Retail stores such as Macy's and Gap have suffered financial losses with COVID-19. Traditional retail stores failed to adapt to online platforms compared to Nike, which is mitigating COVID-19 losses smoothly. A New York Times article reports that Macy lost most of its sales after closing stores, and Gap furloughed nearly 80,000 store employees in the United States and Canada.
Nike has stood out as a sturdy adapter to COVID-19, but this mitigation plan took years to prepare. QZs revealed that Nike Training Club, offering members at-home workouts, offered shoppers the ability to engage with Nike about their products. Nike's early investment in digital transformation tactics like their apps and e-commerce sites has made them a model company that everyone should. However, how did Nike do all this?
In 2017, Nike introduced the Consumer Direct Offence, a technological initiative to serve consumers personally. Nike Chairman Mark Parker said, "Through the Consumer Direct Offense, we're getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever." This initiative was a successful investment for Nike because they focused on serving consumers through their mobile applications and e-commerce sites.
Fast forward to today. Nike, like many large retailers, closed stores in China, the U.S, and Canada. A CNBC article claims that NIKE sent emails to employees to stay home and protect themselves until they can reopen stores. Nike's closed down most of its retail stores and allowed employees to work from home. Nike's Consumer Direct Offence offered them the ability to conduct business online regardless of store closings.
As Nike closed 5,000 stores in Greater China, physical stores were closed, and some stores were open for limited hours. As China lessen restrictions, Nike slowly opened up stores. A Fortune article highlights Nike Training Club's 80% increase in users within the quarter and 30% increase in digital sales. Nike's recovery stems from their early initiative in technology, and their recovery depends on digital sales with stores opening up.
Nike's digital sales are the main reason why it has recovered smoothly. Nevertheless, Nike has several partnerships with e-commerce sites, which has improved its sales as well. According to Fool, Nike is working with Alibaba's Tmall in China, Foot Locker, and Dick's Sporting Goods daily. Nike is ensuring their survival by collaborating with their partnerships amidst these challenging times.
In China, daily life is entering the normalization phase, and 80% of its stores have reopened since late February. According to Nike, they are seeing double-digit increases in foot traffic and approaching triple-digit-growth. Due to Nike's containment and recovery phase, physical stores can slowly return to its normal state, but until then, Nike's digital platforms will carry the weight of future sales.
Nike's SNKRS app, provides a customized selection for shoppers, and provides Nike with customer data, has been a top app for Nike. Many online shoppers are using apps like these to buy exclusive shoes, regardless of the pandemic. CNN revealed that 140 million members signed up in 2018, and Nike will grow it to 300 million in the following years. Apps with customer focus features will prevail and be the new normal for shoppers.
COVID-19 aftermath will change the traditional brick and mortar structure and embrace a digital-savvy platform for shopping. Nike reported a 5% increase in revenue, and digital sales up 36% percent versus the prior year. Although gross margins are down 44%, Nike's ability to stay afloat in the pandemic demonstrates the resiliency of their online platforms.
As shoppers stay put inside their homes, Nike Training Club app will offer more than 185 workouts for free and tips for movement and nutrition. Nike's consumer-focused plans will be a model that most companies will follow in the future. Not only are they providing an online shopping experience, but they are also ensuring the health of their shoppers with activities to keep them motivated.