Channels24222_Report_Johnson11211063

NIKE AUSTRALIA CHANNEL AUDIT REPORT 1
1Table of Contents
NIKE AUSTRALIA PTY LTD
CHANNEL AUDIT REPORT
MARKETING CHANNELS 24222
JOSHUA CHHAY 10276374
WEIXIN GUO 11497702
ANETTE HANSEN 11182185
ZAC INNES 11226848
LAUREN JOHNSON 11211063
ELIZABETH ROSS 10577423

2Table of Contents
Table of Contents
Executive Summary.................................................................................................................................3
Business Description..............................................................................................................................4
About Nike............................................................................................................................................... 4
Key Milestones....................................................................................................................................... 5
Product Offerings................................................................................................................................... 5
Product Features ................................................................................................................................... 5
Strategic Intent ....................................................................................................................................... 5
Key Strategies........................................................................................................................................ 5
Business Model Framework................................................................................................................. 6
Organisation’s Channel Environment ................................................................................................ 7
Government ............................................................................................................................................ 7
Competitors ............................................................................................................................................ 7
Market ...................................................................................................................................................... 9
Technologies........................................................................................................................................... 9
Profile of Nike Australia’s Channel ................................................................................................... 10
Market Segmentation........................................................................................................................... 10
Distribution Intensity............................................................................................................................. 12
Nike Australia Channel Structure....................................................................................................... 14
Current State of Channel Members................................................................................................... 16
Allocation of Channel Flows ............................................................................................................... 18
Efficiency Template.............................................................................................................................. 21
Service Output Demand Analysis...................................................................................................... 22
Channel Member Behaviour & Coordinating Mechanism........................................................... 24
Channel Conflict ................................................................................................................................... 24
Channel Cooperation........................................................................................................................... 24
Channel Control.................................................................................................................................... 24
Assessment of Channel Performance.............................................................................................. 26
Key Problems and Prospects ............................................................................................................. 27
Gap Analysis......................................................................................................................................... 27
Recommendations................................................................................................................................. 31
Implementation....................................................................................................................................... 33
Bibliography............................................................................................................................................ 34
Appendices.............................................................................................................................................. 36

3Executive Summary
To bring inspiration and innovation to every athlete* in the world.
(*If you have a body, you are an athlete).
Executive Summary
This report provides an audit on Nike Australia Pty Ltd, a wholly-owned subsidiary of US-based
sporting goods giant Nike, Inc. A thorough analysis of Nike Australia’s channel distribution has been
performed and any potential gaps within the channel have been identified. This channel audit report
focuses on Nike’s direct Australian channels and uses retailer Rebel Sport to examine its indirect retail
channels. This report offers several key recommendations to improve Nike Australia’s distribution design.
Information throughout this report was obtained from sources of both a primary and secondary
nature. Secondary research sources encompass industry reports, news articles and Nike’s multiple
websites. Primary research methods used comprise personal interviewing and visitation to the company’s
retail stores. The primary research findings are detailed in the Appendices, as is the list of secondary
sources drawn upon.
This channel audit finds that there exist several demand and supply side gaps that Nike Australia
is able to improve upon. These gaps include customer service, information provision, delivery/waiting time,
spatial convenience, and unnecessarily high physical possession costs. The following recommendations
have been formed based on the gaps found.
First, it is recommended that Nike improve their online e-commerce channel by adding a live-chat
customer service, addition of online fit-technology and social media integration. This would assist in
closing several of the demand-side gaps. It is further proposed that Nike offer tiered service levels to
close the delivery/waiting time gap experienced by some segments. Nike should offer a fast-tracked
delivery time from their online store, improving upon the existing 3-business day estimate.
Another key suggestion is to potential introducing a new intermediary for some of Nike’s goods to
aid in providing consumers with greater convenience. It is recommended that Nike partner with a gym
such as Fitness First, to stock some of their sporting equipment accessories and technology products.
Lastly, it is proposed that in order to reduce potentially unnecessarily high physical possession
costs associated with having the wrong stock or wrong sizes, Nike introduce an in-store purchasing
platform and better track local store demands.

