Given supply chain restrictions, most online retailers have severely reduced stock of inventory. Adobe notes that digital out-of-stock messages are up 261% from a year ago, reports Jon Markman, editor of Pivotal Point.

With products in short supply, retailers are not cutting prices to attract sellers. Some popular items — like PlayStations, Xboxes and Air Jordan hoodies and sneakers — are even selling at a premium.

New trends are emerging, and some companies are already ahead of the game by taking advantage of them. One of those companies is Nike (NKE).

In the middle of 2021, executives at Nike accelerated a 2017 plan to sell more of its goods direct-to-consumer (DTC). The idea was about taking the middleman out of the transactions with customers for its most coveted goods.

This increases profit margins and gives the Eugene, Oregon-based athletic gear maker more control over product inventory. It also culls the number of undifferentiated resellers. In many ways, executives are reproducing the Apple Store experience, only with high-priced sneakers and branded apparel instead of Macs and iPhones.

Supply chain checks earlier this year by Sam Poser, an analyst at Williams Trading, found that Nike gear is no longer available at Designer Brands (DBI), Urban Outfitters (URBN), Macy’s (M), Big Five Sports (BGFV) and others.

In 2020, Nike stopped working with Dillard’s (DDS), Kroger (KR) and Zappos, an Amazon (AMZN) brand. Through May 2021, only 61% of Nike brand sales originated with channel partners. In 2011, that number was 84%.

More importantly, a 10-Q filing with the Securities and Exchange Commission (SEC) shows that during the same time frame, Nike’s direct sales ballooned from only $2.9 billion to $16.4 billion.

Now, jump back to the present and this year’s Black Friday, Cyber Monday and the recent Digital Economy Index report. Apparel was one of the few categories this year to post a year-over-year gain. The report shows monthly increases for cold weather items like outerwear, fleece jackets and hoodies of 720%, 1090% and 805%, respectively.

Nike is ideally positioned to win a big portion of this increase. In addition to moving towards a DTC business model, executives have been extremely aggressive with the corporate digital transformation strategy. The company has a best-in-class mobile application and a robust e-commerce platform where patrons can buy an array of its products. Best of all, everything is sold at the full retail price.


Nike is a a terrific business. The company had $12.2 billion in sales last quarter, up 16% year over year. Nike Direct sales were $4.7 billion, up 28%. Digital revenues shot up 29% and gross margins surged 170 basis points to 46.5%.  

Nike is the right business for the next era of e-commerce. It’s a big, important brand making all the right moves to create wealth for shareholders. Longer-term investors should consider buying the stock into any near-term weakness.

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