Nike to Drastically Cut Number of Retail Partners

Nike CEO Mark Parker said at the annual Investor's Day summit that the company will be favoring a small number of retailers in which its products will be sold. The company currently has 30,000 retail partners, but plans to favor a select few "differentiated retailers" like Nordstrom and Foot Locker — about 40 in all. These differentiated retailers will get special attention from Nike, and are willing to have a special branded space for Nike product as well as dedicated salespeople for Nike product. Nike's plan is to make this shift over the next five years. The rest of Nike's retailers won't be shed immediately. Still, Nike clearly expects some of its retailers to drop out or go out of business.

Total Retail's Take: This news makes sense given Nike's recent commitment to growing its direct-to-consumer (DTC) business. Interestingly, Nike will also be shifting more of its sales online, and a large part of that could come from the athletic brand's recent decision to begin selling its products on Amazon.com. Nike's goal is to generate 30 percent of its revenue from e-commerce by 2022 — up from 15 percent today. Actually, to me that seems like a low threshold. It wouldn't surprise me if in five years Nike was seeing more than half of its total sales coming from e-commerce, particularly if the pilot program with Amazon proves successful. Nike has joined a growing number of retailers that have chosen to partner with Amazon (e.g., Kohl's, Best Buy, Sears) rather than go head-to-head against it. Wholesale is out, DTC is in for Nike.