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Inside Nike’s Business Model: Lessons E-commerce Owners Can Learn

Nike took the brave leap into subscription boxes, a decision far from the original business model. There’s a lot to learn from their success. Let’s take a closer look!

Traditionally the lifeblood of B2B brands, in recent years, the subscription industry has exploded in the B2C eCommerce space.

The subscription takeover has been so successful that 75% of direct-to-consumer businesses are expected to offer subscriptions by 2023, and the subscription industry could hit a whopping $478 billion by 2025.

With such a solid upward trend, it’s no surprise that sportswear megabrand Nike stepped into the ring to deliver a knockout subscription to its fans. Nike dug deep into its data and analytics to uncover a sub-niche it could serve with subscriptions to boost its revenue. It landed on kids’ shoes and the rest is history.

But it’s not just Nike that gets to have all the fun — you can follow in the sportswear giant’s footsteps too. 

To give you some solid inspo for your store’s own subscription boxes, we’ll break down all the things Nike did right in its subscription takeover, along with some actionable tips for success. 

Let’s jump in.

Nike Business Model: What We’ll Cover

  • Why Nike Used Subscriptions to Capture Its Audience’s Hearts and Pockets
  • 6 Key Takeaways from the Nike Business Model Switch-Up
  1. Go where the money is
  2. Dare to go against the grain
  3. Tap into your loyal customer base and provide an unbeatable customer experience  
  4. Build a community around your subscription(s)
  5. Use exclusivity and rewards to supercharge engagement and sales
  6. Apply personalization to drive customer loyalty
  • Grow Like Nike with Wildly Successful Subscription Boxes

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Why Nike Chose Subscriptions to Capture Its Audience’s Hearts and Pockets 

Nike has used a range of strategies and tactics to stay relevant over its 57-year reign —

but the most innovative addition to the Nike business model has to be its subscription boxes. 

There are lots of likely reasons Nike chose to take on this challenge (and why you should too). Let’s zoom in on a few:

  • ‘One-up’ competitors: Subscriptions gave Nike the competitive boost it needed to contend against other titan brands like Adidas, which has historically reported stronger growth rates and profit margins. In 2020, Nike finally jumped ahead of its rival, totaling a smart $37.4 billion against Adidas’ $19.84 billion.
  • The subscription market is booming: The subscription market has grown 300% in just 7 years, so tapping into this incredible strategy was a no-brainer, especially since Nike’s competitors were yet to jump on board. 📈
  • Regular cash month after month: One of the main incentives to add subscriptions to the Nike business model was consistent income and sales. For example, Nike specifically aimed its Nike Adventure Club subscription box at kids aged 2-10 who are notorious for ruining or growing out of shoes regularly. The subscription (no longer available) had 3 pricing tiers ranging from $20-$50, which adds a healthy and regular boost to Nike’s bottom line.
  • Rich, actionable insights: The subscription models’ added benefit is the data goldmine it creates, which can help businesses better understand ever-changing customer needs and wants. So, you can bet top dollar Nike is using these insights to get ahead. 

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6 Key Takeaways from the Nike Business Model Switch Up

There are a million and one things eCommerce sellers can learn from a Goliath brand like Nike. It’s survived the test of time, modernizing and adapting along the way with great precision. But their decision to enter the subscription market was a brave step, at a time when sneaker subscriptions weren’t common.

Fast forward to today, and just a short glance through subscription industry stats shows exactly what a great idea it was. Here are just a few statistics that highlight the subscription boom:

Subscriptions are so popular they’re even native in Shopify now. The opportunity is huge, and there’s a lot to take away from Nike’s journey that can help you upgrade your eCommerce store with subscriptions:

  1. Go where the money is

One of the first things Nike did right was to choose a sub-niche with excellent growth potential. The Nike Kid’s line had been scaling at 11%, so the market already had proof of concept and success, but there was still room for improvement.

Nike made another notable move to use high-quality goods at affordable prices ($20 -$50), proving subscription boxes don’t need to be dirt cheap to get signups. This strategy undoubtedly helped Nike boost their revenue and profits. 💰

Here are some things you can do to dive into the subscription sales format: 

  • Narrow your segment: Kickstart subscriptions in a defined niche that contains your super fans. Their enthusiasm for the brand makes them more likely to advocate for you, which will help pull in more like-minded shoppers.
  • Analyze your data: Look through your store’s data, find your best performers and profit-makers, and then test these products on a subscription model. You can also bundle related products to increase your average order value. 
  • Price your subscriptions to suit your dream customers: Create a variety of tiers to serve the different needs and budgets of your target audience. For example, within your sub-niche, you may have some customers who would only be interested in a lite plan, whereas others may be more willing to fork out for a premium plan.
  1. Dare to go against the grain

‘Zig while everyone zags’ is a common phrase in the business world, yet it’s easy to get caught up in chasing the latest eCommerce trends to make a quick buck (remember Fidget Spinners? 😅). 

But Nike is the exception. The Nike business model has always had innovation at its core, and the subscription service was just one of its ground-breaking moves to solidify its title as one of the most iconic brands of all time.

Here’s how to follow in Nike’s footsteps to help your store rise above the subscription showdown:

  • Sell what makes your store unique: To figure out what makes your store different, revisit your unique selling proposition (USP). Your brand’s unique style and products are what will keep shoppers hooked. 
  • Assess your territory and plan to make an impact: Scope out the markets you trade in. If there aren’t many stores using subscriptions in your niche, this could be the perfect opportunity to create one and blow your competition out of the water.💥 
  • Target products your competitors aren’t serving: If subscriptions are common in your field, don’t despair. Reach out to your customers for ideas on what they’d like to see in a subscription from your store. Pick out the suggestions your competitors aren’t covering, and you may find an unfulfilled need to cater to with subscriptions. 🔥

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  1. Tap into your loyal customer base and provide an unbeatable customer experience  

There are very few places in the world where Nike isn’t a household name. The sportswear giant knows its clout and decided to capitalize on its popularity. 

