Commitment from the industry of Nike

Nike who identified sustainability as a source of innovation and made it a profitable revenue
stream. With over $20 billion in annual global revenue, Nike is the world’s largest manufacturer
of athletic footwear. And, for the last several years, it has also been at the forefront of sustainable
fashion. In 2015, Morgan Stanley ranked Nike “the most sustainable apparel and footwear
company in North America for environmental and social performance.” Last year, along with
apparel companies H&M and Levi & Strauss, the World Wildlife Foundation (WWF) recognized
Nike as a leader in the use of sustainable cotton.
Yet for Nike, this acknowledgement has been years in the making.
In 2004, the company began working with designers, scientists, coders, and students to better
understand the materials that go into today’s fashion products. The items found in Nike’s
material library were each given a score based on long-term sustainability and environmental
impact. Eight years later, Nike launched the Nike Materials Sustainability Index (NMSI)—a
database with information for Nike designers on products and their impact on the environment.
By 2013, there were 75,000 items listed in index. The company then combined this data set with
a user-friendly interface to launch the MAKING app, a tool that helps designers across industries
make smarter environmental decisions about which materials to incorporate into their designs.
Today, the app focuses on four key impact areas: Chemistry, Energy/Greenhouse Gas,
Water/Land, and Physical Waste. 2018, while the footwear giant’s commitment to sustainable
practices benefits the environment and aids the company’s conflicted reputation, it is also reveals
another advantage: Its capacity to spark innovation.

A New Model for Innovation

Nike is not the first to see (self-imposed) restrictions as an opportunity to encourage employees
to think outside of the box. In the medical field, for example, restrictions to budget or electricity
have led to inventions like the 20-cent paper centrifuge that isolates diseases such as HIV or
malaria in remote areas for little cost.
Although not combating deadly diseases, Nike has used its commitment to develop more
sustainable projects to inspire new ways of thinking. By rejecting the traditional sustainability
tradeoff model, which assumes monetary tradeoffs with investment in corporate sustainability
initiatives, Nike has demonstrated its commitment to environmental protection while driving new
forms of innovation.
According to Hannah Jones, Nike’s Chief Sustainability Officer and VP of its Innovation
Accelerator, Nike’s goal for years has been to rethink sustainability and innovation entirely.
“Sustainability was always framed as something that was counter to business success, that if you
made a product that was sustainable, somehow it would be less good or more expensive,” Jones
said in a Fast Company interview. “The reframe [ing] that happened is that we stopped seeing
sustainability and labor rights as a risk and burden and instead as a source of innovation. If you
flip it to be about an innovation opportunity, people step into that space with less fear.”

Flying High
For Nike, that opportunity arrived in the form of a new athletic shoe: the Flyknit.
After ten years of sustainability research, Nike footwear designers figured out how to create a
shoe that gave athletes the support they needed without adding anything unessential to the
design. By setting out to make a piece of athletic footwear that created zero waste and
maintained a high-level of performance for runners, the company developed a new technology
that wove the upper portion of the Flyknit from a single thread.
The key, according to Jones, was involving designers in the sustainability process—celebrating
their creative ideas and willingness to take risks. For the Flyknit shoe, the constraints Nike
placed on the designers were: to develop the lightest shoe possible to win a marathon; to make it
beautiful; and to rethink the concept of waste.
“That’s an unlikely mash-up of constraints,” Jones wrote in a Nike new post in 2016, “but if the
designers hadn’t had all three in mind, they wouldn’t have arrived at the Flyknit Racer, which
turned the industry upside down.”
Released in 2012, the Flyknit was a major factor in the company being named Fast Company’s
Most Innovative Company in 2013.
A key selling point in Nike advertisements, the Flyknit is also proof that corporations do not
have to make the tradeoff between sustainability and profit. Today, that piece of athletic
footwear is not only lighter and more breathable—it has generated upward to $1 billion in
revenue each year.

