year. In comparison, the company’s
consolidated revenues increased by only about 7%.
Nike expects to expand its online distribution channel further and expects 30%
of its sales to come from online sales by 2023.
 9

11

SALES GOAL
• The Company expects its Women’s business to reach $11 billion in revenue
by the end of fiscal year 2022.
• It expects the Running category to grow to $7.5 billion by the end of fiscal
year 2022.
• The Jordan Brand, which will be reported separately from the NIKE
Basketball category going forward, is expected to nearly double in size, to
$4.5 billion, by the end of fiscal year 2022.

Long-term Financial Objectives

Reviewing performance against the Company’s long-term financial model, Andy

Campion, Executive Vice President and Chief Financial Officer, highlighted the
Company’s strong returns to shareholders, “Our strong and consistent financial
performance over the past 10 years has fuelled Total Shareholder Returns in the
high-teens on average, significantly outperforming the broader market and
placing us in the top quartile of the S&P 500.”

Nike had originally set a goal in 2015 of reaching $50 billion in annual revenue. It
was forced to delay that until 2022 due to earlier stumbles when it lost ground
to Ad idas, but the company is on track to achieve that goal even with setbacks
from the pandemic. Doing so would mean growing its revenue at a compound
annual rate of about 9% from its fiscal 2019 revenue of $39.1 billion.

Building on the momentum in digital and the rebound after the pandemic, Nike
should be able to reach more than $60 billion in revenue by 2025, three years
after it eclipses its $50 billion goal in 2022.
 12

SALES STRATEGY
Nike’s focus has always been on providing customers with well-constructed,
uniquely designed products. Most Nike products are leaders in their individual
categories. The company invests extensively in R&D (research and development)
for new technologies and their applications for existing product lines, depending
on consumer preferences.

Nike’s product portfolio features premium products that command higher prices.
This allows the company to differentiate its products in the marketplace and
charge higher prices than the competition. Nike is also focused on providing a
personalized customer experience.

In 2013, 81% of Nike’s business came from wholesale. Towards the end of 2019
sales generated through Nike’s wholesale channel made up 68% of Nike’s sales. One
of the strategic moves Nike made to provide more direct connections with
consumers was to rationalize its wholesale business. In 2017, Nike sold its product
through an estimated 30,000 retailers but by 2019 it only had 40 strategic retail
partners. To make this shift Nike exited several wholesale relationships including the
ones it had with Zappos, Belk, and Fred Meyers. As part of their recently announced
Consumer Direct Acceleration strategy, they are doubling down on their approach
with Nike Digital and their owned stores, as well as a smaller number of strategic
partners who share their vision to create a consistent, connected, and modern
shopping experience.

Nike also reduced its reliance on department stores. In August of 2019, department
stores sales in the United States were down by 16.9%. Nike saw the writing on the
wall and decided to move towards selling through its own channels before the
pandemic made it more urgent to do so.

Nike’s own stores provide an opportunity to offer a powerful and differentiated

customer experience which it can’t provide when it’s selling through someone else’s
channel.

Nike also has a strong ecosystem that provides many entry points to its business
outside of its of its core footwear products. One these entry points are apps like Nike
Training Club and Nike Running Club. These apps allow users to access training
programs such as strength workouts that can be done from the comfort of a user’s
home.

Early in the pandemic Nike saw just how valuable these apps could be. Once COVID
19 started to spread in China, Nike quickly shifted its focus to helping customers
stay fit and connected while stuck at home. This approach resonated strongly with
Chinese consumers. By the end of Nike’s 2020 third quarter weekly active users of
Nike’s activity apps in China were up by 80% versus the beginning of the quarter in
what the company has called an “extraordinary” increase in usage. Not only was
engagement up but so were sales. In the third quarter of 2020 Nike’s digital sales in
China were up by more than 30%. Speaking about this John Donahoe, the CEO of
Nike Inc., said, “the strong engagement of Chinese consumers with our activity apps
translated into strong engagement with our Nike commerce app.”
 13
As you can see it’s not just about commerce it’s about truly understanding what
your customers need and coming up with creative solutions to meet those needs.
That may sound cliché but the best companies in the world do this better than
anyone else. If Amazon believed that all its customers needed were books it might
not exist today.

