Nike Treads New Sales Path -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 6, 2017).

With the retail sector in flux, Nike Inc. is looking for new ways to sell sneakers and shirts, but some industry watchers worry that the company's efforts to broaden its reach could damage its cultural cachet.

The world's largest sportswear maker has begun selling goods through Amazon.com Inc. and increasingly is using its mobile apps as sales tools, attempting to connect with consumers who are buying more online. Already, sales on Nike.com and the company's apps have doubled to more than $2 billion since 2015, the company said last month.

Those initiatives mark a shift away from how Nike has traditionally released its most desirable products. Five years ago, the company had to tell longtime sales partners Foot Locker Inc. and Dick's Sporting Goods Inc. to move limited-shoe releases to the morning hours from midnight because shoppers who camped outside stores were getting out of hand. Frequent online releases of coveted Jordan shoes could make them less rare and not as much in demand anymore, some industry watchers say.

"They're putting their foot on the gas in terms of releases," said Matt Halfhill, founder of sneaker-news site Nice Kicks, which chronicles new releases across major shoe brands. Mr. Halfhill, who said he has been involved in sneaker culture since the 1990s, believes the push toward direct sales actually hurts Nike's connection with consumers.

"It's a great way to sell commoditized shoes, but most boutiques even discourage you from buying on the phone. They only sell shoes in stores to customers, where you see everyone in line waiting for shoes talking to each other," he said.

A Nike spokesman said the company is focused on "disrupting the sneaker shopping experience" by offering different types of releases, some in nontraditional places. Last month, the company released a limited edition sneaker in collaboration with acclaimed chef David Chang. Users of the Nike SNKRS app could purchase the shoe at Mr. Chang's Fuku restaurant in New York through augmented-reality technology by taking a photo of the menu within the app, which unlocked a sales portal.

Wall Street has taken note of the choppy waters for Nike, which has to navigate North America's retail downturn, in particular the troubles facing sporting-goods stores. "The big picture concerns are competition is gaining on Nike, 'athleisure' is slowing, and the shift to online spending is proving highly disruptive to Nike's wholesale business," Morgan Stanley analyst Jay Sole wrote in a research note.

Nike's share of the U.S. retail sneaker market fell 1 percentage point to 50% this year through May, according to industry tracker NPD Group, while rival Adidas AG climbed to 11% from 7% over the same period. Adidas's gains come about two years after the company changed its leadership and refocused on sales in the U.S., where the German company has struggled for years.

Adidas's resurgence includes new "franchises" -- such as the NMD and Kanye West's Yeezy line -- that have gained a youthful following and made inroads on Nike's cultural dominance.

Nick Santora, a former sneaker-store owner and editor of online sneaker magazine Classic Kicks, said Adidas is more on point with youth culture of late.

"It took them a while, but things are coming together the right way," Mr. Santora said. "Kanye, for some people, for certain kids, that brand is now acceptable," he said. "Nike was always 'sports, sports, sports,' but if you're over 11 years old right now, musicians are where it's at."

Nike has released collaborations with hip-hop artists such as Drake and A$AP Bari among others, and a training shoe with actor and comedian Kevin Hart. The company says it has relationships with entertainers as well as thousands of athletes, and it develops signature sneaker lines for only a select few.

Although Mr. Santora, 39, said he is a lifelong Nike fan, he admits to some brand fatigue.

"I haven't bought a pair of Nikes in a couple of years," he said. "I don't need to be that cool anymore."

Write to Sara Germano at sara.germano@wsj.com

Corrections & Amplifications Matt Halfhill said he has been involved in sneaker culture since the 1990s. An earlier version of this article incorrectly said he has been involved since the 1980s. (July 5)

(END) Dow Jones Newswires

July 06, 2017 02:47 ET (06:47 GMT)