In an effort to further industry sustainability efforts, NIKE, Inc. (NYSE:NKE) today released its
Environmental Apparel Design Tool. Based on Nike’s Considered Design Index, the release of
the tool aims to accelerate collaboration between companies, fast-track sustainable innovation
and decrease the use of natural resources like oil and water.
“Whether for sneakers or cars, it is hugely important to integrate water, chemical, energy and
waste considerations into all product design. If all apparel companies use this tool, the impacts
could be breathtaking, from less-clogged landfills to expanding our sustainable material
industries.”
Designed and built by Nike over seven years with a six million dollar investment, the software-
based Environmental Apparel Design Tool helps designers to make real time choices that
decrease the environmental impacts of their work.
Recognizing the decline of natural resources and the need to move to a low-carbon economy, the
tool is a practical way to rate how apparel designs score in reducing waste and increasing the use
of environmentally preferred materials while allowing the designers to make real time
adjustments.

Nike is committed to open innovation and welcomes others building and improving on this tool.

“This tool is about making it simple for designers to make the most sustainable choices right at
the start of the product creation process. Over the past four years it has proved to be invaluable at
Nike and has helped us create products with a higher sustainability standard,” said Hannah Jones,
Vice President of Nike Sustainable Business and Innovation.
“By releasing the tool we want others to improve on it and we hope to inspire further
collaboration to create global industry standards for a level playing field, encourage widespread
industry adoption of sustainable design practices and have more sustainable products available
for the consumer.”
The Nike football jerseys produced for South Africa 2010 are an example of how the tool helped
designers produce the most environmentally-friendly and technologically-advanced kits in
football's history. Made from 100% recycled polyester, the material choice diverted 13 million
plastic bottles from landfill. In the last year alone, Nike doubled its use of recycled polyester,
saving 82 million plastic bottles from landfill. If all apparel companies committed to converting
one third of their polyester garments to recycled polyester, the demand for recycled polyester
would be greater than the annual production of plastic bottles, diverting PET bottles from
landfill.
"Nike's decision to open-source this design tool is a win-win because it leverages important
intellectual capital to benefit an entire industry," said Mindy Lubber, president of Ceres, a
leading coalition of investors and environmental groups that works with companies like Nike to
address sustainability challenges. "Whether for sneakers or cars, it is hugely important to
integrate water, chemical, energy and waste considerations into all product design. If all apparel
companies use this tool, the impacts could be breathtaking, from less-clogged landfills to
expanding our sustainable material industries."
Mike Barry, Head of Sustainability for Marks & Spencer, who has worked closely with Nike for
several years on sustainability issues, said: “As a company committed to developing a
sustainable business, we welcome this type of industry collaboration. The Nike tool will help
apparel companies and retailers design more sustainable product. We firmly believe that sharing
knowledge like this helps us all move towards a more sustainable future faster.”
In addition to the Environmental Apparel Design Tool, Nike will also be releasing its Footwear
Design Tool, Material Assessment Tool and Water Assessment Tool in 2011.
These efforts come after Nike’s announcement earlier this year about the GreenXchange (GX), a
Web-based marketplace where companies can collaborate and share intellectual property which
can lead to new sustainability business models and innovation. Nike committed to placing more
than 400 patents on GX for research, demonstrating its belief that the best way to stimulate
sustainable innovation is through open innovation.

Industry Challenges
The $3 trillion global apparel industry remains the second largest industrial polluter, following
oil & gas [1]. The industry is a complicated business involving long and varied supply chains.
Each step of the chain requires tremendous consumption and puts pressure on our carbon
footprint. The industry accounts for 10% of global carbon emissions and 25% of the world’s
chemical usage [2]. The compiled pollution releases toxic chemicals into our air, water, and soil,
resulting in the creation of greenhouse gases and diminution of our water resources.

As one of the largest apparel brands, Nike has a significant role to play in shaping the climate
change conversation for two primary reasons: corporate social responsibility and business
performance.

