Nike Jumps on Artificial Intelligence
AI is revolutionizing Nike. On August 5th, 2019, Nike announced its acquisition of Celect, a predictive analytics company founded in 2013 in Boston. The acquisition is the latest in a series of deals made by Nike to improve their new strategy of selling directly to customers. Celect’s technology will be integrated into Nike’s app and website. Celect’s technology also allows Nike to have the proper inventory to meet customer demands. Better control of inventory will lead to fewer costs and increased profit margins for NIke.
Nike opted to buy Celect rather than spend several years developing a similar platform internally. In an interview, Nike Chief Operating Officer Eric Sprunk said, “It’s really difficult work… predicting the retail shopping patterns and behavior… this [acquisition] gets us much more accelerated.” While Nike has not disclosed the financial details of the deal, Celect’s co-founders will consult with Nike as part of the agreement.
Before their acquisition of Celect, Nike had already acquired other similar companies. In 2016 Nike bought Virgin MEGA, a digital design studio based in New York, backed by Richard Branson’s Virgin Group. Nike bought Virgin MEGA in order to build its SNKRS app, a shoe commerce platform launched in 2015.
In March of 2018, Nike bought New York based consumer data analytics firm Zodiac to accelerate its “digital transformation,” as many of its sales were happening online. In April of 2019, Nike bought Invertex, a Tel Aviv based computer-vision company. Invertex helped develop Nike Fit, a 3D scanner in Nike’s mobile app that helps customers figure out their shoe size. Nike has not released how much it acquired any of these companies for.
According to Sprunk, inventory needs to be planned differently and the consumer should become the ultimate signal of demand. Nike has recently been shifting its business towards direct sales to consumers rather than going through retailers such as Foot Locker. Nike’s direct business sales rose from $9.1 billion in 2017 to $10.4 billion in 2018, an increase of 12%. Direct revenue now accounts for roughly 30% of Nike’s revenue, largely fueled by online growth. Nike’s new strategy seems to be succeeding; Nike shares are up more than 10% year to date.
Nike’s acquisition of Celect is one of a series of deals between companies in the fashion industry and AI companies. For instance, Adidas recently partnered with AI company Findmine, and Under Armour utilizes IBM’s AI technology. AI is pushing the fashion industry towards selling directly to customers and could possibly eliminate intermediaries such as Foot Locker.
Written by Lorenzo Lizzeri, Edited by Willie Turchetta & Alexander Fleiss