Storm Uru

The tech disrupters: How 3D printing shoes has transformed the outlook for Nike

Storm Uru

In the first of a of a new series from the Liontrust Global Equity Team looking at tech disrupters, Global Dividend manager Storm Uru looks at sport giant Nike, how it’s embracing technological disruption and why your next pair of trainers may be 3D printed based on the latest fashion in Paris.

Nike

Technological disruption is ripping industries apart and creating all sorts of issues for big business. Established players now have to deal with well-funded challengers who are intent on dismantling the status quo, enabled by new technology. It’s not all bad news for incumbents, however; across our investment universe companies are responding by pivoting their business model and making innovation a key focus. Nike is one such company intent on convergence with leading technology companies. Traditionally a wholesale company, Nike is using digital innovation to not only sell direct to the consumer, giving it greater pricing power, but is also using unique insights available from tech to redefine the concept of supply chain optimisation.

Nike’s focus on digital transformation has opened numerous opportunities but there are two key characteristics we feel are key.

  1. In the past, traditional retailers made purchasing decisions annually in the hope it could accurately forecast consumers’ tastes and purchasing behaviour. Now, thanks to digital innovation, Nike can adjust its inventory management real-time, based on demand metrics enabling management to re-allocate resources efficiently by flexing its value chain. This redefined supply chain optimisation means Nike is not left with a hoard of unsold and unpopular products at the end of the season, enabling the company to reduce the amount of money needed to expand its business.

  2. Switching to a direct-to-consumer model enables management to manage the brand’s distribution more effectively. Nike adjusts designs in real-time by taking the intel of which of its products are faring well in fashion capital of the world Paris, sending this information direct to Nike’s Portland head office where they 3D print new shoes. This technology allows the company to redesign products and get them to the market within two weeks. We expect this breakthrough in the product life cycle to generate pricing power and stoke demand for new sneakers.


This transition is not without its risks, particularly in how the direct-to-consumer model endangers its relationships with retailers, however we expect this to be a transitory issue due to Nike’s brand power and ability to co-exist in a mutually beneficial relationship.

What does this business model transition mean in the real world? Nike intends to grow its direct-to-consumer business from $6.6bn in 2015 to $16bn in 2020 – which it is well on track to achieve. This is only the beginning; for companies focused on digital transformation one of the keys to success is their management of execution capabilities. With the steady hands of John Donahoe and Mark Parker at the helm, with a focus on brand power and operational efficiency we expect the Nike team to deliver.

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Wednesday, October 30, 2019, 11:19 AM