Corporate Social Responsibility

Operating 566 factories, employing over a million workers, Nike is responsible for the well-
being of those workers and the communities they live in [3]. In the late 90s, the company
suffered from negative allegations regarding harsh labor and factory conditions. Since then,
Nike has made one of the greatest image turnarounds in the recent decade. And focus on
sustainability has been the means to achieve it. The company revamped its management tools –
one such example includes the Sourcing & Manufacturing Sustainability Index (SMSI), a tool
used to evaluate factories on health, safety, and environmental dimensions. By 2020, Nike
targets to have 100% of its factories improve
Business Performance
By minimizing the environmental footprint, improving product innovation, and transforming
manufacturing, Nike has repositioned its supply chain to use sustainability as a strategic growth
engine.
To minimize waste in 2015, Nike used 54 million pounds of factory scrap and transformed it into
premium material. Additionally, the company reduced water use per unit in footwear by 43%
[6]. These initiatives introduced Nike’s Closed Loop Ecosystem, a new method for designing,
finishing, and processing materials (See Figure 1).
As of September 2017, Nike announced the launch of Nike Flyleather, a new super material
made with ~50% recyclable leather fibers, using 90% less water, and an 80% lower carbon
footprint. The product is created to maximize performance as it’s 5x more durable and 40%
lighter than regular leather [7]. As Nike expands this new material to its leather sneaker
portfolio, it’ll have a strong impact on cost reduction and production waste. Similar to the
impact the Flyknit technology created post 2012, reducing waste by ~3.5 million pounds.

In manufacturing, Nike diverted 92% of total waste from landfill and incineration without energy
recovery. And in Q1 of 2014, Nike reached a major step by introducing a water-free dyeing
facility in Taiwan. The factory features high-tech equipment designed to eliminate the use of
water and process chemicals from fabric dyeing – Nike names the innovation “ColorDry.” See
Figure 2 for an image of the factory [9].

Water is outpacing population growth, and over the next decade, water demand will exceed the
general population growth 4 to 1, implying two-thirds of the world’s population could be living
in water-stressed areas [8]. The ColorDry investment marks Nike’s strong commitment to taking
a future outlook and reducing its reliance on constrained resources.

What’s Next?
Nike set a prime example of using sustainability as a competitive driving force. As a result, the
sustainability initiatives have created a solid foundation to adapt to climate change pressures
(e.g., emission cuts, constrained supply of cotton and leather). Nike should now use these same
sustainability principles and apply them to its dotcom business, which is an important strategic
focus for the next 5 years. Nike plans to grow its E-Commerce business to $7 billion by 2020 (a
$5 billion increase over today’s position). The growth will meaningfully increase the number of
packages shipped per day, and hence will be compounded by number of packages returned. The
growth will inadvertently create lots of waste in the system. In the short-term, I’d like to see
Nike use its sustainability best practices in packaging and shipping. A few years ago, Nike hired
a design firm to help it rethink packaging, but those ideas haven’t been fully realized in the
mainstream [11]. I hope to see Nike expedite the innovation on that front to ride its next wave of
growth.

As alluded to earlier, the company has done a great job at incorporating synthetic fabrics to
address cotton and water supply shortages, but in some cases, synthetic fibers can emit gases like
n20, which are 300x more damaging to the environment compared to co2 [12]. I’m sure Nike
has processes in place to monitor such effects, but I’d make sure these reactions aren’t offsetting
the hard work.

This brand has truly lived and breathed its sustainability mission and I’m confident it will
continue to innovate and set the standard, but can Nike actively expand this standard and help
other industry players realize its benefits? Should Nike even play this role? The big question I
pose for you, is how can we now create a movement within the apparel industry and get other
key players to set high sustainability standards?to the highest required SMSI scores [4].

