With stores temporarily closed at various times throughout the past couple of years, Nike's (NKE -0.40%) business was severely impacted. A year-over-year sales increase of 5% in the fiscal 2022 third quarter (ended Feb. 28) shows that the company is continuing to head in the right direction by posting gains.
But ongoing investments the business has made in recent years to bolster its technological foundation are providing a new lever of growth for the world's top athletic apparel brand. Nike currently has more than 300 million members in its booming ecosystem. That massive figure demonstrates the company's digital prowess.
Nike's budding ecosystem
Nike has a full suite of digital apps, including the flagship Nike mobile app, the SNKRS app, Nike Training Club, and Nike Running Club. While the last two are activity-based, the first two are where customers can shop for the company's products. What's remarkable is that all of these digital apps work together to reinforce and strengthen the company's ecosystem.
For example, last year Nike collaborated with hip-hop artist Megan Thee Stallion to create workout content. Nike members who took these exercise classes might have then received emails with personalized recommendations of apparel that was inspired by the musician.
But it doesn't end there. Blending the digital experience with in-store shopping is a key facet of Nike's Consumer Direct Acceleration strategy. New store formats, like Nike Live, House of Innovation, and Nike Rise, create a smooth and seamless omnichannel offering. While in stores, shoppers can use their Nike app to pull up product information, pick items to try on in a dressing room, and get one-time discounts to use.
Nike CEO John Donahoe came from eBay, so he knows a thing or two about digital commerce. In the most recent quarter, digital sales represented 26% of the Nike Brand business. Management's objective is to get this figure to half of total revenue one day, which would be a boon for profitability because this channel produces higher margins.
Having a robust digital ecosystem is a key differentiator between Nike and its competitors. The massive amount of data the business collects helps to inform product development and marketing initiatives, ultimately driving higher return on investment. And by creating a frictionless and smooth onboarding process, more consumers will sign up for Nike's apps in the future. This further allows the company to develop deep connections with its customers, an invaluable advantage in today's cutthroat retail environment.
For Nike, it's all about the unquestionable power of the brand. As management focuses relentlessly on continuing to integrate technology into the business, thus strengthening the digital ecosystem, Nike will only become more popular among consumers.
Shareholders can expect the global leader in athletic apparel and footwear to maintain its standing at the top of the industry.