Nike Inc. managers said Tuesday they will add 100 new company stores worldwide over the next three years as part of a plan for the world's largest athletic shoe and clothing manufacturer to reach $23 billion in sales by 2011.
Nike Chief Executive Mark Parker said the strategy is to boost the market for both the company and its retail partners with a more personalized approach to their individual customers.
"We've got good relationships with our wholesale accounts," Parker said in an interview with The Associated Press. "And the good news is they're quite supportive of Nike's efforts to lead."
Sara Hasan, an analyst with McAdams Wright Ragen in Seattle, said the move was needed.
"Nike doesn't really have a choice," Hasan said about its decision to open the retail stores. The stores not only can help showcase Nike products, but they will also show retailers "how it's done."
Parker told an annual meeting of Nike analysts and major institutional investors the strategy is part of a new emphasis on defining consumer needs by dividing the brand into six broad categories: soccer, basketball, running, men's training, women's fitness, and sports culture.
The company had previously divided the brand into three components: footwear, apparel and equipment.
"We're fundamentally changing the way we organize the company," Parker said, emphasizing it is a growth strategy and no cutbacks are planned.
Nike, which had sales of $15 billion in 2006, hopes to tap into more of the individual needs of its customers through its stores, retailers and the Internet.
"Consumers have never held as much power as they do today," Parker said. "And clearly the power has shifted to consumers."
Nike Brand President Charlie Denson said the shift is reflected in the way the company looks at its consumer profiles. It used to consider 18- and 22-year-olds as part of the same demographic target, but now they're treated as separate and different individual markets in terms of age and their interests, the AP reports.
Due to planned retail investment, Nike expects capital spending to increase to $475 million per year within the next few years, Chief Financial Officer Don Blair said.
Growth may also come from acquisitions and emerging markets. China is eventually expected to become Nike's second-largest market behind the United States with potential sales of $1 billion and India has seen 40 percent growth within the last year through Nike's efforts in cricket, the company said.
Executives cited the recent success among runners and music fans of Nike+, shoes that tell the wearer how far they have run via Apple Inc.'s iPod, as an example of innovation that drives market expansion.
In August, Nike announced it segmented its business into six categories -- running, men's training, basketball, soccer, women's fitness and sports culture -- to better focus on customers' specific needs, Reuters reports.
But probably Nike's boldest bet is on the consumer. In the eyes of Parker, this new and evolving digitally driven consumer is reshaping the retailing landscape. The power is now in the consumer's hands, and Parker believes Nike and other consumer brand companies need to adjust to the new market dynamics. "Consumers have never held as much power as they do today," Parker said. "And clearly the power has shifted to consumers."
Nike's Denson said this fundamental shift can be captured in the way the company studies its consumer profiles. In the past, managers used to consider 18- and 22-year-olds as part of the same demographic target. Now he says they are treated as separate and distinct markets when it comes to age, interests, and tastes. "We spent the last 30 years trying to bundle things, and now it's almost the reverse and we have to unbundle things," Denson said, explaining Nike's new efforts to tailor products to individual consumers.
Despite these fundamental changes in how Nike approaches its customers and its reshaped management structure, some things never change. Nike remains its audacious self and competitive juices still run strong. It still has goals to dominate markets where it is not already No. 1, and it's redoubling efforts to unseat rival Adidas as the world's top supplier of soccer shoes and apparel.
Its recent bid to sponsor the German national team is part of its 2010 goal to "dominant the football brand," said Nike marketing vice-president Trevor Edwards. "We believe it's time to create separation. This is not a game of chicken." Some things never change, businessweek.com reports.
Prepared by Alexander Timoshik
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