Multi-brand retailers have weathered a sea of challenges in recent years. Among the biggest? Rising competition from brands’ direct-to-consumer businesses. The pandemic has only intensified this trend, as shuttered stores and cancelled orders have pushed even majority-wholesale brands to focus more on selling straight to customers online, funneling dollars away from department stores and specialty boutiques.
No brand has been more active or intentional in reducing its distribution than Nike, which has been culling its list of retail partners since 2017 as part of a holistic direct-to-consumer strategy.
Last month, it was revealed that the sportswear giant would sever ties with a list of retailers including DSW, Urban Outfitters, and Shoe Show — together representing nearly 3,000 stores across the US. In August, Williams Trading analyst Sam Poser also broke the news in a client note that the brand would stop selling to Belk, Dillard’s, Zappos, and Fred Meyer, along with several other mid-size chains.
Nike’s competition appears to be following suit: Under Armour announced in October that it plans to trim its North American distribution by 2,000 to 3,000 doors, while Adidas hopes to increase DTC’s share of its total revenues to 50% by 2025 from 40% in 2020.
Beyond the sneaker world, brands like Crocs are now whittling down their retailer networks. The rubber clog-maker, which FN named its 2020 Brand of the Year, sent a letter to an unknown number of retailers earlier this month informing them that it would end their sales agreements on April 30. With demand for its products soaring, the company has more power than ever to decide where and how it wants to be sold.
“They’re in a position where the brand is hot,” said Steve Marotta, managing director of equity research at C.L. King & Associates. “Any wholesaler that it’s in right now is going to be ordering more now than they ordered last spring. And they’re going to be ordering more for fall than they ordered for last fall.”
With this shift toward DTC continuing to play out across the industry, it’s a good time for multi-brand retailers to take a look at their vendor partnerships and figure out what’s working and what isn’t. Here are four ways retailers can be an indispensable partner to top-selling brands:
1. Be a brand in your own right
Retailers shouldn’t rely on the product they carry to be the main factor that sets them apart from their competitors, said Poser. If they do, then customers will simply shop elsewhere if the item they’re looking for isn’t available.
“If you can make your brand mean something, then that makes the product you carry stronger, because [customers are] trusting you as the curator,” he said. “Retailers that are building that trust with their consumers, those are the retailers that Nike or any other brand should be really deeply committed to.”
Differentiation isn’t easy, but it’s one of the few ways a retailer can stand out that doesn’t rely on pulling in eye-popping revenues every quarter. If an account relationship is brand-building, brands are more likely to stick around even if it isn’t among their biggest in terms of volume.
The reverse can also be true: while a retailer like Amazon may rake in sales, brands like Birkenstock have been very vocal about cutting ties with it due to its drag on brand equity. Amazon-owned Zappos was nixed from Nike’s lineup this year in part, experts say, because the qualities that once made it unique — first-class customer service and a massive inventory selection — aren’t enough to differentiate it in today’s marketplace.
2. Make presentation a priority
At a J.P. Morgan conference earlier this month, Academy Sports CEO Ken Hicks reflected on a period in 2017 when Nike nearly broke off its longstanding relationship with the retailer because it was dissatisfied with how its products were presented in Academy’s stores.
“It was not a good situation, and we worked very hard with Nike to improve their presentation, to improve what we sold, to make sure that we stayed within their guidelines, and to build up the things that were important to them like sports, female customers and getting people started in athletics,” said Hicks, the former Foot Locker chief.
The strategy paid off, he said. “When they came back, they were amazed when they saw what the stores looked like and how we were treating them. And it significantly changed how they treated us.”
Beyond everyday displays, presentation can include unique exhibitions and pop-ups that draw fans into stores and celebrate brands’ hero products.
European sneaker retailer Snipes opened in Brooklyn’s Crown Heights neighborhood in January with a month-long Dunk Museum celebrating the 35th anniversary of the legendary style.
“We pitched it to Nike and they loved it,” Adam Herstig, VP of marketing for Snipes, told FN. “We brought our version of modern art to the neighborhood.”
Significant initiatives are important and can build trust and strong relationships with the big brands, said Neil Saunders, managing director of GlobalData Retail. “However, not every retailer is going to go this far or invest this much. What they do need to do, however, is show a company like Nike that they understand the importance of elevating the brand and creating an experience for the consumer. The big brands are more likely to partner with those retailers who show respect and love for their labels.”
3. Share data — but proceed with caution
Nike has made no secret of the fact that it wants to be looped in on its retailers’ customer data. On the company’s March earnings call, CEO John Donahoe said its members “expect us to know who they are whether they are in our stores or our partner stores.”
Therefore, he continued, “We’ll work with a smaller number of strategic partners… that want to and are willing to share membership data so that we can, together, deliver a very seamless experience, a very personalized experience for our consumers.”
One such initiative appears to be with Foot Locker, which announced a pilot drop-shipping program with the brand earlier this year. As Poser outlined in a client note, the program stands to benefit all parties — customers will see fewer out-of-stocks, Foot Locker will generate more revenue and potentially higher margins, and Nike will sell more product and better satisfy consumer demand — but it does present possible concerns for Foot Locker down the road if Nike uses the customer data to drive sales to its own DTC channels.
While data sharing can be a win for both brands and retailers if it unlocks insights and drives sales, says Saunders, “Retailers need to be sure that they are in a long-term partnership and are not just sharing data that the brands can then use to cut them out and sell direct to consumers — which has always been a fear of retailers.”
4. Recognize that offline strength may no longer be enough
While a few years ago it might have been a strong selling point for a retailer to have access to a customer base that typically couldn’t be accessed online (say, older shoppers or those in rural communities), many of those consumers have become far more digitally literate throughout the pandemic. According to data from The NPD Group, consumers aged 65 and older now make up the fastest-growing segment of online shoppers, spending 49% more year-over-year during the period from January through October 2020.
“No retailer can afford to count on ‘less tech savvy’ consumers,” said Matt Powell, The NPD Group’s senior sports industry advisor.
“With more people than ever shopping online, using this argument to persuade the big brands to stick with traditional retailers has become less compelling,” added Saunders.