Thread by @JoePompliano

With retail stores all over the world closed during the COVID-19 pandemic, consumer brands have suffered tremendously.

The interesting part?

Nike is thriving.

Time for a thread 👇👇👇

1) What if I told you the following was true about Nike:

— Revenue is down 5%
— Inventory is up 15%
— 2,000+ employees have been let go

You would probably think—similar to Under Armour & Adidas—that Nike has been hit hard by the COVID-19 pandemic.

But context matters…

2) Despite seeing a decline in sales, a rise in inventory, and thousands of layoffs, Nike's stock has performed well this year.

2020 Performance:
Nike: +35%
Adidas: +5%
Under Armour: -20%
———
S&P 500: +13%

How?

Because they've completely changed their business model.

3) Over the last few years, in an effort to become a "digital-first organization," Nike has strategically shifted their retail strategy.

They've cut ties with thousands of retailers across the country & cancelled any outstanding orders.

Their plan?

It's actually quite simple.

4) Rather than selling inventory though department stores & wholesale outlets, Nike wants to own end-to-end distribution.

They've built smaller stores called "Nike Live," which serve as pickup hubs for online orders, and multi-level flagship stores called "House of Innovation.”

5) Nike's end-to-end distribution model helps with inventory management & customer service, but the real benefit comes through digital.

Nike stores allow customers to scan barcodes for pricing, check available inventory & complete their transaction — all through the Nike app.

6) By creating stores that reinforce digital interaction, Nike will see a massive financial benefit.

Not only does Nike earn 10% higher margins on digital sales, but a customer who connects with Nike on 2+ platforms has a LTV that’s 4x higher than those who don’t.

7) As a result of Nike's investment in owning the end-to-end distribution model, they've seen their digital business explode.

Before COVID-19, Nike had a goal of e-commerce representing 30% of their business by 2023.

Now, they expect 50% of their business to be digital by 2023.

8) Outside of improved margins & increasing a customer's lifetime value, Nike will see other benefits from digital transformation.

An example?

Data

Improved customer data will assist Nike with “predictive modeling tools, data driven member personalization & inventory staging.”

9) From a global revenue perspective, here's how the top athletic brands in the world rank:

2019 Revenue
Nike: $39B
Adidas: $27B
Under Armour: $5B

My prediction?

Through digital transformation, Nike will take an even bigger lead.

10) Only time will tell the true financial impact of Nike’s digital transformation strategy, but for a company with the size & scale of Nike, it seems like a no-brainer.

Why?

Because as CEO John Donahoe has said:

“The accelerated consumer shift toward digital is here to stay”

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