NIKE, Inc. Statement on Commitment to the Black Community

Today NIKE, Inc. is announcing a $40 million commitment over the next four years to support
the Black community in the U.S. on behalf of the NIKE, Jordan and Converse brands
collectively. This commitment will be focused on investing in and supporting organizations that
put social justice, education and addressing racial inequality in America at the center of their
work.
“Systemic racism and the events that have unfolded across America over the past few weeks
serve as an urgent reminder of the continued change needed in our society. We know Black
Lives Matter. We must educate ourselves more deeply on the issues faced by Black communities
and understand the enormous suffering and senseless tragedy racial bigotry creates,” said John
Donahoe, President and CEO of NIKE, Inc. “The NIKE, Inc. family can always do more but will
never stop striving to role model how a diverse company acts. We will continue our focus on
being more representative of our consumers while doing our part in the communities we serve.”
We believe in a level playing field for all and leveraging the power of sport and our brands to
move the world forward. This additional $40 million builds upon the NIKE, Inc. family’s long
history of providing support to the communities in which they operate in. We are deeply
committed to driving focus and impact through our teams, brands and community partners.
During this past year, we’ve stepped up our own efforts and measures of accountability in the
areas of Diversity, Inclusion and Belonging to foster an inclusive environment and attract a
more diverse workforce. We are driven by a commitment to transparency, accountability and
impact and share our progress in these areas annually through the Nike Impact Report.

Nike’s CRM Program

According to Stokes, Customer Relationship Management (CRM) is a customer-focused

approach to business that is based on meaningful, long term relationships and not immediate
profit (2010, p. 202). In 2010, Nike launched a new business division called Nike Digital Sport
(NDS). The objective of NDS was to develop technologies and devices to allow users to track
their personal performance while Nike collected and stored data relating to customer trends and
needs. Through NDS, Nike has been able to communicate openly and effectively with customers
about their needs. Nike also has its own social networking service called Nike+ (Rao, 2012).
This social networking service focuses on building social networks and social relationships
among people and communities. Nike has built relationships between the company and
customers by understanding the customers’ needs and preferences.

CRM programs implemented by Nike are mainly operational and strategic. One CRM program
implemented by Nike to build and maintain customer relationships is Nike Fuel. Nike Fuel
enables customers to record their progress through the use of Nike Plus devices. These devices
are designed to update customers on the latest Nike sports trends and insights, and allow them to
communicate with Nike. Another CRM program implement by Nike is Nike + Connect apps. It
is a free app developed by Nike that uploads customers’ Nike+ data from plus devices to their
nikeplus.com accounts. Nike also created a Nike+ running app that enables customers to share
their experience on social media sites such as Twitter and Facebook.

Nike reaches over 200 million fans every day in an interactive dialogue, rather than having to
rely on big sponsored events to reach this number (Stokes, 2012). The massive volumes of freely
shared user data produce meaningful brand insights, lead to product innovations, and allow the
brand to get closer to consumers. Effective CRM has enabled Nike to collaborate with
customers, drive business processes, maximize return on investment (ROI) and support brand
development (Stokes, 2012).

Customer Service Policies

Nike promises to stand behind all of the company’s products for both consumer and retail
accounts (Nike, 2014). Nike’s web site enables its customers to use the search function to search
for information related to Nike’s customer service policies. The answers are provided by the use
of intelligent automates response technology. The website also provides customers with answers
of Frequently Asked Question (FAQ). Through the implementation of this program, Nike is able
to have an open communication line with and a better understanding of customers.

Web site Navigation

Nike, Inc. (nike.com) has more than seven million visitors each month. Navigation of Nike’s
web site is user friendly for both loyal customers and occasional browsers. The language used on
the site is clear and easy to understand. Nike’s latest products and ad campaigns are featured near
the top of the Nike.com landing page. Newest products include Mercurial: soccer cleats, The
Last Game Collection: National Team Replicas, Cool under Pressure: U.S. National Team Kit
made in red, white and blue, and Nike Tight of the Moment: four limited edition national tights.
Nike’s main feature ad is currently for the Run for your Country Campaign which is introducing
and promoting the new Lunarglide 6 iD. The 6 iD is customizable exclusively online at
Nike.com. All Nike products featured on the landing page are shown in bright, eye capturing
colors. Links to follow Nike are available for Nike, Nike Store, Nike Fuel, Nike Basketball, Nike
Running and Nike Soccer.