4Business Description
Business Description
About Nike
Established in 1992, Nike Australia is a foreign-owned Australian proprietary company that is
primarily a wholesaler and retailer of sporting footwear, apparel, accessories and equipment. The
company exists as a wholly owned subsidiary of Nike Incorporated, one of the world’s largest and most
valuable sporting brands. Nike is Australia’s largest sports footwear and apparel producer by market
share (Company 360 2013).
In terms of distribution, Nike Australia operates a mix of wholesale contracts and retail stores.
The largest component of Nike Australia’s sales revenue is generated through wholesale contracts with
large sporting goods retailers such as Rebel Sport Limited. The company has Nike retail stores across
Australia. It operates its own factory outlet stores in Sydney, Melbourne, Brisbane and Perth.
Parent company US-based Nike Incorporated was founded as Blue Ribbon Sports in 1964, and
has expanded exponentially since then. The company’s reach extends to over 190 countries, with an
estimated market value of $49.5 billion US dollars; ranking it 136
th
on the Fortune 500 list and deeming it
the largest apparel chain worldwide (Forbes Magazine 2012).
Integral to Nike’s significant company value and size has been the utilisation of memorable
marketing. This encompasses slogans (Just Do It), heavy endorsement/sponsorship of professional
athletes and sporting teams across a wide range of sports (Manchester United, Rafael Nadal and the
NFL), memorable campaigns (2002 Move campaign) and innovative branding measures (Air Jordan’s).
Key Milestones
Notable milestones for both Nike Australia and the wider corporation include:
 1964 Blue Ribbon Sports founded by Bill Bowerman and Phil Knight
 1972 The first line of Nike shoes are released bearing the now widely known Swoosh logo
 1978 Blue Ribbon Sports officially changed its name to Nike
 1988 Nike’s tagline ‘Just Do It’ is introduced
 1992 Nike Australia introduced as a localised channel for sales
 1998 Nike opens its first branded Niketown franchise in Australia in Melbourne

Product Offerings
Refer to Appendix A: Product Offerings.
Nike Australia offers athletic goods including footwear, apparel and equipment for females, males
and children. They provide sport-specific products and product ranges such as Nike Golf and Nike Soccer.
A significant part of the company’s product offering is footwear. Nike produces and sells footwear
for specific athletic use, such as running, soccer, and basketball (Company 360 2013). Additionally, the
company offers sports-inspired shoes for casual and leisure use.
Nike sells sports apparel and gear for many of the sporting activities for which it offers footwear.
Nike's apparel product line comprises sports-inspired lifestyle clothes, bags and other accessory items.
Many consumers wear Nike clothes not just for sports activities but also for brand status. The company
sells performance equipment including bags, socks, balls, eyewear, watches, electronic devices such as
the Nike Fuel Band, protective equipment and other sports equipment like yoga mats (MarketLine 2013).
Product Features
Product features vary from product to product, but general features infused into products include:
 Modern design with Nike branding.
 Availability in a variety of different colours.
 Performance or comfort enhancing technology.
 A key example is the FlyKnit technology incorporated in Nike shoes. It is a micro-engineered
yarn and knit structure that is structured and durable. It enables the wearer to attain a snug fit
that goes virtually unnoticed (Nike 2013)
 Consumer technology.
 Many of Nike’s products have integrated technology, such as the Nike FuelBand, a wearable
band that tracks daily activity. Nike is also well known for their Nike + iPod collaboration with
Apple, that lets the user receive feedback on their run.
Strategic Intent
Nike’s mission statement is “To bring inspiration and innovation to every athlete* in the world (*If
you have a body, you are an athlete)”. The company explicates that they strive for innovation to serve the
athlete, innovation to grow the company, and innovation to inspire the world (Nike, Inc. 2013).
Key Strategies
Global Distribution Network
Nike operates a global production and distribution network, aiding in the achievement of low
manufacturing costs, economies of scale, and ultimately a competitive advantage. To ensure a low cost
of production, the large majority of Nike’s products are manufactured by countries in Asia, with the
company holding manufacturing agreements with independent factories (Data Monitor 2013).
Brand Equity
Nike’s robust market position is bolstered by strong brand equity. Nike makes a significant
investment in marketing activities to impart the significant competitive edge of strong brand recognition
and preference (Data Monitor 2013). Key examples include their Swoosh branding, and targeting of high-
profile sponsorships, such as Tiger Woods (1996) and the Australian football team, the Western Sydney
Wanderers (2012).

