NIKE: PUTTING FUNCTION BEFORE FORM
Byline: Rosemary Feitelberg
NEW YORK — “Nike is not a fashion company.”
Not only did chairman and chief executive officer Phil Knight write those words in the company’s annual report last year, but Nike executives echoed the sentiment at an event here last week.
That’s quite a statement coming from a manufacturer that generated more than $1.5 billion in apparel sales for fiscal 1996 and is projecting $2.5 billion for the fiscal year ending in May.
Held in an auditorium at Chelsea Piers on Manhattan’s West Side, the show had three elements:
Nike executives highlighted the company’s sports-specific apparel.
Images of athletes performing in Nike apparel played on two screens.
Models sprinted across a stage in what looked more like a gym class than a fashion show.
Despite the company’s seemingly anti-fashion attitude, Nike executives acknowledged its ties to fashion.
“Everything at Nike is designed to get down to the individual needs of athletes,” said Liz Dolan, vice president of marketing and communications. “In the fashion business, that’s called couture. At Nike, it’s called engineering work performance.”
Whatever it’s called — it’s working.
For the nine months ended Feb. 28, Nike’s U.S. apparel sales catapulted 82 percent to $1.09 billion from $596.8 million. International apparel sales grew 74.4 percent to $788.2 million from $452 million.
Women’s apparel now accounts for 20 percent of Nike’s total apparel business, but is expected to increase to 40 percent by 2002, said Stephen Gomez, vice president of apparel, during an interview last week.
Asked what he feels might be the greatest misconception about the growth of sports apparel, Gomez said too many people feel it could be just a passing fancy. He and his team, he said, take the women’s business seriously.
And the greatest misconception about Nike?
“A lot of people think all we do is think about making money,” Gomez said. “What we use as a litmus test for the company is, ‘Is the concept in some way making the sports market more innovative and leading us into different areas?’ When you look at some of the things we’re getting into, such as sports equipment, eyewear, timing [equipment] and hockey, I think it is.”
To get firsthand information from female consumers about product, Nike’s designers and merchandisers occasionally work in NikeTown stores. Women are generally more discerning about shopping than men, especially in terms of fit and color, Gomez said, adding, “We certainly want to partner with retailers to focus on women.”
That strategy involves providing more product information to retailers, opening more concept shops and focus areas — parts of a store that, generally through signage, draw attention to the Nike brand — and improving merchandising.
“As a category leader, we want to go to the retail community with a vision. We’re working on partnerships as a way to help stimulate the business,” Gomez said. “In the end, it’s the customer who will decide if sports are important and if she’s going to do something about it.”
To inform retailers about the benefits of its high-performance apparel, Nike executives now spend two days each season presenting the line to key accounts. To convey its message of high-performance to consumers, Nike, of course, is known for its advertising campaigns featuring athletes training and competing. Images from the campaigns are routinely used as point-of-purchase displays.
Concept shops have also been an effective means of conveying the technical message to shoppers, Gomez said. In the past 12 months, the number of Nike concept shops in the U.S. has increased to 350 from 200, and the number of focus areas has increased to 1,000 from 800. Concept shops feature Nike signage and fixturing. They range from 500 to 3,000 square feet, with most at 1,200 square feet. Focus areas consist primarily of linear space with signage.
In the next 12 months, the number of focus areas and concept shops should increase by at least 20 percent, Gomez said.
There are currently 60 Nike merchandisers — compared to 30 two years ago — who visit two stores each week. The number of salespeople has increased slightly, from 100 two years ago to 110. The sales force, however, has been realigned to allow salespeople to spend more time with key accounts.
Lady Foot Locker, The Sports Authority and NikeTowns are the top three areas of distribution, respectively, for Nike women’s apparel, Gomez said.
“In other words, we’re fishing where the fish are,” he said.
At NikeTowns, women’s apparel accounts for 16 percent of the overall apparel and accessories volume, men’s apparel for 46 percent, children’s apparel for 8 percent and T-shirts and accessories for 30 percent. Women make 50 percent of the purchases of men’s apparel, Gomez noted.
Nike is considering opening NikeTowns that feature only women’s products, but no formal plans have been set, said Gomez.
“We don’t know enough yet about the customer. There are not enough retailers focusing on that customer,” he said.
Aside from Lady Foot Locker, there are no “significant” retail outlets exclusively for women athletes, said Gomez who does not expect that to change in the next five years or so.