Category and subcategory names are clear and mutually exclusive. Subcategories are
immediately displayed when the menu is clicked on; items listed in the menu are classified
logically. The website has a filter option where visitors can select the size, style and color of the
chosen subcategory items they are viewing. The task flow is very efficient. The website has a
safety and security page which covers all of the major questions users may have about the site’s
security practices. The site has an SSL certificate and provides customers with an SSL Secure
Checkout. The website is designed to help the company remain the most authentic, connected,
and distinctive retailer in sportswear.

Customer-Facing Business Processes

Customer facing process results in a product or service that is received by an organization’s

external customer (Stokes, 2012). In 2010, Nike created a division called Nike Digital Sport
(DS). DS provides skilled resources, budget, and coordination across the enterprise (Cendrowski,
2012). Nike’s goal was to create a combined consumer experience that shapes responds to the
evolving preferences of consumers (Cendrowski, 2012). Nike DS leads most customer-facing
digital projects, releasing products under the Nike Plus brand. Personnel, designers and a team of
marketers work together to develop new digital innovations. Together, they work to find new
ways to mine large amounts of highly accurate customer data, which is a key strategic asset for
marketing and product development in the highly competitive digital space. Nike plans, in the
future, to become ever-closer to each of its customers around the world.

Nike's Top 3 Priorities for the Digital Customer Experience

1. Building relationships with customers through mobile apps
At the core of Nike’s retail strategy is extending the customer life cycle through value-creating
mobile apps that become a part of their everyday lives. For instance, the Jordan Breakfast Club
serves users with daily reminders each morning for 30 days with personalized workout regimes
designed by former pro-athlete and world-class trainer Alex Molden.
Meanwhile SNKR, favored by “sneakerheads,” gives exclusive access to limited releases and
special products. The app’s Nike Fit feature uses augmented reality and AI to help consumers
accurately measure their feet to find shoes at the right size. Nike claims that, according to
industry research, over 60 percent of people wear the wrong-sized shoes. However, when the
Nike chatbot first rolled out, the technology was incapable of handling any customer request that
was even slightly off-script, resulting in dead ends for users.

Nike brand“Our number-one principle when we laid out our design principle was: no dead ends,”
said Rogers. “[Now], there’s a way to get a live agent if you need one. It can do everything that
most of our contact drivers are – where’s my order, returns, exchanges, et cetera.”
The team realized they also needed to make sure the technology could understand customer
intent. This turned out to be more important than providing 24/7 service; peak engagement was
concentrated in the mornings and afternoons. No matter how robust the technology or how large
your budget, chatbots entail a process of trial-and-error because no two use cases are the same.
2. Ensuring career progression for agents, AKA "athletes"
From the get-go, Nike’s retail store and customer support agents are affectionately called
“athletes,” and they’re given numerous opportunities for career progression. For instance,
customer support athletes can work towards certifications that enable them to level up through
training.

“Every single athlete started as an L1 and then had the opportunity to get certified in certain
things,” said Rodgers. Those who wish to stay in the company’s customer support division can
qualify for L2 and L3 certifications. L3s live on campus at the company’s headquarters rather
than at the contact center, and they’re the last point of escalation in the customer support
function. Alternatively, L1s can go down the Expert certification path to move to other parts of
the organization in a non-CS role.
“Experts have different hours and a very specific skillset. A lot of the reason why we have
athletes come and join is because they love the brand and they want to continue to be a part of
the brand in different ways.”

