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Sports Direct versus Nike. But Should we Really be Surprised?

This week, the Sunday Times broke the news that Nike had terminated supply agreements with dozens of independent retailers, and would end their access to Nike products by 2021.

The news was such a shock that it prompted Sports Direct to call for a wide market review by the appropriate authorities in the UK and Europe, essentially alleging abuse of market power. 

But was it a shock? After all, Nike first briefed investors on a plan to drive more sales through its own branded channels, at the expense of ‘non-differentiated retailers, back in 2017.  

Even then, Nike pulled no punches when talking about the impact on those ‘non-differentiated stores’, which roughly translates as those lacking dedicated, Nike-branded displays. Nike’s Brand President at the time, Trevor Edwards, put it pretty bluntly: “Undifferentiated mediocre retail won’t survive.” 

Old news it may be, but the fact that Nike seems bang on track to realise those plans is still terrible news for independent sports retailers, which have already been hit hard by competition from JD Sports and, ironically enough, Sports Direct. It’s estimated that there are now just 1000 left in the UK, down from 6000 20 years ago.

A sign of things to come?

But there is another aspect to this story that has been largely overlooked to date, and which offers a vision of the future that no retailer can afford to ignore.

That is, while most commentators have characterised Nike’s move as simply removing a middle man in order to increase profit, that is only half the story.  A closer look at Nike’s pronouncements in 2017 tells us this is really about the brand, and brand experiences.

Brands like Nike increasingly recognise that in order to deliver the experiences customers expect now and in the future, they have to take control of every part of that experience. That means combining engaging digital experiences with offline retail theatre, and with slick operations and fulfilment that provide the differentiation brands need to stay relevant to customers in the future.

In fact, back in 2017 Investor’s Business Daily reported that Nike’s strategy was focused on a very similar combination. It pointed to “…speed to market, tighter product selection and a digital-focused consumer experience”, and that over the next five years “…half of Nike’s growth will come from ‘new innovation concepts’.”

It’s very easy to see why that strategy means changes to the distribution model – though really, it’s about engagement, not distribution.  After all, taking control of, and innovating Nike’s customer experience pretty much demands that very same experience is delivered only via Nike owned outlets – online and offline – and a few strategic partners able to deliver a comparable experience.

So, yes this is undoubtedly a crushing blow for a great many smaller sports retailers but don’t imagine it ends here. It is also a sign of things to come for retailers – and one that no-one should ignore.