Are We Running Today?
Looking down, you see the Nike+ Run Club app logo on the face of your Apple Watch, followed by a guilt-inducing reminder: 3 days, no runs . . . Are we running today? Wearable fitness trackers and mobile fitness applications are nothing new. Yet this watch is different: the integration of the Nike+ Run Club app with the latest Apple Watch represents a unique partnership between Nike and Apple, two of the most iconic brands in the world. For NIKE, Inc. (“Nike,” or “the Company”), however, it represents something more – the Company’s continued push into digital.
Started in 1964 by Phil Knight and legendary track coach Bill Bowerman, Nike today is one of the world’s most recognizable companies. Although sales through third-party vendors continue to comprise the majority of the Company’s revenues, Nike has, in recent years, made a concerted effort to expand its direct-to-consumer (“DTC”) reach, and digital is an important piece of the Company’s DTC growth goals. Indeed, for the last three fiscal years (2014-2016), Nike’s DTC revenues have grown nearly 20% each year, with digital growing at nearly a 50% clip. (By comparison, Nike as a whole experienced 5%-10% revenue growth over the same period.) Digital revenues now represent 22% of Nike’s DTC revenues and have grown by nearly $1 billion since 2014 . Figure A shows the three-year trend:
Nike’s recent structural changes further convey its emphasis on digital. In February 2016, the Company created a new executive position (Chief Digital Officer) solely dedicated to the growth and development of digital . In addition, the Company launched a digital studio in New York City in August 2016 to house a team of talented tech entrepreneurs “focused on pioneering engaging consumer experiences across the Nike Digital portfolio” .
Nike has also sought to integrate digital into physical stores. For instance, the Nike+ Run Club app advertises group runs (led by Nike pacers and coaches) that begin and end at Nike stores. In addition, the new Nike Soho store in New York City is, what the Company calls, “a seamless link between Nike’s digital and physical platforms” due to an array of immersive digital trials. Store visitors can, for instance, try out basketball shoes on a basketball court surrounded by images of iconic New York basketball courts and test running shoes on treadmills that offer real-time, on-screen feedback .
The new Nike+ mobile app takes the Company’s digital relationship with the consumer one step further. Darren Heitner of Forbes describes the app as “much more than another shoe and apparel company app designed to track performance,” pointing out that “this stand-alone app provides the user with a feed of stories tailed based on inputs of interests, the ability to connect with an expert for training tips, and most importantly a store with highlighted products that makes it easy for a consumer to buy straight from Nike” . Indeed, after installing the app, a user is prompted to enter information about his/her preferences – for instance, whether to follow categories like running, basketball, training, and/or soccer – and provide a shoe size. From there, the user is fed product and training recommendations, and he/she can make purchases directly from the app. If the user wishes, he/she can even place orders for pickup at a Nike store.
The Company’s digital efforts have not all been rousing successes, however. Many may remember the since-discontinued Nike FuelBand fitness tracker. While not exactly a success story in and of itself, many in the wearable technology industry believe it was a product that catapulted wearable fitness technology to the mainstream. For instance, Chris Smith from Wearable, a site dedicated to the wearable technology industry, argues that despite the product’s limitations, “[the wristband’s] importance as a transformative product can’t be understated” because it was “the first high-profile marriage of consumer tech and fitness [in what’s] now a multi-billion-dollar industry” .
As it moves forward, Nike needs to focus on differentiation and further digital innovation because, in many respects, competitors face a low barrier to entry to do what Nike has done in the digital space. For example, New Balance recently partnered with fitness app Strava; when New Balance’s MyNB app is linked to Strava, the resulting app operates very similarly to the Nike+ app – just with New Balance products . One potential way to drive innovation could be to focus on new digital product offerings that encompass a greater variety of sports and activities. Although products for multiple sports appear for purchase in the Nike+ app, the focus of Nike’s other apps – notably, the Nike+ Run Club and Nike+ Training Club apps – is predominantly on general fitness and running. Adding skill-based training regimens for sports like basketball and soccer to the Nike+ Training Club app could be a way to appeal to more consumers.
[Word Count: 796 without citations or figures]
 NIKE, Inc., 2016 Annual Report, p. 76
 Ibid., p. 76
 NIKE, Inc., “Company News,” http://news.nike.com/news/names-adam-sussman-as-chief-digital-officer, accessed November 2016.
 NIKE, Inc., “Company News,” http://news.nike.com/news/nike-digital-studio-2016, accessed November 2016.
 Darren Heitner, “Just Do Digital: Nike’s Fundamental Shift to Direct-to-Consumer.” Forbes, August 2, 2016, http://www.forbes.com/sites/darrenheitner/2016/08/02/just-do-digital-nikes-fundamental-shift-to-direct-to-consumer/#3a58edf3707a, accessed November 2016.
 Chris Smith, “Nike FuelBand: The Rise and Fall of the Wearable that Started It All,” February 22, 2016, http://www.wareable.com/nike/not-so-happy-birthday-nike-fuelband-2351, accessed November 2016.
Cover photo credit:
NIKE, Inc., “Product News,” http://news.nike.com/news/nike-plus, accessed November 2016.