Speaking about its apps on Nike’s first quarter 2021 earnings call, Donahoe said: “in
Q1, we saw an all-time high of the percentage of our members working out on The
Nike Training Club app, with more than 50% of our members worldwide starting to
work out in Q1. And in the Nike Running Club, we've seen four consecutive months
of more than a 1 million downloads each month of our audio-guided runs.”

As Fortune writes: “Nike has long understood that digital tools must do more than
just support sales and have to insinuate themselves into customers' lifestyles to
really pay off. Otherwise, e-commerce growth often just means business going from
one avenue to another, rather than growing the overall pie.”

Nike has made several investments in new store formats over the last few years
each of which have a strong tie to its digital business.

In 2018 Nike opened its 68,000 sq. ft flagship House of Innovation store in New
York. Using Nike’s “Scan to Try” functionality on Nike’s mobile app customers can
scan the barcode on any product in the store using the app to learn more about a
product and see what colours and sizes are available. With the app customers can
also see if a product is in stock, or if it is available at nearby stores or online all
without speaking to anyone. Using the app customers can also request that a sales
associate bring items to designated locations in the store or have items placed in a
fitting room.

Using Nike’s “Instant Checkout” functionality customers can also pay for their
purchase by scanning the bar code on a product using Nike’s mobile app. After
paying for the purchase within the app customers can skip the checkout line and
walk out of the store with their items. Michael Martin, Nike’s Global Head of Digital
Products, has said: “we want to have the best store experience where our most
connected customers are, whereas another company might look at the inverse — if
people are shopping in the app, they don’t need a store there. But we see our
approach as better serving our customers.”

Martin also said: “the way we look at digital and in-store is not channel-by-channel,
or one channel helping the other. Instead, we architected the entire notion of why
someone with a phone in their pocket would walk into a store.” Viewing the store
and Nike’s mobile app as connected customer touchpoints has also increased Nike’s
sales. “We know a consumer who connects with us on two or more platforms has a
lifetime value that's 4 times higher than those who don't.” said Donahoe on Nike’s
last earnings call.

Consumer Direct Offense

NIKE, Inc. has recently introduced the Consumer Direct Offense, a new company
alignment that allows Nike to better serve the consumer personally, at scale.
Leveraging the power of digital, Nike will drive growth — by accelerating
innovation and product creation, moving even closer to the consumer through
Key Cities, and deepening one-to-one connections.
 14
“The future of sport will be decided by the company that obsesses the needs of
the evolving consumer,” said Mark Parker, NIKE, Inc. Chairman, President, and
CEO. “Through the Consumer Direct Offense, we’re getting even more
aggressive in the digital marketplace, targeting key markets and delivering
product faster than ever.”

Consumer-focused Growth

Trevor Edwards, President of the NIKE Brand, will drive the Consumer Direct
Offense through integrated category, geography, marketplace, product,
merchandising, digital, and direct-to-consumer teams.
In the new alignment, the company will drive growth by deeply serving
consumers in 12 key cities, across 10 key countries: New York, London,
Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona,
Seoul, and Milan. These key cities and countries are expected to represent over
80 percent of Nike’s projected growth through 2020.

Nike is moving closer to the consumer—creating a local business, on a global

scale. To improve efficiency, all key cities and countries are supported by a
simplified geography structure, changing from six to four—comprised of North
America; Europe, Middle East, and Africa (EMEA); Greater China; and Asia
Pacific and Latin America (APLA). The leaders of the newly-formed geographies
are: Tom Peddie VP/GM of North America, Bert Hoyt VP/GM of EMEA, Angela
Dong VP/GM of Greater China, and Ann Hebert VP/GM of APLA.

As such, financial results for the NIKE Brand will be reported based on these four
operating segments beginning in fiscal 2018.

