When FN sat down with Heidi O’Neill last November, the then-president of Nike Direct was on the offense.
Nike Inc. was capping off a stellar year — having opened digitally enabled (see: tricked out) stores in Tokyo and Long Beach and posting sales growth of 7% to $39.1 billion — however, O’Neill was laser-focused on positioning the brand for a rapidly evolving future.
“Nike has an amazing playbook that has lasted decades and that playbook need not go away. But it needs to merge with a new playbook on serving faster, more responsibly, through digital,” she told FN for a December 2019 cover story. “[We’re integrating] people who think about stores first with people who think about digital first, and there’s magic that happens when we do that. Consumers don’t live in channels and silos.”
Perhaps no one could have predicted the upheaval the coronavirus pandemic would unleash on the world in the months that followed. But, suffice it to say, O’Neill, who was elevated to president of Consumer and Marketplace in April, and Nike leaders — including CEO John Donahoe — are reaping the rewards of non-complacency and forward thinking.
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As much of its peers are forced to shutter stores and resort to mass layoffs due to tumbling sales, for the three months ended Aug. 31, Nike logged diluted earnings per share of 95 cents — up 10% from the prior year and trouncing analysts’ estimates of earnings of 47 cents per share. Revenues, although down 1%, amounted to $10.6 billion, compared with Wall Street’s forecasts of $9.14 billion. It also saw an 82% increase in sales via its digital channels.
But even as O’Neill acknowledges that the brand’s Consumer Direct Offense strategy, unveiled in 2017, positioned it to survive and thrive in such a time as this, she says it, too, had to create a new line of defense.
“We created a COVID playbook [informed by our position] as a global brand and seeing the different phases of how COVID impacts consumers’ lives and retail,” explained O’Neill. “The playbook starts with the react phase — moving from a defense to an offense — and then finally a recovery phase.”
The react phase took shape on the public stage in March as the COVID-19 health crisis started taking hold in the United States. As gyms shuttered across the country and sports leagues were suspended worldwide, Nike sent a new message to fans: Stay inside.
“If you ever dreamed of playing for millions around the world, now is your chance. Play inside, play for the world,” the Beaverton, Ore.-based company posted across its social media channels in March. The Swoosh also dropped the subscription fee for its NTC Premium app that offers streaming workout videos, training programs and expert tips from trainers.
“We immediately listened to the voice of our consumers and athletes,” said O’Neill. “And we knew that what they needed right now is to be healthier, think about mental health and to be working out from home.”
From a broader strategy standpoint, said O’Neill, the brand accelerated its emphasis on digital transformation — accomplishing in months what it planned to do over the course of several years. (For example, the company several years ago set a digital penetration target of 33% by 2023; it hit that goal this year.)
“Digital is the biggest theme across everything we’re doing,” she said. “And we’ve scaled convenience from a live operations perspective [accelerating] digital services such as buy online, pick up in-store and reserve and ship from store.”
BOPIS, for example, has grown 800% in the past few months, and it’s an area the brand will continue to scale and optimize — viewing the current change in consumer patterns as long-term versus a temporary shift due to COVID.
“We see consumer expectations and behaviors as being fundamentally shifted,” she said, pointing to the rapid adoption of digital services and stronger demands for convenience.
— Nike (@Nike) March 21, 2020
So even as the brand moves through the recovery phase of its COVID playbook — a section largely informed by its China business that has returned to growth — O’Neill is leading with the assumption that key tenets of its pandemic-induced strategy will stay in place for the long haul.
“For one, if we see a COVID-19 spike, we know the plays to drive,” she explained. “[Secondly,] some of what’s in the playbook has made us better for the long run: We built new muscle and we’ve had some more reps in some areas, which will carry us through.”
In June, in tandem with the release of its fourth-quarter results, Nike announced that it had entered the next phase of its strategy: Consumer Direct Acceleration, which is focused on increased investments in e-commerce and technology, as well as a more simplified “consumer construct” of men’s, women’s and kids’ businesses. (The changes, it noted in an updated filing with the state of Oregon this month, would also result in the layoffs of 700 or so employees at its corporate headquarters.)
Now, even as COVID-19 cases tick up across the U.S. and angst over renewed lockdowns loom large, O’Neill said the brand is doubling down on its plans to invest in tech — even if making large-scale investments amid macroeconomic uncertainty goes against the grain.
“What sets us apart is that convention might tell you right now to not invest, to kind of settle into business norms,” she said. “Honestly, we’re doing quite the opposite: We’re building new journeys with our consumers digitally around some of our biggest growth opportunities — like running and women’s apparel — and we’re going to continue to scale our logistics.”
What’s more, heading into a holiday season unlike any other, the brand is continuing to grow its brick-and-mortar presence — it’s opening two digitally enabled stores in New York alone in the next two weeks — and tapping into new momentum around live streaming, a consumer favorite in China.
“We just had Alibaba’s 11.11 [or Singles Day] and we did 20 live streams — and one of them had over 20 million views,” O’Neill noted, adding that the brand is building live streaming into its ecosystem for the foreseeable future.
As O’Neill looks ahead, where her leadership is concerned, that’s evolving, too.
“I’d be failing my team and myself if it hadn’t [changed]: We had to learn and grow over the course of COVID,” she said, noting her team has continuously reminded itself to focus on the bigger picture, which at Nike, translates to: staying connected to the consumer.
But even with all that ambition, she’s also learned to “read the room” and sometimes the writing on the wall is to breathe and slowdown.
“It was just in the last week or two, I was feeling [the Zoom fatigue] from the team as we were needing to gear up for the holidays,” said O’Neill. “So yesterday, I sent out a note to my team and I took meetings off of our calendar to make sure that they had time off from Zoom for rest and recovery.”
She added, “I think it’s something we all have to look out for: We need to edit from our strategy what is important because we’re all under stress and pressure and we don’t know what’s happening in everyone’s home or in their personal lives. We’ve got to really take care of our team.”