PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
When Nike Inc. decided to add an e-commerce layer to its Web site-to sell the shoes and clothes it promotes online-staffers didn’t have much direct-to-consumer retail experience to go on: no catalog operation, no order-fulfillment program. But the executive who’s overseeing the launch, Mary Kate Buckley, is a pro at figuring out how to implement retail operations under the most challenging circumstances.
“I am excited in unchartered territory,” says Buckley, who recently celebrated her one-year anniversary as director of new business ventures for the Beaverton, Ore.-based manufacturer. “I have been in the position where I am in the dark and have to figure out just what approach to take to solve all of the problems.”
The world’s leading maker of athletic shoes (fiscal 1998 revenues: $9.6 billion) is one of the biggest brand-name manufacturers yet to tiptoe into e-commerce. In February, Nike initiated the first phase of a four-part Internet sales plan by adding online ordering and payment functions to Nike.com, which until then had been an informational Web site. To test the waters, Nike began selling its innovative Alpha line of shoes, clothes and accessories online to U.S. customers.
In Phase 2, the company will roll out a full Internet store of Nike products sometime this summer, and in the final phase, Nike will sell its goods online worldwide. “Nike is one of the first manufacturers trying to do out and do e-commerce right,” she says. “To me, that’s exciting.”
Information vs. inspiration
But, like the Chicago Bulls in the post-Jordan era, Nike’s future in e-commerce is anything but a sure win. Among the many questions the manufacturer faces is whether selling online will pull business away from traditional retailers that sell its shoes. Nike finds itself competing online against traditional retailers like Foot Locker, and going toe-to-toe with other manufacturers, such as Adidas, that have begun to sell directly to consumers over the Internet.
Nike’s biggest online stumbling block may turn out to be Nike. The manufacturer “doesn’t have an awful lot of experience in retailing in general,” observes Ken Cassar, an analyst with the digital commerce group at Jupiter Communications, a New York-based consulting firm. “Nike doesn’t have any experience with direct-to-consumer fulfillment or with taking orders remotely. It also will be a challenge for any manufacturer to grab a significant portion of the market because people just aren’t used to buying athletic footwear from manufacturers.”
Right now, however, Nike doesn’t expect online sales to run laps around its traditional retail business. As Buckley sees it, the Web site remains more of a communications vehicle than a sales channel-a way to showcase Nike products and connect with consumers. “The very nature of our product is that sizing and fit is important,” she adds. But after concluding that many merchants selling Nike products online weren’t doing much beyond simply slapping up product photos and discounting prices (Nike approves the sale of its products on Web sites it inspects and endorses), company staffers thought they could do it better. “The Web is a perfect environment to bring a lot of depth of product information to consumers,” Buckley says.
“When you think of Nike advertising, there are a lot of inspirational messages,” she adds. “By putting our products on the Web site and really talking about what the technologies are, we are giving consumers what they need to select the right product.”
From Disneyland to Niketown
To make e-commerce work at Nike, Buckley is drawing on her previous experience heading up new business projects for The Walt Disney Co. in Europe and Asia. She created a business model in India for Disney without the benefit of market research or an existing infrastructure. In Japan, Buckley built an electronic catalog and a showroom where retailers could view the entire Disney line from 300 licensed vendors.
Nike’s drive to do things better-to be the best-is what attracted Buckley, who worked for 10 years at Disney prior to assuming her new position. “I had always admired the way Nike managed the brand,” she recalls. “To me, Nike stands for quality. It’s a company that always does something right, so I thought it would be great to help them expand a little bit.”
When Buckley arrived at Nike and began looking at new business proposals, e-commerce quickly floated to the top. To evaluate its potential, Buckley asked a series of questions: Would it enhance the brand value? Would it at some point be profitable? She subsequently presented a strategy to Nike’s management council, winning approval to set up a Web store.
Nike already had an online creative team and a Web master to handle its Internet activities. To initiate the e-commerce venture, Buckley assumed control of the Nike.com group and hired a few key players, including a merchandising coordinator to select which items will be sold online, and a creative director to articulate Nike’s brand message within the brand tone on the site.
The team is leveraging the resources of the entire company for its Web site, working closely with departments such as marketing, Buckley says. “E-commerce will impact every area. We also have decided that we will limit spending to the best of our ability. So we are really scrambling to do things at low cost.”
Early on, Nike staff identified many of the hurdles they would have to overcome to set up an e-commerce business. While the company has a small number of Niketown stores, “we recognized that we are not direct-to-consumer retailers and we didn’t have direct-to-consumer delivery systems,” Buckley says. “We had a lot of work to do.”
As one of its first steps toward e-commerce, Nike hired United Parcel Service to be its distribution partner for the venture. “We weren’t going to invest our money in building distribution systems,” Buckley says. “That’s not core to our business.”