Responding to Consumer Preferences
As a company that produces consumer products, one of Nike’s key strategies is responding to
changes in consumer preferences. Responding to such changes entails modifying existing offerings as
well as developing new products and product categories (Nike, Inc. 2012).
Unleashing Innovation
Innovation lies at the heart of Nike’s strategy, placing emphasis on innovation in both product
design and manufacturing, and business practice. Technical product innovations introduced in 2012
include the digital technology and community NIKE FuelBand. Another innovation is the FlyKnit
technology which is used in the creation of many of Nike’s shoes. Nike was named number one most
innovative company of 2012 by Fast Company.
Utilising Trademarks and Patents
Nike seeks out trademarks and patents for a large array of its inventions, designs, and
improvements. Notable examples include the aforementioned Swoosh and the Fly Knit technology. Using
trademarks and patents aids in creating a market for their products and also in identifying their brand and
distinguishing their goods from competitors’.
Business Model Framework
See Appendix: B for an overview of Nike Australia’s business model.
Nike Core Capabilities
Strengths
 Strong brand equity
 Broad distribution network
 Technical product innovation
Weaknesses
 Limited control over contract manufacturers
 Dependence on third-party manufacturers

7Organisation’s Channel Environment
Organisation’s Channel Environment
Government
Australian Consumer Law (ACL)
As a consumer-centric organisation where the end-user is a primary focus, it is important for Nike
Australia to abide by Australia’s national consumer law. This is overseen and enforced jointly by the
Australian Competition and Consumer Commission and State and Territory consumer protection
agencies (Australian Government 2013). Abiding by ACL ensures that, amongst other affairs, the
company and the consumer participate in fair contracts, and practices relating to price and consumer
information are enforced.
Fair Work Commission (FWC)
The FWC is the Australian industrial relations tribunal, and an important influence on determining
the structure of Nike Australia’s channels. The FWC's functions notably include the fixing and varying of
modern awards and determining the minimum wage. The influence of the FWC on Nike’s channel
structure is primarily concerned with the business’s decision to maintain the outsourcing of manufacturing
to countries where the minimum wage is lower.
Intellectual Property Legislation
Intellectual property rights are of great concern to Nike, whose trademarks and patents ensure a
competitive advantage and protection from counterfeit products (Nike, Inc. 2012). Nike adheres to
Australian intellectual property legislation, such as the Patents Act (1990) and Trade Marks Act (1995),
which provides the foundation for patent, trade mark and design rights systems. Securing rights to their
trademarks and patents means that Nike can conduct business and organise distribution without
challenge from imitation or counterfeit products, and reflect the full power of its brand and competitive
position.
Occupational Health and Safety (OH&S)
Nike must also comply with OH&S standards, which are particularly pertinent to Nike’s operation
of the retail stores it owns. OH&S ensures businesses create a safe work environment for their
employees with safe systems of work. Failure to comply with OH&S standards can result in prosecution
and a fine (Australian Government 2013).
Importing Regulations
Nike imports the goods it manufacturers overseas into Australia, and therefore are implicated by
importing regulations and costs. Nike must abide by the pertaining government regulations, duty taxes,
import taxes and other similar components. If Nike does not abide by such regulations they risk breaking
the law and not receiving the merchandise, which can greatly impact on their business operations
(Australian Government 2013).
Competitors
Nike faces intense competition within the Sporting Footwear, Clothing & Equipment industry, which
has relatively low barriers to entry. The aim of remaining competitive greatly shapes Nike’s distribution
channel. Nike acknowledges that costs of production, e-commerce and customer service are amongst
key areas that they intensely compete on (Nike, Inc. 2012). Thus, Nike commits to low-cost production,
offers an e-commerce store, and provides customer’s service in all channels. Competition in the form of

