Nike CEO says focus on its own website and stores went too far as it embraces wholesale retailers again
Nike CEO John Donahoe acknowledged Friday that the company moved too far away from wholesale partners like Macy's and DSW in its quest to become a retailer that primarily sells merchandise to shoppers through its own stores and website.
"We recognize that in our movement toward digital, we had over-rotated away from wholesale a little more than we intended," Donahoe told CNBC's Sara Eisen from Paris. "We've corrected that. We're investing heavily with our retail partners. They were all here over the last couple of days; they're very excited about the innovation pipeline."
Over the past several years, Nike has worked to transform its business from a brand that primarily sold its sneakers and clothes in department stores and specialty athletic shops to one that does the bulk of its sales direct to consumers.
The strategy allowed Nike to earn far more from its sales and gain better insights about its customers through data collection. Over the last four years, Donahoe said Nike tripled its mobile and digital business from about 10% of overall sales to 30%.
However, it's a tough strategy to pull off and one that can pressure margins in the short term. Shifting to a direct model is capital-intensive and saddled Nike with the headaches of returns and owned inventory, which had typically fallen on wholesale partners.
On top of that, department stores and specialty shops are massive customer acquisition engines. Without them, brands have to spend more on marketing, which has become more expensive and challenging to do online.
Some analysts have said Nike's decision to shun wholesale partners was a mistake. They argued it set the company back and is part of the reason why it fell behind on innovation and products. It also had a