Just don’t do it… Retailers like Foot Locker need brands like Nike. But brands don’t always share the love. Foot Locker shares have fallen nearly 30% since last Thursday. That’s when the sneaker retailer said it expected sales to slip this year as top vendor Nike sells fewer shoes in its stores. The sneaker giant says it won’t fully abandon Foot Locker, but will reduce inventory to ensure scarcity and sell more top kicks directly to buyers.
- Big shoes to fill: Foot Locker expects Nike sales to make up 60% of total sales this year, down from 70% last year and 75% in 2020.
- To make up for lost Nike $$, Foot Locker plans to stock more Adidas, Puma, New Balance, and Crocs.
Kicked to the curb… Nike makes twice as much profit selling shoes directly as it does wholesale, so it’s not surprising that it’s focusing less on retailers. By investing in its own stores and apps, Nike has more than doubled its D2C sales since 2011, to 35% last year. At the same time, Nike has been unlacing retailer relationships:
- Nike stopped selling its shoes on Amazon in 2019 to push customers to its sites, and ended partnerships with DSW, Zappos, Dillard’s, and Urban Outfitters.
- Other shoe giants like Under Armour and Adidas have also ditched retailers to boost D2C sales. But Allbirds, a smaller shoe biz that started out D2C, is investing in wholesale to tap new customers.
Markdowns scuff brand image… Nike’s D2C push is all about control. If Nike can control its supply, it can control its brand image — and if Nike can elevate its brand image, it can sell shoes for higher prices. But Nike can pitch Jordans as luxury items only if they’re not available in Foot Locker’s clearance bin. As the Swoosh moves up market, it could expand past partnerships with luxe brands like LVMH, whose profits are soaring despite inflation.