Nike Cuts Ties with Several Small, Local Retailers - EFFECTIVE JUNE 30, 2013 - MORE TO COME

[chancedprep]

I have seen employees at shoe chains like footlocker , Champs and Specialy DTLR here in Atlanta do A LOt of shady stuff. No one should ever have to pay $250 for 7y Jordan 11

 

[deltadogman1]

Of course Nike can "cut out the middleman" to increase profits, but it's not as simple as a lot of you make it sound.

First off, while Nike doesn't need these stores to help them move hot items, they do need them to help move the junk. Hell, Nike uses them to move the junk. As others have stated, you have to accept a lot of other crap to get the privilege of selling hot releases. And, this is key to Nike for a number of reasons.

First, Nike doesn't have to worry about selling their less desired product on their own. They hold the hot items for ransom and essentially extort the shops by forcing them to buy all this other stuff - for the NYC cats, this is the same model Dolan used with his networks that led to the MSG/Time Warner lock out a few years ago. Anyway, if you take away the retros from these stores and many of them fold, Nike now has trouble moving their Tailwinds and stuff, so that eats into the profits they gain by bringing a greater percentage of the hot item commerce in house. Rule #1 - there are always unintended consequences to actions!

Second, tons of these shops are likely in debt to Nike in the first place. If you cut off their best sources of revenue, you hurt your chances of getting paid. That's part of the reason Nike is somewhat two-faced about the mark-up issue. They act like they hate it, but they set up their vendor model in a way that often makes it borderline necessary for the shops. Essentially, a good chunk of that money goes back into Nike's pocket too - paying down bills, and keeping the store going to sling more product and begrudgingly accept more shipments of stuff that won't sell. A pimp can't beat his ladies to the point that they can't work...

Third, somebody in the thread mentioned creating more Nike Towns. Well, physical stores are expenses. You have to pay for space. You have to pay employees. You have to pay liability insurance. When Nike sends product out to others, these are all costs that the third party retailers have to bear. Certainly the overhead to expanding their digital storefront is lower, but it's still more employees to process orders, more warehouses, and all that. Changing the current model requires bringing in costs that are currently passed off to others. ...Certainly, this does not equate to the increased profit per item from selling more through their site and B/M locations, but it's a factor that hasn't been discussed.

TLDR; relationships with shops are not about moving AJ Retros, they are about a network that allows Nike to still profit from all the junk too. The proposed move potentially threatens that.


BTW, nice info 160 - but it's quite ironic to hear you so adamantly lambaste those marking up newer releases. Sold those Yeezy 2s for your $2500 asking price yet?

The overall Jist of you post is true but remember that in this case we are talking about what has essentially become a lifestyle brand for the most part. People who shop Nike/JB, shop Nike/JB. Like Apple customers, Audi drivers and etc... Nike would not miss a beat by cutting all the smaller accounts because like you said most of them probably owe Nike anyway for the non retro items that they can't move. And while Niketown and factory store outlets would cost more in overhead to operate, Nike wouldn't have to add a ton of stores due to the fact that with smartphone/debit card usage people wouldn't have to adapt as much to online shopping for shoes, as well as the fact that unlike a start up company Nike wouldn't have to start with store #1 and expand outward. People keep saying that the non retros are a hard sell when honestly 8 out 10 Nike/JB products you see are non-retro, bottom of the price tier products and like I said before current outlet pricing is well above what the true outlet prices use to be, so Nike/JB is still making a ton more money than we think of those items that go to outlet or hit clearance. 

Also as to the effect that new stores would have on profitability, just pay attention to Wal Mart and chain dollar stores. You have to create extensive retail networks to increase profitability. These stores usually become profitable in a very short period of time and with the case of Nike the you would have the wholesaler/distributor/retailer all in one, therefor maximizing profit. Also, I really think that Nike noticed that with the recent upswing of phone orders at outlets that alot of these accounts are not as beneficial as they use to be. Because as you said alot of these stores are in debt to Nike but are still receiving new orders while stock is sitting, while the same stock is moving in outlet because of modest markdown or internet buzz. Also, just think about the fact that the stock that is sitting in these stores can't be stock located by Nike because the store has it in their system. Nike is loosing big time on most of these small accounts or better yet loosing out.