Nike used the subscription model to drive stronger connections with its audience by solving their pain points and ensuring their customer experience was second to none. 

For example, in addition to the subscription service, Nike offered outdoor children’s games and guides to help parents manage kids’ technology usage. Nike’s subscription box customers liked it so much that 70% of parents said they’d pay for the guides. 

Here are a few simple ways to build an unforgettable customer experience: 

  • Make customer experience a priority: Just as it is in the Nike business model, your customer experience should be a key strategic area. Research what your customers want out of their shopping experience, then go above and beyond to give it to them. For example, if your customers like to be well-informed before making a purchase, set up blog posts, videos, and social media posts that educate your audience on your products every step of the way.
  • Find your fans and sell to them: Pinpoint die-hard tribe members and create a subscription service tailored to their struggles, likes, and dislikes. This tactic may seem basic, but it’ll help build stronger ties with your biggest supporters, encouraging them to stick around even longer. 🤝🏻
  • Help customers reach their goals: Find out what lifestyle your audience wants to achieve with your products and use your subscription boxes to help them get it.
  • Lean on tech to do the heavy lifting: These days you can use tech to facilitate better customer experiences throughout the customer journey. E.g., chatbots, apps, autoresponders, AI-driven personalization tools, etc.

  1. Build a community around your subscription(s)

It’s one thing to build a community around your store, but it’s a whole other genius level to build an active and engaged community around your subscriptions.

Nike did just that by making their subscriptions a right of passage for future Nike fans. Since the kids using their subscription boxes will grow up wearing Nike, their affinity with the brand will be deeper than those who only connect with the brand later in life.

Nike also tapped into another niche audience by seeking to make a positive impact with its subscriptions. They encouraged subscribers to return worn shoes to them, which would either be recycled or donated — a clever way to get signups from people who want their purchases to make a difference in the world.

Here are some action steps to activate your community:

  • Build a community your audience will be proud of: The community you create should help members reach their goals and improve themselves. You’ll then be able to sell products that support your customers’ journey and attain higher conversion rates.
  • Make drool-worthy offers: Every day, shoppers get requests to sign up to mailing lists and tap into discounts. The outcome? They just aren’t exciting anymore. To close more sales, provide deals that are irresistible to your target customer.
  • Focus on helping your customers win: Aim to outdo the competition by consistently adding value to your subscribers’ lives. For example, skincare company Versed built an engaged community to help each other with their skin concerns and share beauty routines. Think of ways you can do the same for your subscription line.

  1. Use exclusivity and rewards to supercharge engagement and sales 

If there’s one thing the newest addition to the Nike business model has nailed, it’s rewards.

When Nike Adventure Club was still around, it was able to keep members excited and engaged through things like:

  • Early access to products
  • Member-only products
  • Special offers for customer birthdays
  • Free delivery on purchases
  • Complementary resources

These exclusive drops and rewards feed perfectly into today’s FOMO dilemma, making this trick a marketing goldmine.

Here are some pointers for amping up exclusivity in your subscriptions: 

  • Create awe-inspiring products for your subscription boxes: Your subscription-made products should be so good they make your members squeal with happiness when they see the exclusive items. This will keep them excited and anticipating your next drop. 🤩
  • Keep exclusive products exclusive: It’s crucial to ensure subscription box products stay off-limits to unsubscribed shoppers. This will help existing subscribers rationalize their membership and keep your subscription boxes’ unique appeal alive. 
  • Throw in free products and gifts: Providing special treats for subscribers can go a long way to make them feel valued. These don’t need to be expensive — in fact, you can partner with brands who stock items your audience would be interested in and work out a promotional agreement using their products.
  1. Apply personalization to drive customer loyalty

Nike knows its customers incredibly well and uses this information to adapt its infamous Nike business model and products — which is crucial in today’s ultra-competitive market. It’s also how Nike was able to use personalization as a broad differentiation strategy to get their subscribers’ votes. 👌🏽

For example, Nike knew how frustrating it was for parents to constantly search for and replace shoes for their fast-growing kids, and sought to take the pain out of the experience. This detail contributed to their subscription boxes’ success as it solved a current problem.

Here are some tips to win over customers with personalized subscriptions:

  • Personalize your subscription shopping experience: From tailoring product suggestions and tweaking products, there are endless ways to adjust the shopping experience for your customers. It could prove to be a very profitable move as 28% of people use subscription boxes for a personalized experience.
  • Eliminate friction in your customers’ lives: Adjust your subscription services to suit different buyers to increase customer loyalty, slash churn rates, and drive repeat purchases.
  • Solve genuine customer problems: Use subscription boxes to help customers work through and fix annoyances in their life. For example, if you have a fresh food box but shoppers hate chopping, you can offer the option to buy pre-cut ingredients.

Grow Like Nike with Wildly Successful Subscription Boxes

The decision to switch up the Nike business model and take on a growing industry was a bold move, even for a giant like Nike. 

But the footwear megabrand has proved subscription boxes can work for pretty much every eCommerce business (with a little creativity). 

To make your foray into subscription boxes, explore different angles to make your boxes noteworthy. Test before you invest to get proof of concept, and tweak your subscriptions along the way using the data you collect. And don’t forget to look up other subscription boxes to see how they engage audiences and drive sales for all-important inspo.

The subscription box market is an exciting place to be right now for brands and shoppers — so seize this opportunity and reap the rewards for years to come.

Is the subscription model your store’s next big move? Discover how the right eCommerce funding can help you win.

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