Experts might go on to work with the social media team, which is still part of consumer services,
or become a category expert, brand marketer or product lifestyle manager (PLM). PLMs are
responsible for the manufacturing and marketing of a good as it moves through the typical stages
of product life cycle, from development and introduction to maturity and decline.

3. Implementing retail innovations guided by the Voice of the Customer

Hailed by commentators as exemplifying the future of retail, the Nike Live retail concept is a
members-only store with a focus on mobile and a two-week merchandise rotation. The
experiential store is exclusive to members of the Nike Plus loyalty program and features products
catered the local tastes of its location. Similar to the concept of Amazon Go’s cashierless stores,
the items Nike stocks are determined not by product lines but consumer data such as purchasing
patterns and mobile app engagement to provide a hyper-localized feel.

Also, the retailer’s mobile app is at the center of the concept, facilitating everything from
reserving products to loyalty points and product information. Twenty-five percent of the
inventory rotates every two weeks.

Nike opened its first Nike Live store on Melrose in Los Angeles, with a second iteration planned
for Tokyo and more to come. Much of its retail concept is underpinned by consumer research,
which stems partly from the company’s voice of customer program started two years ago,
explained Rodgers.
“If you have a digital ecosystem and you have physical stores, how do those two things go
together? But the real question is: how do consumers want to use those two channels in different
ways?”

Nike just does it with digital re-invention

Among the many retail digital transformation stories we’ve been tracking, sports apparel firm
Nike has been one of the more successful in its ambition to transform into “a digitally-led
enterprise”.
With Nike Digital revenues up 41% year-on-year in the firm’s most recent quarter, the firm
firmly believes that digital is not only proving to be as transformative as predicted, but actually
exceeding those expectations.

According to CEO Mark Parker, the company’s Digital Offense strategy is powering a shift from
traditional operating models to a “digitally-powered” future model that builds on the firm’s
heritage:

The stories of our athletes and the innovation they inspire have always been central to our brand.
Today, those products and stories are being amplified even further by the power of digital.
We’ve talked about how critical mobile and social experiences are to our consumer and how
that’s driving change. But, really, the full digital transformation of Nike that’s taking place right
now is even bigger than that. It's fundamentally shifting our entire company.
Digital is allowing us to realize our vision for smart retail to remove friction and personalize
experiences through the intersection of digital and physical environments. It’s sharpening our
ability to sense the market through data and analytics. It's unlocking new manufacturing tools
that are more precise and drive a new esthetic. And it's opening up opportunities for new
partnerships and how we develop talent in the organization.

One example of this in practice is the use of the firm’s NIke+ membership scheme which is
intended to create differentiated customer experiences. Parker explains:

In our own ecosystem, Nike+ membership is the key to an elevated consumer experience. Once
someone becomes a member and customizes their profile, we know what sports they like, how
active they are, and the style of products they prefer. That insight allows or unlocks exclusive
product, style advice from experts and rewards for their activity. It personalizes the entire
experience and allows us to remove friction points for members as they move seamlessly from
mobile to the in-store environment. We re-launched Nike+ membership in November and for the
year, we've exceeded all of our membership targets with strong growth in new, active and buying
members and improvement in engagement and in conversion.

Manufacturing
Behind the scenes, there are promising developments in revolutionising manufacturing and
supply-chain, says Parker:

Digital acceleration is critical to creating an overall faster company, from consumer insight to
responsive manufacturing to delivering products to the consumer when they want it. In other
words, it is integral to our 2X Speed initiative.

Through digital, we’re also inventing new manufacturing tools that allow us to push the
boundaries of product creation, like computational design with React or new Flyknit apparel.
Automation throughout our supply chain continues to drive speed and efficiency.

But its’s early day, he cautions, talking in terms of a multi-year journey:

I'd say we're on the early stages. I mean, this is a constantly moving opportunity for us - design
and product creation and the express line, the supply chain, they are all connecting digitally. It's
predictive demand planning. Sensing and demand planning is absolutely a critical part of
advancing this capability moving forward. I feel like we're making a tremendous progress in that
respect.

