MANAGEMENT DECISION CASE Taking the Nike Experience Direct to Consumers

Lets say youre upping your game and want to exercise more. Maybe that means walking in the mornings, playing a pickup game after work, or running a marathon. Whatever your goal is, you need some new shoes, and Nike is your favored brand. If youre like the majority of consumers, you head to a retail store to purchase a pair. Until recently, this was your only choice. Just a short while ago, if you tried to connect to Nike directly youd find yourself squarely in a system focused on B2B (business-to-business) marketing channels. While Nike is no stranger to B2C (business-to-consumer) marketingit opened its first NikeTown retail store in 1990these stores were as much museums as retail outlets, and more about brand promotion than retail sales.

In 2014, with more than 700 Nike-contracted factories moving shoes and apparel through 57 distribution centers to 140,000 retail stores, Nike garnered 82 percent of its revenue through B2B channels and just 18 percent from B2C.⁵⁵ But this is changing fast. Competitors such as Under Armour already get 30 percent of their sales direct from consumers.⁵⁶ Acknowledging trends in both B2C and B2B behaviors and needs, Nike announced that by 2020 it will grow its B2C e-commerce business seven-fold, from $1 billion to $7 billion. Total B2C business, including company-owned retail, will rise to $16 billion, or 32 percent of its total global revenue, almost doubling in just six years.⁵⁷ As discussed in this chapter, demographic trends plus changes in consumers motivations and behaviors are guiding Nike to expand its target markets and channels. For example, broad consumer trends suggest e-commerce B2C sales will continue to grow, from $1.9 trillion in 2016 (8.7 percent of total

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worldwide retail sales) to $4 trillion by 2020.⁵⁸ More specifically, consumers desire to have healthier lifestyles suggests an increase in Nikes overall business. But the continued rise in the number of working women, who have less time to shop, suggests more spending power in the womens sector and a greater need for access to online purchasing. In addition, demographic trends show younger cohorts, who are very comfortable with online shopping, are now the largest consumer segment. Nike, intent on serving customers in ways that meet their needs, has addressed these trends by increasing its attention to its womens line of training footwear and apparel, and expanding its e-commerce presence.

But trends in B2B also suggest that Nike should target more of its business with direct-to-consumer models. Threatening the traditional B2B distribution model in the eyeglass, razor, and shoe industries, companies like Warby Parker, the Dollar Shave Club, and TOMS Shoes are selling products directly to the consumer instead of through wholesale distribution channels.⁵⁹ This has placed traditional manufacturers, those who make the product but rely on a distribution channel to reach consumers, on the defensive.

please answer in accordingly referring this. Answer i need 400 words for every question

1. Introduction is concise and introduces topic in a general but interesting way.

2. All paragraphs are well structured with topic sentences. Sequenced well and linked to the next paragraph.

3. There are details which support the points. Ideas are explained and expanded on.

4. Conclusion is concise and summarizes supporting points: restates the topic in a new way.

5. Presents a balanced and informed discussion about the topic

Prior to the Internet, it was difficult to purchase directly from a manufacturer. B2B firms didnt have the operational systems to take and fill small orders from individual consumers. But the Internet makes one-to-one communication easier, and readily available e-commerce tools make fulfilling orders much simpler. With these tools, small manufacturers can compete with the large. Today, even the smallest of manufacturers can pitch their product directly to consumers. Before a product is made, companies can pitch their value though sites like Kickstarteran online crowd-sourced funding sitesourcing their investor-customers directly and then continuing to sell B2C instead of starting with distribution channels.

Consumers often like the direct model too. Disappointments encountered in retail shopping, where limited inventory may mean the right size, color, or quantity is out of stock, are almost never a problem when shopping directly with the manufacturer, where inventory is largest and the ability to make more quickly is right at hand. Likewise, consumers are often pleased when they get to interact directly with a brand by providing input into product design or sharing feedback on their experience with the product. Manufacturers are also perceived as being the truest experts on the product, and a better place to get advice or help.⁶⁰ Such interactions can lead to improved brand loyalty.

Manufacturers are recognizing this disruption in the marketplace, so much so that Unilever, one of the worlds largest consumer goods conglomerates, recently paid $1 billion for the Dollar Shave Club. And the reason? Not the excellent e-commerce site operated by Dollar Shave Club, but the firms ability to build a relationship directly with consumers.⁶¹ For manufacturers, the opportunity to own the relationship with the customer, and to be able to define their own brand without intermediaries, is an attractive reason to go direct. And for Nike, one of the worlds top 20 most valuable brands, owning the relationship as trends move toward B2C will be important.⁶²

Questions for Consideration

1. This chapter highlights how marketing efforts are different for B2B and B2C firms. As Nike and other manufacturers continue to expand into B2C channels, what are some differences in B2C and B2B behavior that might affect Nikes approach to these channels?
2. What are some hurdles Nike may face as it expands its B2C business? Consider this question both internally, with new skills Nike needs to amass, and externally, with challenges it may face from its B2B channel partners.
3. What would be some negative consequences to consumers if all manufacturers sold only B2C and eliminated wholesaler distributors who supply retail stores?