The geography leaders will report to Elliott Hill, President of Geographies, and
Integrated Marketplace.

Nike’s Triple Double Strategy

The Consumer Direct Offense is fuelled by Nike’s Triple Double strategy: 2X

Innovation, 2X Speed and 2X Direct connections with consumers. To double
innovation, Nike will accelerate the impact and cadence of new innovation
platforms. As an example, over the past few months, Nike launched a
cushioning revolution, featuring three new ground-breaking platforms: ZoomX,
Air VaporMax and Nike React. And, to give consumers more choices of the
products they love, Nike is editing to amplify — reducing its styles by 25 percent
and offering a deeper selection of key franchises.

To double speed, Nike is on a path to cut product creation cycle times in half.
That starts with the Express Lane, which quickly creates, updates and fulfils
products in response to consumer demand. Already operating in North America
and Western Europe, a new Express Lane will be activated this summer in China,
serving Shanghai, Seoul, and Tokyo—some of the world’s most promising
markets for sport.

To supercharge this faster pipeline, Michael Spillane is assuming the new role of
President of Categories and Product—leading an end-to-end design-to-delivery
 15
organization, including Categories, Design, Product and Merchandising. This new
integrated organization will place greater resources in the categories with the
highest potential to fuel growth: Running, Basketball, Nike Sportswear, Men’s
and Women’s Training, Global Football and Young Athletes. To build on the
growth of the Nike Women’s business, a new dedicated Women’s team will
complement each top-tier category.

To double direct connections with consumers and shape the future of retail, Nike
is creating the new Nike Direct organization, led by Heidi O’Neill, President of
Nike Direct, and Adam Sussman, Chief Digital Officer. This organization will
unite Nike.com, Direct-to-Consumer retail, and Nike+ digital products to
enhance and expand Nike’s membership experience on an increasingly global
scale. Nike will also extend innovations to its strategic wholesale partners.

Leading with mobile, this team will unite physical and digital retail to serve
consumers with the best of Nike. Two recent examples of innovative consumer
connections are SNKRS Stash, which unlocks access to exclusive Nike and
Jordan product using mobile geo-locations; and Shock Drop, surprise alerts for
coveted sneakers that allow consumers to buy instantly through the app or at
their nearest Nike or wholesale store. Over the next several months, Nike is also
launching its Nike+ and SNKRS apps globally to energize the sneaker experience
in new markets.

Spillane, Hill, O’Neill and Sussman will all report to Edwards.

Nike’s leadership and organizational changes will streamline and speed up

strategic execution. The changes are also expected to result in an overall
reduction of approximately 2 percent of the company’s global workforce.
 16

23

CONCLUSION
Nike is a well-known, successful company worldwide. Nike maintains a
productive and efficient supply chain logistics within an innovative and profitable
company. Nike is more profitable than its competition and dominates the global
athletics and footwear market.

Furthermore, Nike has understood the importance of digital distribution channels

and is able to target specific audiences through multiple products. Social media
plays a key role in Nike’s marketing strategy and is a key reason for its strong
brand name. This has led people to buy Nike products online from their own
website.

Nike’s innovation is one of the most notable aspects of Nike and is written in its
mission statement "To bring inspiration and innovation to every athlete in the
world." It is present in everything it does and is the reason for Nike’s consistent,
financial growth.

24

REFERENCES
https://www.nike.com/in/

https://www.indigo9digital.com/blog/nikedigitalstrategy

https://investors.nike.com/investors/news-events-and-reports/?toggle=earnings

https://marketrealist.com/2019/10/analyzing-nikes-distribution-channels-and
retail-strategy/

https://www.cnbc.com/2020/06/25/nike-nke-reports-q4-2020-
earnings.html#:~:text=The%20company%20had%20previously%20set,
%22in %20the%20foreseeable%20future.%22

https://news.nike.com/news/nike-consumer-direct-offense

https://purpose.nike.com/worker-engagement

https://marketrealist.com/2019/10/analyzing-nikes-distribution-channels-and
retail-strategy/
25