fakes or imitations is greatly limited by Nike’s securement of patents and copyright on their branding and
products.
Direct Competitors
adidas
There are 16 adidas stores (including factory outlets) in Australia, in addition to independent
sports retail stores that offer adidas product. adidas is amongst the biggest sports brands in Australia
(adidas, 2013). adidas offers 10 ranges of original shoes, an assortment of apparel and a wide variety of
sports gear for male, female and children. adidas also operates internationally with 840 factories all over
the world, competing with Nike on a global scale.
ASICS
ASICS is another strong competitor with Nike in the Australian market. There are 10 stores
Australia wide, in addition to all other retail sports chains that sell ASICS products. ASICS provides a
sophisticated customisation program on their website, allowing the customers find the most suitable shoe
option in terms of fit (ASICS, 2013).
Puma
Puma does not have any official stores in Australia, but offer their products through intermediaries
such as Westfield and Footlocker. Puma have their own online store and products are also offered by
other online retailers. Puma mainly offer shoes and clothes, but also have some assortment of fan gear
and accessories (Puma, 2013).
Lorna Jane
Lorna Jane is a key competitor for Nike in the women’s sporting apparel industry, with the
company experiencing tremendous growth since their first store opening in 1990. Lorna Jane operates
125 stores across Australia, run an Australian and a United States online store, and has 15 stores in
California.
Figure 1. Nike Australia’s Competitors

Indirect Competitors
Bonds
Bonds Australia, whilst mainly specialising in underwear, branches out into clothing that is
exercise appropriate. Bonds targets both males and females, with an affordable range of sporty lifestyle
products. Bonds are stocked by many retailers including Myer, Target, David Jones, Coles (Bonds 2013).
Customers are also able to purchase Bond’s product through their online store. A Neilson’s research
survey ‘Superbrands’ found 60% of respondents owned Bonds exercise clothing, the highest percentage
of any brand mentioned within the report (Superbrands, 2012).
Target
Target is a mid-market department store that offers customers a wide range of products, notably
including sporting and lifestyle apparel and footwear. Target has a large offering of women’s activewear,
including Target brands Moda, Piping Hot and T30 (Target, 2013). There are over 300 Target and Target
Country stores across Australia.
Market
Economic Factors
Uncertainty in the economy has significant potential to implicate many businesses and their
distribution channels. As a consumer oriented business, resulting declines in consumer confidence and
spending could have an unfavourable effect on Nike Australia’s business, operating results, and financial
condition. Despite Australia’s emergence from a significant economic downturn, an almost return to full
employment, and Reserve Bank interest rate cuts, consumer sentiment remains fragile (Westpac 2013).
Socio-Cultural Factors
High Rates of Social Networking Usage
Social networking usage is widespread and an increasing important part of consumer-facing
business. Australia’s social media penetration is the second-highest of Australasia, with 89% of
Australia’s internet users visiting a social networking site each month (The Social Skinny, 2012). 62% of
Australian internet users use social media sites, and of those users 36% access social networking sites at
least once a day (The AIMIA Yellow Social Media Report 2012).
Brand Conscious Consumers
An established socio-cultural trend is for consumers to purchase brand-name items because they
act as ‘status symbols’; an external indication of one's social or economic position (Cherrington 1994).
Nike’s strong branding and premium positioning in the market means that many of its products can be
regarded as status symbols. Consumers will purchase Nike products to accrue the positive connotations
that the branded-item reflects.
Technology
The Rise of E-Commerce
Expenditure through e-commerce platforms has experienced exponential growth since the rise of
the internet, and will sustain solid momentum into the future. In 2012, 9.6 million Australians made online
shopping purchases, and it is predicted that over the course of 2013 that 88% of Australian online
shoppers will maintain or increase their online expenditure (PwC and Frost & Sullivan 2012).

