Nike's DTC shift, customer loyalty and the path to growth
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
A while ago I talked with a very experienced physical-retail boss about Nike's DTC (direct-to-consumer) policy and the strategic logic behind it.
Background: Nike's DTC shift and how the market reacted
From 2020, Nike pushed hard into DTC. It ended its relationships with many wholesale partners and concentrated its resources on its own website, e-commerce platforms and brand stores. The logic was that DTC would let Nike serve customers at higher margins. The strategy worked in the short term during the pandemic, but as the market returned to normal, the channel cuts exposed clear problems:
1. Fewer touchpoints, weaker brand penetration
Many customers were used to meeting the brand in familiar retailer stores. Cutting wholesale partners pushed them toward competing brands and further weakened Nike's coverage in its core markets.
2. Overestimating customer loyalty
Nike leaned too heavily on brand power and overlooked customers' real buying motives: price, convenience, shopping habits. However strong a brand is, it can't fully control what customers choose.
3. A blind spot in leadership
A leadership team from a finance background relied too much on data models and overlooked the nature of the industry and the complexity of customer psychology. That kind of short-term profit focus can come at the cost of long-term brand value.
Nike's share price has fallen 25.61% this year, clearly the market's response to its strategic mistakes.
The veteran's view: what is the right path?
On Nike's DTC problem, he offered a few very thought-provoking points:
1. Change should be gradual, not all at once
He said DTC itself isn't wrong. The problem is that Nike "cut too fast". Wholesale channels aren't just places to sell; they are important touchpoints for promoting the brand, and Nike shouldn't have abandoned them entirely. The right way is to transition step by step, giving customers and partners time to adjust, rather than betting everything on DTC.
2. Growth comes from penetration, not loyalty
"Growth shouldn't come from LTV (lifetime value) or loyalty. It comes from penetration."
He gave SPEED99 and MR.DIY as examples: their growth came from market penetration, not from relying on so-called loyal customers. Brands easily overestimate customer loyalty, but in reality most customers choose based on the situation and their needs, not a sense of belonging to a brand.
3. Founders can't be replaced
He stressed how important founders are. He doesn't believe a company can keep growing once the founder is gone. Founders shape a company's culture and long-term direction deeply, while companies led by fund managers or professional managers tend to focus only on short-term numbers. Nike's problem is that when it decided to give up the in-store experience, it had already lost the trust of many customers. Experience is expensive, but it is an important way for customers to connect with a brand.
Balancing growth
Growth isn't a one-off burst. It is long-term accumulation. Customer loyalty isn't what drives growth. It is the result of market penetration.
Understanding customers' habits and the situations they shop in matters a great deal. By cutting wholesale, Nike seemed to lift its margins, but customers lost the familiar places they shopped and moved to other brands such as Hoka and On. Brands can't rely on data alone; they need to understand how customer behaviour and shopping scenarios are changing.
The key to brand growth isn't only making good products, but finding the most effective way to reach people. A diverse, flexible set of channels is the foundation of reaching customers, and shouldn't be cut back too far.
Founders are the core of long-term growth
The cultural identity, market sense and long-term vision a founder brings are hard for professional managers to replace. While chasing short-term profit, a company needs to keep a founder's long-term way of thinking.