And your arguement about more manpower and space. Doubling it would be justified if current profit reflected, Nike being able to clear 100% of current retail sticker versus the 55-65% that they do by selling to account holders.

Also, I think a NIKE/COLE HAAN/JB stoe would be pretty hard to compete with. And look what they could do with Cole Haan in terms of casual clothes, WOW.

 

[1ix8vi]

does he charge retail for his hot products?

For me YES, for everyone else I have no idea. Nine times out ten he charges retail, with the exception of a FEW different products.

 

[bip roberts]

The overall Jist of you post is true but remember that in this case we are talking about what has essentially become a lifestyle brand for the most part. People who shop Nike/JB, shop Nike/JB. Like Apple customers, Audi drivers and etc... Nike would not miss a beat by cutting all the smaller accounts because like you said most of them probably owe Nike anyway for the non retro items that they can't move. And while Niketown and factory store outlets would cost more in overhead to operate, Nike wouldn't have to add a ton of stores due to the fact that with smartphone/debit card usage people wouldn't have to adapt as much to online shopping for shoes, as well as the fact that unlike a start up company Nike wouldn't have to start with store #1 and expand outward. People keep saying that the non retros are a hard sell when honestly 8 out 10 Nike/JB products you see are non-retro, bottom of the price tier products and like I said before current outlet pricing is well above what the true outlet prices use to be, so Nike/JB is still making a ton more money than we think of those items that go to outlet or hit clearance. 

Also as to the effect that new stores would have on profitability, just pay attention to Wal Mart and chain dollar stores. You have to create extensive retail networks to increase profitability. These stores usually become profitable in a very short period of time and with the case of Nike the you would have the wholesaler/distributor/retailer all in one, therefor maximizing profit. Also, I really think that Nike noticed that with the recent upswing of phone orders at outlets that alot of these accounts are not as beneficial as they use to be. Because as you said alot of these stores are in debt to Nike but are still receiving new orders while stock is sitting, while the same stock is moving in outlet because of modest markdown or internet buzz. Also, just think about the fact that the stock that is sitting in these stores can't be stock located by Nike because the store has it in their system. Nike is loosing big time on most of these small accounts or better yet loosing out.

And your arguement about more manpower and space. Doubling it would be justified if current profit reflected, Nike being able to clear 100% of current retail sticker versus the 55-65% that they do by selling to account holders.

Also, I think a NIKE/COLE HAAN/JB stoe would be pretty hard to compete with. And look what they could do with Cole Haan in terms of casual clothes, WOW.

I don't necessarily disagree with this. I just wanted to register these points. There was a lot of talk that such a changeover would mean no unintended consequences and a 100% absorption of the new profit margin. And, that's not the case. There are mitigating factors... mitigating, though not overwhelming.

 

[theeabstrvct]

our local City Gear should be on the list and I'm down south. they only sell their stock to family. and they're extremely rude when you ask about releases.

 

[hazeee and sn3akers]

Mister sports in the Bronx was charging $272 for Bred 11's on Release day

 

[1ix8vi]

Again, supposedly this only had to do with these locations not renovating as per Nike's request. Not saying that these spots don't or have practiced shady business practices, but allegedly that was not the reason for these locations to losing their Nike accounts.

 

[160jordansdeep]

Of course Nike can "cut out the middleman" to increase profits, but it's not as simple as a lot of you make it sound.

First off, while Nike doesn't need these stores to help them move hot items, they do need them to help move the junk. Hell, Nike uses them to move the junk. As others have stated, you have to accept a lot of other crap to get the privilege of selling hot releases. And, this is key to Nike for a number of reasons.

First, Nike doesn't have to worry about selling their less desired product on their own. They hold the hot items for ransom and essentially extort the shops by forcing them to buy all this other stuff - for the NYC cats, this is the same model Dolan used with his networks that led to the MSG/Time Warner lock out a few years ago. Anyway, if you take away the retros from these stores and many of them fold, Nike now has trouble moving their Tailwinds and stuff, so that eats into the profits they gain by bringing a greater percentage of the hot item commerce in house. Rule #1 - there are always unintended consequences to actions!