10Nike Australia Channel Profile
Nike Australia Channel Profile
Market Segmentation
Segmentation Strategy
Nike’s market segmentation strategy may best be described through 3 key methods of dissection:
 Demographic
 Geographic
 Psychographic
Demographic
Nike does not have a precise demographic when segmenting their market on the common basis’
of age, gender, income and education level. Due to the universal nature of Nike’s product, their marketing
approaches are broad. Their demographic can be summarised as relatively young to middle-aged
individuals, between the ages of 18 and 35.
Geographic
The majority of Nike’s retail outlets are within major cities and Nike also selects distributors
operating within similar regions that hold a high population density. Constant exposure to potential
consumers ensures higher adoption rates of their products. As consumers seek to replicate fellow
consumers with products that become ingrained within a culture, Nike capitalises on this phenomena
through their geographic placement, as evidenced by their current performance.
Psychographic
Nike segments its market by psychographics in several key ways. Firstly, Nike uses lifestyle to
segment its market. Nike seeks to target buyers who seek high-quality sports gear while they engage in
an active lifestyle. Psychographic segmentation can also be seen in Nike’s utilisation of their
understanding of consumer behaviour. Nike experiences high degrees of brand loyalty and high product
adoption rates, particularly in their footwear product category. Nike seeks to leverage this behaviour and
target those that exhibit this buying behaviour.
Key Segments
The above market segmentation methods define Nike’s target demographics as:
 Brand Loyals
 Casual Customers
 Students
 Young Workers
 Performance Seekers
While these segments can be considered Nike’s key target groups, it must be recognised that the
product offerings appeal to a wider market. This is ultimately demonstrated via their position as market
leader and wide use of their primary product of footwear as casual wear.
Brand Loyals
Sportswear, particularly footwear, is an item with a culture of enthusiasts behind it. Many
consumers eagerly await product launches in order to expand their collection. Nike sees this niche as a
profitable consumer group. Nike release of extensive product ranges as well frequently launching ‘Limited
Edition’ models. A notable example is the release of Nike’s “Back to the Future” sneakers modelled off
the memorable footwear of Michael J. Fox’s footwear as Marty McFly in the cult classic ‘Back To The

Future.’ The release of this shoe, which sold out in minutes at extremely high prices, has demonstrated to
Nike the potential for profit within this market, with these shoe’s now circulating in excess of tens of
thousands of dollars (Skidmore 2011).
Performance Seekers
This consumer group places a high emphasis on quality sporting equipment and sportswear in
order to succeed in their athletic pursuits. Nike, as the market leader in this field will naturally be
perceived to have a superior product both through the product offering as well as their history of ‘cutting-
edge’ innovation in the field of sportswear in order to maximise potential athletic performance.
Casual Customers
This consumer group is not as intensive as performance seekers or athletes but still partake in
exercise and/or general lifestyle activity. With Nike’s strong brand and positive reputation, individuals
have a pre-existing motive to purchase Nike products. Nike appeals to this consumer group sector with
their extensive product range covering a large variety of sportswear and exercise equipment. They may
purchase from any of Nike’s product categories, and are the segment more likely to purchase Nike’s
casualwear apparel. Through their distribution strategy, Nike has made these products easily accessible
to this consumer group.
Young Workers
The young worker demographic is another noteworthy segment. This segment falls within the 18-
35 age bracket. These individuals will generally lead active, busy lives that may incorporate sporting
activity. Nike’s products may appeal to this consumer group due to the versatility of the company’s
footwear, as well as the casual nature of the apparel.
Students
A large number of students fall directly into Nike’s core demographic. In the pursuit of either
casualwear or athleticism, this demographic sees Nike as holding notable brand value. This segment
generally has a more constrained budget than other segments, so purchases are often one-off for items
such as footwear, or lower-value items, such as accessories.