Parker predicts that the next 12 months will see a ramping up of the use of data analytics to
inform product design and capabilities going forward:

Then it's actually impacting how we manage our supply chain in our manufacturing flexibility in
response time. You'll see a lot of scaling of the data and analytics capabilities for Nike here in
the months and quarters ahead.

Nike is clearly seeing tangible results from its digital focus, setting itself achievable short term
wins while also investing in longer term innovation and evolutionary tech. As noted at the start,
it’s a race that firm is winning and one with no finishing line in sight.

Nike Is Building a Massive Digital Advantage

One of the impressive things about the performance of Nike (NYSE:NKE) in the third quarter of
2019 was the acceleration in footwear sales compared with the year-ago quarter. It's not easy for
a company of Nike's size -- one that does $24 billion in footwear sales in a year -- to accelerate
sales growth from 2% in the year-ago quarter to 13% in the last quarter (excluding currency
changes).
During the fiscal third-quarter conference call, management credited the company's improved
growth not only to innovation but also to investments in digital sales channels, including
technology that is improving the company's efficiency throughout the supply chain. Management
sees the digital business, which grew sales 36% year over year last quarter, emerging as one of
Nike's competitive advantages.

The digital connection

Nike's digital strategy is more than just throwing up a website or rolling out an app where you
can shop for Nike shoes at your leisure. The company is making its digital shopping experience a
lifestyle all its own.

For example, it has been investing in its NikePlus membership program to create more
personalized connections with customers. For instance, data analytics are being used to drive
advanced algorithms to better reward active members and utilize demand-sensing technology,
which helps keep product in supply. CEO Mark Parker said in prepared remarks, "When we offer
more tailored product and experiences, we bring more value to the consumer and it opens up
more opportunities to grow our business."

CFO Andy Campion elaborated on the broader thinking of Nike's digital ambitions: "Our vision
is to create direct, unbreakable relationships with our consumers. And we know the most direct
connection is through the mobile device they carry with them everywhere they go."

Management's push for this "unbreakable" customer relationship is evident in its SNKRS app,
which allows customers to read about upcoming releases, track their favorite styles, and store
payment information to make checkout easier.

Rolled out in 2015, the SNKRS app is a valuable marketing tool for the Nike brand, as it sends
customers an alert when a shoe is about to launch. Shoes routinely sell out, which encourages a
must-have-now mind-set among users. Last quarter, both traffic and revenue in the SNKRS app
increased by triple digits.

The digital transformation

Supporting this level of personalization and the demand it creates requires significant
investments on the back end of the business. In line with Nike's supply chain improvements over
the last few years, the company continues to fine-tune its operations, including digital tagging
and tracking of products using radio-frequency identification (RFID), which allows Nike to track
products through the production process until the item is sold to the customer.

Ultimately, RFID will help Nike better match supply to demand. This, in turn, will help Nike
avoid having to mark down unsold merchandise. It will achieve sell-through of more items at full
price, which should contribute to higher margins.

Along with the RFID initiative, Nike is doing a better job getting materials in place faster, ready
to go into production ahead of demand. A real-world example of this occurred when LeBron
James moved from Cleveland to play for the Los Angeles Lakers last year. Nike was able to cut
jersey lead times in half to respond to the surge in demand for his new team jersey.
Additionally, Nike recently digitized its full palette of 6,000 footwear materials, which will
improve coordination across its design teams and allow Nike to respond to shifts in consumer
trends more quickly.

Fundamentally, Nike is a growth company built on innovation, but it is also increasingly

differentiating itself with its investments in technology. As Parker said on the recent call: "The
innovation pipeline is full at Nike, and it gives us great confidence that we'll continue to win
with consumers for years to come. While we view innovation as Nike's No. 1 competitive
advantage, our digital transformation will create even further separation."