Nike is one of the most recognizable brands in the world, known primarily for its athletic shoes and apparel. With its slogan “Just Do It” and endorsements from top athletes, Nike has established itself as a leader in the competitive sportswear and footwear market.
But is Nike strictly a business-to-consumer (B2C) company selling to individual customers? Or does it also operate as a business-to-business (B2B) company selling to other businesses? The answer is not completely straightforward. While Nike engages heavily in B2C sales, it does have some B2B elements as well.
Nike’s Primary B2C Approach
Nike was founded in 1964 as Blue Ribbon Sports, selling athletic shoes out of the back of a car. It officially became Nike, Inc. in 1971. From the beginning, Nike has focused on selling its products directly to individual consumers.
Nike’s shoes, apparel, and accessories are designed for everyday athletes and weekend warriors. Walk into any Nike store or go to Nike.com and you’ll find running shoes, basketball sneakers, dri-fit tops and shorts, and other gear targeted at individual recreational and amateur athletes. Nike sponsors top professional athletes like Michael Jordan, LeBron James, and Serena Williams to market these products to consumers who want to perform like the pros.
This demonstrates that the vast majority of Nike’s business is B2C. Nike sells most of its products directly through its own retail stores, website, and mobile apps. It also distributes through third-party retail chains like Foot Locker and Dick’s Sporting Goods. But the end consumer walking into these stores or going online to make a purchase is an individual customer, not another business.
Key Takeaways
- Nike primarily sells athletic shoes, apparel, and accessories directly to individual consumers through its own channels and third-party retail.
- The target customer is the everyday athlete or weekend warrior, not other businesses.
- This demonstrates Nike’s strong B2C approach.
Elements of B2B in Nike’s Operations
While Nike does business overwhelmingly through B2C channels, it does have some B2B elements as well. These include:
Selling to Colleges and Universities
Nike has contracts with major NCAA athletic programs to be the official supplier of shoes, apparel, and gear. This includes big programs like the University of Oregon and University of Michigan. While individual student-athletes and coaches may get Nike products for free, the schools themselves pay for and receive bulk team orders of products. Nike then gets marketing and branding exposure through the school teams wearing its recognizable swoosh logo.
Licensing and Sponsorship Deals
Nike enters into major sponsorship and licensing deals to get its swoosh logo featured in professional sports leagues and on individual athletes. For example, Nike pays a licensing fee to be the official uniform and apparel provider of the NBA. It has a sponsorship deal with NFL quarterback Patrick Mahomes guaranteeing him millions in endorsement dollars to wear Nike gear and promote its products.
Selling to Retail Chains
While retail chains like Foot Locker primarily sell to individual consumers, Nike does business directly with the companies themselves. Nike sells its products in bulk to the chains, which then market and sell them in their retail locations.
Key Takeaways
- Nike engages in some B2B sales such as selling products in bulk to major universities and professional sports leagues.
- It enters licensing and sponsorship deals with brands and athletes to promote Nike gear.
- Nike sells its products wholesale to retail chains, which then sell to individual consumers.
These examples demonstrate that while Nike does participate in some B2B transactions, the consumer-facing B2C side accounts for the lion’s share of its business.
Revenue Breakdown by Operating Segments
Looking at Nike’s revenues by operating segment further illustrates the weighting towards B2C sales vs. B2B sales:
Nike Brand
In FY2020, Nike brand revenues were $37.4 billion, making up approximately 90% of total Nike, Inc. revenues. The Nike brand segment sells footwear, apparel, equipment, and accessories primarily through wholesale customers and Nike-owned retail stores and websites. This targets individual consumer athletes.
Converse Brand
The Converse brand generated $1.9 billion in FY2020 revenues, mainly from selling rubber shoes and apparel through wholesale channels and Converse retail stores. Again, the target market here is consumers buying Converse Chuck Taylor shoes and Jack Purcell sneakers for everyday wear.
Nike Direct
Nike Direct revenues were $11.8 billion in FY2020. This represents sales to individual consumers through Nike-owned retail stores, websites, and mobile apps. As online sales become a bigger portion of Nike’s distribution, this direct-to-consumer channel gives Nike valuable consumer data and feedback to drive marketing and product development.
| Operating Segment | FY2020 Revenues | % of Total Revenues |
|---|---|---|
| Nike Brand | $37.4 billion | 90% |
| Converse Brand | $1.9 billion | 5% |
| Nike Direct | $11.8 billion | 28% |
Key Takeaway
- The vast majority of Nike’s revenues come from selling branded athletic footwear, apparel, and accessories to individual consumer athletes rather than other businesses.
This breakdown confirms that Nike operates overwhelmingly as a B2C business. The core of its operations involves marketing and selling Nike-branded products directly to customers.