Second, tons of these shops are likely in debt to Nike in the first place. If you cut off their best sources of revenue, you hurt your chances of getting paid. That's part of the reason Nike is somewhat two-faced about the mark-up issue. They act like they hate it, but they set up their vendor model in a way that often makes it borderline necessary for the shops. Essentially, a good chunk of that money goes back into Nike's pocket too - paying down bills, and keeping the store going to sling more product and begrudgingly accept more shipments of stuff that won't sell. A pimp can't beat his ladies to the point that they can't work...

Third, somebody in the thread mentioned creating more Nike Towns. Well, physical stores are expenses. You have to pay for space. You have to pay employees. You have to pay liability insurance. When Nike sends product out to others, these are all costs that the third party retailers have to bear. Certainly the overhead to expanding their digital storefront is lower, but it's still more employees to process orders, more warehouses, and all that. Changing the current model requires bringing in costs that are currently passed off to others. ...Certainly, this does not equate to the increased profit per item from selling more through their site and B/M locations, but it's a factor that hasn't been discussed.

TLDR; relationships with shops are not about moving AJ Retros, they are about a network that allows Nike to still profit from all the junk too. The proposed move potentially threatens that.


BTW, nice info 160 - but it's quite ironic to hear you so adamantly lambaste those marking up newer releases. Sold those Yeezy 2s for your $2500 asking price yet?

i have my price on the yeezy's for 2 reason

1. i really dont want to sell the shoe but if i get that price i would be stupid to keep
i sold a pair of black/ pink yeezy 2's last year for $2400.00
2. if i do sell it i want maximum value just like these stores do
3. i not a retail store and so i am pretty much screwed on every pair of jordans i have picked up this year and last
hardly paid retail on many of the jordans i copped

that's why i am asking so much for my yeezys

 

[160jordansdeep]

Of course Nike can "cut out the middleman" to increase profits, but it's not as simple as a lot of you make it sound.

First off, while Nike doesn't need these stores to help them move hot items, they do need them to help move the junk. Hell, Nike uses them to move the junk. As others have stated, you have to accept a lot of other crap to get the privilege of selling hot releases. And, this is key to Nike for a number of reasons.

First, Nike doesn't have to worry about selling their less desired product on their own. They hold the hot items for ransom and essentially extort the shops by forcing them to buy all this other stuff - for the NYC cats, this is the same model Dolan used with his networks that led to the MSG/Time Warner lock out a few years ago. Anyway, if you take away the retros from these stores and many of them fold, Nike now has trouble moving their Tailwinds and stuff, so that eats into the profits they gain by bringing a greater percentage of the hot item commerce in house. Rule #1 - there are always unintended consequences to actions!

Second, tons of these shops are likely in debt to Nike in the first place. If you cut off their best sources of revenue, you hurt your chances of getting paid. That's part of the reason Nike is somewhat two-faced about the mark-up issue. They act like they hate it, but they set up their vendor model in a way that often makes it borderline necessary for the shops. Essentially, a good chunk of that money goes back into Nike's pocket too - paying down bills, and keeping the store going to sling more product and begrudgingly accept more shipments of stuff that won't sell. A pimp can't beat his ladies to the point that they can't work...

Third, somebody in the thread mentioned creating more Nike Towns. Well, physical stores are expenses. You have to pay for space. You have to pay employees. You have to pay liability insurance. When Nike sends product out to others, these are all costs that the third party retailers have to bear. Certainly the overhead to expanding their digital storefront is lower, but it's still more employees to process orders, more warehouses, and all that. Changing the current model requires bringing in costs that are currently passed off to others. ...Certainly, this does not equate to the increased profit per item from selling more through their site and B/M locations, but it's a factor that hasn't been discussed.

TLDR; relationships with shops are not about moving AJ Retros, they are about a network that allows Nike to still profit from all the junk too. The proposed move potentially threatens that.


