Over the last two years, Nike has been ramping up its digital presence through its various free Apps that serve purposes in shopping, fitness, and community. The Nike Running Club and Training Club saw all-time high usage during the pandemic, while the Nike App itself continues to offer a viable digital shopping experience while offering exclusive products just for Nike members. Of course there’s also the SNKRS App, a veritable must-have for anyone who is looking buy the latest and greatest from the brand’s fashion forward standpoint. All in all, Nike was making the proper moves to create its own ecosystem centered around its strive for innovation, all supported by the public’s never-ending need for Air Force 1s.
With this strengthened ability to sell directly to the consumer, Nike commenced its plan to controlling the retail environment of its product. Step one: phase out smaller retailer partners. The mom-and-pop shops that were once the foundation of the brand’s distribution were slowly seeing diminished product being available to them, with many small family-owned business saying that Nike cut them off completely. This is a rather ruthless move by the brand as it basically takes away a major portion of profits for these independently run businesses. Still, Nike ensured that it would maintain relations with important retail partners such as the large chain retailers and the ever-so-crucial sneaker boutique.
Recent reports (Forbes, Oregon Live) have confirmed that Nike is pulling out all its product from Foot Locker. This comes as a rather shocking revelation as Foot Locker is nearly synonymous with the Nike brand and has been since their earliest days in business. While we expected the aforementioned mom-and-pop shops to be slowly stricken from the exclusive list of partners, this decision to cut ties with Foot Locker comes as somewhat of a shock because they’re its number one retail partner in terms of volume. It probably makes the most business sense for the Swoosh because despite the vast number of doors and communities served, Foot Locker can simply be viewed as an unnecessary middle-man, and their closure of 110 stores in 2018 was already an indication of that.
70% of Foot Locker’s sales in 2021 came from Nike product. The retail brand will have no choice but to focus on competing footwear brands such as adidas, Puma, and Reebok, (Jordan and Converse are under the Nike umbrella) to make up those figures, but that’ll be a nearly impossible task. The demand for Nike product can’t be matched by its competitors, and they have the means to go direct to consumer as well. adidas itself has a formidable online presence through its retail channels and the Confirmed App while offering community-based services as well. Nike leaving is the first domino to fall. Don’t be surprised if adidas follows suit.
Nike pulling out of Foot Locker is a major milestone in the ever-changing landscape of the post-pandemic retail business. While the quality of product is important, Nike has dedicated itself to digital services, eco-friendly shipping processes, and a lenient return policy. These advancements require financial investment on Nike’s end, but it’s an investment off-set by the gained profits of going direct-to-consumer. On the flip-side, this will obviously force Foot Locker to pivot immensely because they don’t exactly have their own in-house brand to peddle and will have to rely on brand partnerships, which Nike proved is more important to the retailer than it is the brand. Other competing retailers are surely on notice and are likely preparing (or have been) for Nike to say goodbye as well. However, this will push Foot Locker to get creative and not depend so much on one brand.
What does this mean for sneaker boutiques? While they too are retail partners, they provide access to community in ways that Foot Locker never could. Many shops have loyal followings and serve the locals in their own unique ways (breadth of product, curation, and taste), so the entirety of boutiques will likely replace Foot Locker, but not nearly as big in scale.