Strategic Partnerships a Small Part of the Business
Nike has forged partnerships over the years to boost innovation, gain expertise, and expand its business. However, these partnerships only make up a minor portion of Nike’s overall operations. Key partnerships include:
Apple Partnership
Nike partnered with Apple in 2006 to launch Nike+ products tracked by iPods and iPhones. This allowed Nike to enter the digital health and fitness tracking space. The Nike Run Club and Training Club apps have expanded this partnership. However, Nike does not break out digital revenues specifically, indicating it is currently a small part of the business.
Virgin Galactic Partnership
In 2022, Nike announced a partnership with aerospace company Virgin Galactic to explore innovations in sustainable materials and footwear advancements. While an intriguing long-term development project, this is not currently generating revenues.
Roblox Partnership
Nike acquired virtual sneaker company RTFKT in 2021 and partnered with gaming platform Roblox to market digital branded sneakers for avatars. However, Nike’s core revenue generator continues to be tangible, physical products.
Key Takeaway
- Strategic partnerships represent potential growth areas for Nike but currently make up a minor portion of sales.
- The core of Nike’s revenues come from in-person retail and wholesale channels selling physical products.
So while Nike is open to innovative opportunities, its established business model still focuses overwhelmingly on marketing real sneakers and apparel to individual consumers.
Nike’s Marketing Targets Consumers, Not Businesses
Nike spends billions on marketing each year, but its campaigns are aimed squarely at individual consumers rather than business customers. For example:
- Nike commercials feature top athletes and everyday people pushing their limits in sport. The tagline “Just Do It” inspires consumers to buy Nike gear to raise their own athletic performance.
- Nike’s branding focuses on attributes like motivation, perseverance, confidence, and determination. These resonate with individual retail consumers.
- Nike sponsors sports stars like LeBron James and Serena Williams as aspirational figures for consumers to admire. Consumers then want to wear the same Nike gear as their heroes.
- Nike maintains an online community presence with 26 million Twitter followers and over 150 million Instagram followers. This allows Nike to engage directly with retail customers.
Nike’s marketing is targeted at the end consumer, not wholesalers or other businesses in the supply chain. This further demonstrates that Nike operates primarily through B2C channels.
Key Takeaway
- Nike’s massive marketing budget is dedicated to campaigns targeting individual consumers, not other businesses.
Nike’s Product Development Focuses on Consumers
In addition to marketing, Nike’s entire product development process centers on catering to the end consumer:
- Nike analyzes consumer trends, preferences, and feedback to drive shoe and apparel design. For example, Nike designs shoes for specific sports and incorporates the latest innovations like Flyknit material and Nike Air cushioning based on consumer demand.
- Nike caters to individual consumers with a wide portfolio of branded footwear models like Air Jordan, Air Force 1, Air Max, and Air Zoom. It releases new designs and variations frequently to align with consumer tastes.
- Nike allows customization and personalization of shoes on Nike.com and in its Nike stores. Consumers can choose colors and materials to design their own unique pair.
- Nike has shoes and apparel tailored specifically for men, women, and children. It offers options across price points from value-priced basics to premium offerings for sneaker enthusiasts.
Nike’s entire product engine – from design to distribution – aims squarely at satisfying the consumer. It does not design bulk commodity products for business buyers. This further reinforces Nike’s strategic focus as a B2C company.
Key Takeaway
- Nike’s product portfolio is designed from the ground up based on consumer insights, not business buyer requirements.
Nike’s Organizational Structure Aligns to B2C
Looking at Nike’s organizational structure also provides clues that it operates as a business-to-consumer company:
- Nike has major divisions for regional sales covering North America, Europe/Middle East/Africa (EMEA), Greater China, and Asia Pacific/Latin America. This allows Nike to tailor products and marketing to different consumer demographics and local tastes.
- Nike has departments for marketing, digital commerce, retail, and sales. These functions all feed into serving the end consumer experience.
- Nike does not appear to have major organizational units devoted to business procurement, contract management, or wholesale distribution which would indicate more of a B2B focus.
While we cannot see the full details of Nike’s organization, the high-level divisions suggest that it is structured to engage consumers in target markets, rather than to serve business customers.
Key Takeaway
- The design of Nike’s organizational structure reinforces B2C priorities rather than B2B functions.
Conclusion
In summary, while Nike does sell products to retailers, sports leagues, and other businesses, its core business model, operations, marketing, and organizational focus are clearly aligned to serve end consumers. Nike’s revenues are driven overwhelmingly by B2C channels rather than B2B channels. This makes Nike predominantly a business-to-consumer company. Any B2B sales serve to facilitate getting Nike’s products ultimately to individual consumer athletes. But the vast majority of Nike’s business involves marketing, selling, and distributing branded athletic footwear, apparel, and accessories directly to customers. So while Nike participates selectively in B2B opportunities, it is primarily built to excel as a B2C brand.