BTW, nice info 160 - but it's quite ironic to hear you so adamantly lambaste those marking up newer releases. Sold those Yeezy 2s for your $2500 asking price yet?

i have my price on the yeezy's for 2 reason

1. i really dont want to sell the shoe but if i get that price i would be stupid to keep
i sold a pair of black/ pink yeezy 2's last year for $2400.00
2. if i do sell it i want maximum value just like these stores do
3. i not a retail store and so i am pretty much screwed on every pair of jordans i have picked up this year and last
hardly paid retail on many of the jordans i copped

that's why i am asking so much for my yeezys

 

[160jordansdeep]

Mister sports in the Bronx was charging $272 for Bred 11's on Release day

thats not a terrible price from what i saw around the city

but still way over retail

the only plus dealing with these small stores they most times dont follow release dates

so you can go and most times get your shoes and not deal with lines campouts ect

 

[mkc1983]

The post(s) about Nike requiring stores to be update seems like the most likely scenario. I don't think Nike is too concerned about prices going for above retail. They're most likely more concerned about selling stuff for less than the suggested price, as it could undermine the product. Canada Goose is a popular jacket company here in Canada, and they hate retailers selling their jackets for less than the suggested price (I don't think stores are contractually allowed to sell their jackets for less than retail). Of course selling before the launch date would be a huge issue with Nike.

 

[fahqu001]

our local City Gear should be on the list and I'm down south. they only sell their stock to family. and they're extremely rude when you ask about releases.

Are you in Houston?

 

[fahqu001]

our local City Gear should be on the list and I'm down south. they only sell their stock to family. and they're extremely rude when you ask about releases.

Are you in Houston?

 

[bigmike24000]

our local City Gear should be on the list and I'm down south. they only sell their stock to family. and they're extremely rude when you ask about releases.

100% true especially here in Houston, City Gear is MADDDD shady!!!  Their is a local reseller who I have watched for 8-9 months now.  After inspecting his pics on Craigslist I noticed in almost all of them they had a sticker sku on the box that is only exclusive to City Gear for inventory tracking.  All you have to do is go to craigslist and this guy has at least 2 size runs of EVERY release thats hot.... including foams etc. And his price is at least 100.00 over sticker even after tax!!!  He even had 2 size runs of the Corks.  When u type in his phone number over 30-40 listings pop up under it... SHUT THEM DOWN!!!!

 

[theeabstrvct]

Are you in Houston?

nah , Mobile , Alabama.

 

[fahqu001]

nah , Mobile , Alabama.

I moved from Mobile in '11. I actually lived there twice. I wasn't collecting Jordan's when I left so I don't remember a City Gear, but we have them around Houston. Where in Mobile are you?

 

[mr s j king]

Ok, just had this conversation with my boy who owns 2 stores with accounts. From what he told me, the stores in the Cherry Hill/Philly area are not losing their accounts because of them being shady. This had more to do with stores not updating their retail space to Nike's satisfaction or at all in some cases. The way Nike sees is it that it is a privilege for a retail location, especially Mom & Pop stores, to have a Nike account, let alone an urban account that may get you the hottest releases of the year. My boy situation was that he has a store in North NJ. It was a per existing shop with small account. During this same time, he had another shop not too far away they didn't really have a Nike account and a few sister stores in the area. They decided to do some renovating and actually ended up closing one of the stores that had the most foot traffic. Nike rep stopped in a few months ago and more or less insisted he make renovations or he may lose his account. So he shuttered the door to one store, and decided to renovate his premium space to start a new store. Nike came back and inspected and were very impressed with the newly renovated location. Because of this he said they may be giving him a quick strike account, upgraded from second tier urban I believe. BUT the trade off is that the other location that he refused to renovate can no longer hold the Nike account or even sell Nike products. This has everything to do with Nike's desire to have an "upgraded" customer experience with its higher end, money making products.

Good info, thanks.

[COLOR=#red]That post by 1IX8VI is right and exact. When Nike comes to your shop they are coming to do an inspection.
They want to see how you are presenting THEIR product compared to the competition. They want to see your overall store appearance as well.
Nike product has to be displayed at the very front of the store, etc etc.
And you HAVE to do what they tell you, or expect a series of emails similar to the ones being issued now.
Think about it. As your supplier I know your selling my products for twice the MSRP.
The LEAST the store can do is use some of that money to upgrade their store.[/COLOR]

 

[1ix8vi]

That post by 1IX8VI is right and exact. When Nike comes to your shop they are coming to do an inspection.
They want to see how you are presenting THEIR product. They want to see your overall store appearance as well.
Nike product has to be displayed at the very front of the store, etc etc.
And you HAVE to do what they tell you, or expect a series of emails similar to the ones being issued now.