Channel Intensity
Nike’s channel intensity is classified as selective distribution. Nike Australia offers their product
through a number of retailers and resellers including their own official Nike stores. Although distribution
intensity is high, it would still be classified as a selective distribution market, as Nike products are not a
low involvement product, and there exists a strict licensing policy for retailers to carry Nike as a brand.
Through their selective distribution system, Nike gain maximum control over their brand, as only approved
retailers and outlets can sell Nike.
Figure 2.1 Nike Australia’s Selective Distribution Strategy
There are the 12 official Nike stores in Sydney metropolitan area. Using Sydney as an example, a
selective distribution strategy allows Nike to have maximum control over its channel members. In Figure
2.3 the red balloons, representing Nike stores, illustrate the relative exclusiveness of Nike stores in
Sydney (Nike, 2013, Google Maps).
Figure 2.2 Nike Australia Official Stores in Sydney Metropolitan Area (Selective Distribution Strategy)

Nike has implemented a focused distribution strategy, concentrating distribution towards the
largest cities and capitals in Australia, Sydney, Melbourne, Adelaide and Brisbane in addition to a large
town, Gold Coast. In addition to the exclusive Nike stores, there are also licensed retailer stores, as
illustrated above.
Figure 2.3 Nike Australia’s Focused Selective Distribution Strategy

Manufacturer
Nike
Australian
Distribution
Centre
Rebel Sport
Distribution
Centre
Rebel Sport
Store
End-user
Manufacturer
Nike Australian
Distribution
Centre
End-user
Manufacturer
Nike
Australian
Distribution
Centre
Nike Store End-user
Manufacturer
Nike
Australian
Distribution
Centre
Rebel Sport
Distribution
Centre
End-user
Channel Structure
Nike Australia operates a multi-channel distribution strategy. The design of Nike’s channels varies
depending on the service, location, and the needs of the consumers. For the purpose of this audit, we
focus on Nike’s direct marketing channels and use Rebel Sport to examine Nike’s indirect retail channels.
Nike Stores
Nike’s products are sold directly to consumers through Nike physical retail stores. Nike’s products
are produced at third-party production facilities outside of Australia, and then arrive at Nike’s Australian
distribution centre. They then progress to Nike’s physical stores across Australia, before lastly being
placed in the hands of the end consumer.
Figure 3.1: Nike Stores Channel Structure
Nike Online Store
Nike’s products are sold directly to end through its Australian online store. As with the Nike
physical store channel, the products are produced at a third-party manufacturer and then shipped to
Nike’s Australian distribution centre. The online order is fulfilled by the distribution centre and sent to the
end-user.
Figure 3.2: Nike Online Store Channel Structure
Rebel Sport Stores
After arriving at the Nike distribution centre, the products are then distributed to Rebel Sport’s
Distribution Centre. From here, stock is distributed to the Rebel Sport physical stores across Australia.
Figure 3.3: Rebel Sport Store Channel Structure
Rebel Sport Online Store
This channel is largely similar to the Rebel Sport Stores channel, except instead of stock being
shipped to Rebel Sport retail stores, the product is sent to fulfil individual customer’s online orders.
Figure 3.4: Rebel Sport Store Channel Structure

MANUFACTURER
NIKE AUSTRALIAN
DISTRIBUTION
CENTRE
REBEL SPORT
DISTRIBTUION
CENTRE
END-USER
REBEL SPORT
STORE
END-USER
NIKE RETAIL
STORE
END-USER
END-USER
Figure 3.5 Nike Australia’s Distribution Channels Structure

