Dealt Out … Nike’s New Deal Revisited

Just about one year ago Nike told the world – and
Team Insight, specifically – that reacting to dealer complaints it was going to service the team business in a new, improved way by stocking team product deeper than in previous years and with more depth in its overseas factories. That ostensibly meant more uniforms, more accessories, more warm-ups and even more footwear, so that America’s team dealers could order, receive and fill-in during the season.

The news was met with praise along with more than a little bit of skepticism by team dealers used to the cold shoulder and low inventories from a key team brand.

That’s because at about the same time Nike introduced a so-called “Partnership Program” for dealers willing to carry Nike Team apparel, accessories and shoes exclusively. Companies such as Impact Sports, Brand Athletics (Oregon) and Sport Supply Group (Dallas) – which owns Dixie Sporting Goods (Virginia), Orlando Sports (Florida), Kessler (Indiana) and Salkelds (Illinois), among others – would be supported in these partnerships with stronger discounts than other (read: smaller, non-exclusive) dealers.

This improved stock program was a bold new step and according to Nike it seems to be working well, at least from its point of view. Based on dealer feedback to Team Insight, everyone isn’t on quite the same page, yet Nike remains nonplussed. Answering a series of email questions sent to Rosemary St. Clair, GM of Nike Team, her assistant, Shelly Peng, reports that, “they (Nike) are very happy with the success for their team business … and are committed to carrying the necessary inventory levels to serve the youth, high school and college community.”

The impact of the Partnership Programs is certainly being felt at the team dealer level, as current Nike dealers must now contend with generally much-larger competitors who have the ability to offer significantly lower pricing on Nike team uniforms and accessories.

“I recently met up with the folks from Impact Sports and I asked them if they knew what was going on,” recalls Doug Martin, of Complete Team Outfitters, in New Hampshire. The competitor’s response? “They stated that they are Nike! Well that just about sums it up for all the dealers that have been taking this line out of the bag and building it up for years. They close most of the smaller dealers and give it [the business] to the largest-selling Nike-only dealers.”

Nike pleads patience as the program evolves. According to Peng, Nike is in the second year of its three-year strategic plan to “meet the needs of the athletes, coaches and institutions we serve through our existing dealer base.”

Deal, No Deal …

So now the question remains — With the expanded level of commitment to holding stock for team and partnership dealers, why are some Nike Team dealers now suddenly unable to order team wear?

The answer lies in a seemingly normal “change of terms” letter sent out to a number of Nike Team dealers last November, a missive from St. Clair that issued in more of a significant change than the letter would indicate for some dealers. In it, St. Clair stated, in reference to ordering Nike product, that “product would be available through Nike.net or SAP only.” In clearer terms, that meant a number of dealers that had been ordering on-line got a surprise when they were unable to place orders in the “team wear” section.

Several of the dealers who were impacted by the
changes contacted Team Insight with their take on the letter, the changes and what it will mean to them.

“I have been ordering on Nike’s Web site for years and now I can’t order any team wear. It’s like they flicked a switch for no reason,” says Martin. After speaking with his local Nike sales rep, his Nike regional sales manager and finally St. Clair at length, he still was unable to get an answer about why Nike was not allowing him to order team wear.

Martin is concerned that his Nike customers will be “really angry” when they have to replace full sets of uniforms instead of just doing a few fill-in sets. He referred back to Team Insight’s previous story where St. Clair promised, “We are not excluding or closing down any dealers. We realize that the small and independent dealers are critical to our team business. This program is part of our comprehensive distribution strategy. With thousands of high schools out there, there is enough business for all dealers.”

Apparently not.

“What do I tell my customers that trust me to spend their hundreds of thousands of dollars?” Martin asks.

Pam Grimes, co-owner of Specialty Sports, also received a letter from Nike changing the terms of payment and telling her to go to Nike.net to order. “Nike says this letter told us we were no longer going to be part of the team dealer network. Nowhere in the letter does it state that and if we had not happened to call to order some merchandise we would not have known,” Grimes says.

“They way they (Nike) have handled this is just wrong since they know that when you sell clubs and schools you have a three-year agreement committed to the Nike brand.” Making matters worse, Specialty Sports had just sold a whole school into Nike, as well as a couple of local club teams.

“It took us almost two years to get Nike. We are a non-traditional sports store (soccer, lacrosse, rugby, volleyball) in a niche market with few competitors doing what we do,” Grimes explains. “We were growing our team Nike business when we are cut off without notice.”

What are the Nike reps saying?

According to Grimes, the Nike rep told her that “the decision was made above them, they can’t do anything about it, that she was fielding calls from all over … and they were dealing with the fall-out.” The rep also told Grimes her that “they will try to help her with the fill-ins from the Fall and any backorders, but after that you’re done.”

Grimes went on to say, “We would have been happy if they would give us a team dealer to work with … but they did not give us any alternative. They know I will just lose business over this because they know that my schools and clubs cannot afford new uniforms because Nike cut me off.”

For Grimes, it comes down to simple business ethics and supplier/customer relationships. “I would never treat my clients this way. Somebody out there has got to care and it’s time for someone to say this isn’t right,” she says. “There is a right way to do things … and this isn’t it.”

The Nike Response

Nike’s responses to emailed questions is telling of its attitude as 2010 take shape.

Q: How widespread are the “account modifications” and what it will mean to the typical team dealer?

A: “As part of our plan (three-year plan) we are looking to achieve consistency within our dealer base.”

Q: Is this a change in policy and how many of the 600 team dealers is this apparent change affecting?

A: “We look to our team dealers as an extension of our brand. They are our sales force. That philosophy has not changed.”

Q: How about those dealers who can no longer
access Nike Team apparel and have leagues, teams or clubs in long-term programs with their brand?

A: ”Unlike our competitors in the business, we did not close any of our dealer accounts. We will continue to evaluate our needs, identify any gaps we have in our coverage and look for opportunities on a regular basis.”

What’s It All Mean for Team Dealers?:

At the end of the day, Nike is technically correct in stating that it has not closed these affected dealers, since they can still order accessories, although it is not much of a consolation to the dealer who has teams in multi-year contracts. Any way it is worded, Nike has effectively made life exceedingly difficult for these dealers without what many feel was proper notice or explanation.

Nike’s strategy seems to be to narrow its distribution to stronger team dealers at the expense of smaller dealers and challenge some of their stronger dealers with their “partnership program” dealers. If this is the case, then current Nike team dealers may just want to be sure there are no more “New Deals” in their future.




Nike Takes Over Texas High Schools

In its next step towards its attempted domination
of the U.S. team business, late last year Nike signed a deal with the University Interscholastic League in Texas (the largest interscholastic organization in the nation, with more than 1300 schools) to be the official brand of choice for all uniforms, apparel and footwear.

The key component of the deal is that while the UIL member schools are not mandated to buy Nike team apparel and gear, they will receive special pricing on Nike apparel and uniforms as part of the agreement.

This is not the first time Nike has partnered with a statewide organization for uniforms, apparel and footwear at the high school level. According to Nike’s Shelley Peng, “They (Nike) also have a similar partnership with the Louisiana High School Athletic Association. We have several all district deals in various states. It allows us to be more connected with and provide more support to high school athletes in Texas.”

According to Peng, the partnership with the UIL will be serviced through Nike’s existing dealer base within the state of Texas.

“The contract doesn't require schools to use Nike products, but does offer discounts on uniforms, apparel and footwear,” points out Kim Rogers, chief of staff at UIL. Rogers stressed that the contract was put out for public bid several months ago.

Comments: