Nike's changing technology strategy
Why e-commerce is important
1. No middle person. Selling through a retailer means that Nike has to pay a cut of the total sale price to that retailer, diminishing Nike's margin on its gear.
Takeaway: the new app is a good bet
This is not to say that the wearable market isn't a great opportunity, and that the companies still competing in it don't have their own strategies for success. And it's not to say that a mixed wearables and digital focus, such as what Under Armour is employing with its own new shopping app that collects data from its wearables, doesn't have its own advantages.
However, Nike's investment in this new app plays clearly into its new digital strategy that seeks to connect intimately with the consumer and ramp up direct-to-consumer sales of its gear all around the world. Nike's e-commerce sales growth in fiscal 2016 was impressive, and thanks to advancements in Nike's digital infrastructure, such as with this new app, that growth should accelerate going forward. Because of direct-to-consumer sales' positive effect on profit margin, Nike's new digital strategy seems to be a winning one for Nike's bottom line.
Seth McNew owns shares of Nike and Under Armour (A Shares). The Motley Fool owns shares of and recommends Nike and Under Armour (A Shares). The Motley Fool recommends Fitbit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.