Thank you sir. All I have been trying to say is that although these stores could possibly have been practicing in shady deals, that was not the reason for them losing their Nike accounts. Now if only the shops that DO practice in shady deals start to get investigated....but that's a completely different animal...

 

[mr s j king]

[COLOR=#red]That post by 1IX8VI is right and exact. When Nike comes to your shop they are coming to do an inspection.
They want to see how you are presenting THEIR product compared to the competition. They want to see your overall store appearance as well.
Nike product has to be displayed at the very front of the store, etc etc.
And you HAVE to do what they tell you, or expect a series of emails similar to the ones being issued now.
Think about it. As your supplier I know your selling my products for twice the MSRP.
The LEAST the store can do is use some of that money to upgrade their store.[/COLOR]

Thank you sir. All I have been trying to say is that although these stores could possibly have been practicing in shady deals, that was not the reason for them losing their Nike accounts. Now if only the shops that DO practice in shady deals start to get investigated....but that's a completely different animal...

[COLOR=#red]Nike doesn't "really" care about the price the shoes are being sold for.
They DO care about shoes being sold early, with disregard to the release date.
Its all about how you sell them early. [/COLOR]

 

[deltadogman1]

That post by 1IX8VI is right and exact. When Nike comes to your shop they are coming to do an inspection.
They want to see how you are presenting THEIR product compared to the competition. They want to see your overall store appearance as well.
Nike product has to be displayed at the very front of the store, etc etc.
And you HAVE to do what they tell you, or expect a series of emails similar to the ones being issued now.
Think about it. As your supplier I know your selling my products for twice the MSRP.
The LEAST the store can do is use some of that money to upgrade their store.

You sure? I would beg to differ but then you might have some insight that i don't have into policy versus practice. I think any brand is concerned about presentation but I know for a fact front of the store is not one.

 

[1ix8vi]

I know for certain that the physical look of a store is of utmost importance to Nike as far as retail location goes. Just because you have the means to do so does not mean that you are entitled to a Nike account. There are a number of different things they look at to determine if they grant you an account and more specifically what kind of account. Now it's more up to your Nike rep what kind of numbers of a shoe, especially hot releases, of how many you will allotted. There are a NUMBER of smaller sized "boutiques" that have opened in Northern NJ in the past few years and there SEEMS to me as well as a number of people I know that do have accounts/stores/etc. that there are some back room deals to receive more stock of a particular item or even a few sizes of extremely limited items. The Nike rep for your area is predominately the larger factor in who gets how many pairs of certain model. JUST MY THOUGHTS...

 

[160jordansdeep]

[COLOR=#red]That post by 1IX8VI is right and exact. When Nike comes to your shop they are coming to do an inspection.
They want to see how you are presenting THEIR product compared to the competition. They want to see your overall store appearance as well.
Nike product has to be displayed at the very front of the store, etc etc.
And you HAVE to do what they tell you, or expect a series of emails similar to the ones being issued now.
Think about it. As your supplier I know your selling my products for twice the MSRP.
The LEAST the store can do is use some of that money to upgrade their store.[/COLOR]

i told you guys "upscale"

others have said so

nike dont get a damn about the customers & what shops charge

they wanna have a show room in your store and the store passes the buck to the customer

i have been told the same by store owners

you wanna have nike products put them in the front of store
or you will get nothing good

a cheap wood floor and nike by the door is all you need & you might get account upgrade
plus follow the release dates on certain shoes

 

[160jordansdeep]

double

 

[theeabstrvct]

I moved from Mobile in '11. I actually lived there twice. I wasn't collecting Jordan's when I left so I don't remember a City Gear, but we have them around Houston. Where in Mobile are you?

West Mobile. the City Gear I'm talking about is in the mall.

 

[fahqu001]

West Mobile. the City Gear I'm talking about is in the mall.

I have probably walked past it a few times in the Bel Air Mall and never noticed it. After you made the City Gear comment I realized that City Gear extended beyond the Houston Area. I can't remember any real good places to buy shoes out there unless they're GR. What does CG carry out there? Anything special? Or do you have to do the online thing?