Current State of Channel Flows
Manufacturer: Independent Third-Party Production
Effectively all of Nike Inc.’s production of footwear, apparel, and equipment is outsourced to
independent contract manufacturers, which are largely located in Asia. In fiscal 2012, contract factories in
Vietnam, China and Indonesia manufactured approximately 41%, 32% and 25% of total footwear
respectively. Almost all apparel is manufactured by manufacturers located in 28 countries (Data Monitor
2013). Nike takes care to ensure that individual factories do not account for a significant percent of total
production, with the largest single factories accounting for approximately 5-8% of production (Nike, Inc.
2012).
Regulation of government wages has evidently influenced Nike to outsource production overseas
where the minimum wage is lower. Nike Australia imports the products for sale in Australia. This is in
contrast with Nike’s manufacturing arrangement in countries such as India and Mexico where product is
able to be produced in those countries that is primarily for sale within those countries.
Intense competition has also shaped the choice to have third party manufacturing in countries to
ensure low-cost production. Nike acknowledges that costs of production and securing contract
manufacturers that provide this are vital to remaining competitive (Nike, Inc. 2012).
Nike Distribution Centre: Third-Party Operation
Nike Australia distributes its products to its retailers and consumers through its single Australian
distribution centre located in Altona, North Victoria, operated by Toll Group as of 2000. The centre is an
18,000 square metre custom-built warehouse conducts full RF receiving, put away, picking and dispatch
functionality, and the ability to handle in excess of 24,000 stock keeping units (SKU’s).
The influence of the rise of e-commerce technology and the subsequent need for an integrated
distribution centre is evident, as Nike has chosen to combine all of its logistical functions into one, fully
functioning distribution centre.
Rebel Sport Distribution Centre: Third-Party Operation
Rebel Sport contracts one third-party logistics service, Supply-LINQ, to operate their distribution
warehouse. Supply-LINQ performs value adding processes including making merchandise floor ready,
sending products to Rebel Sport retail stores, fulfilling e-commerce orders and return logistics. Rebel
Sport use multiple courier companies automatically selected based on the goods being shipped, the size
and weight, delivery pick-up address and delivery location address (Rebel Sport 2013).
Nike Stores
There are 29 Nike retail stores located Australia-wide. This is a franchise agreement operated by
Retail Prodigy Group, who holds the master franchise agreement. Nike operates its own factory outlet
stores in Sydney, Melbourne, Brisbane and Perth. Nike stores are located in plaza style shopping
complexes and upscale malls. Each store acts as part of its surrounding community with an individual
Facebook page and participation in local Nike initiatives, such as the 2013 We Run Sydney event. The
stores product offerings vary from store to store.

Rebel Sport Stores
There are 91 Rebel Sport stores nationwide, with stores in each Australian state. Any single
Australian retailer can carry up to a maximum of 25% of the Nike product (Company 360 2013). Rebel
Sport stocks Nike footwear, apparel and equipment, including the Nike golf range.
Nike Online Store
The Australian e-commerce store offers the vast majority of Nike’s Australian product offering,
selling apparel, footwear, and gear for women, men, and children. It is a separate website to the Nike
Australia website, offering customer service and other-purchase related information. It has a ‘store finder’
where users can locate their nearest store location. It also offers gift cards that can be redeemable in
either the online store or a physical store.
Rebel Sport Online Store
Rebel Sport operates an online store that stocks Nike products. Rebel Sports website provides
information and customer service, including an Ask and Answer functionality where consumers are able
to ask questions about a product. Rebel Sport’s website also has a ‘store finder’ where users can locate
their nearest store location.
Nike Australia Headquarters: Channel Captain
Nike Australia has a head office located in Abbotsford in Victoria, as well as in Rosebery, New
South Wales. Nike headquarters act as the channel captain, coordinating the distribution of Nike products
in Australia and localising Nike Inc.’s strategy.
Rebel Sport Headquarters
Rebel Sport Limited headquarters are located in Silverwater, New South Wales. This channel
member acts as the channel captain for Rebel Sport’s distribution strategy. They perform key flows such
as promotion, ownership, and payment.

Allocation of Channel Flows
FLOWS
KEY CHANNEL MEMBERS
NIKE REBEL SPORT
Nike Australia
Headquarters:
Channel
Captain
Third Party
Manufacturers
Nike
Distribution
Centre: Third
Party Operation
Nike Stores
Rebel Sport
Headquarters
Rebel Sport
Distribution
Centre: Third
Party Operation
Rebel Sport
Stores
Physical
Possession
N/A
Manufacturers
initially assume
possession of
product.
Third-party storage
facility that
assumes
possession.
Floor and stock
room storage
space.
N/A
Third-party storage
facility that
assumes
possession.
Floor and stock
room storage
space.
Ownership
Nike takes
ownership until
physical
possession
changes hands
with companies
operating in Rebel
Sport’s distribution
chain.
Nike has
ownership of
inventory.
Nike owns the
physical inventory,
although it is at this
stage it may be
later distributed to
retailers or end-
users. Ownership
would then transfer
to these parties.
Nike takes
ownership of
inventory.
Rebel Sport takes
ownership when
physical
possession is
transferred from
Nike to Rebel
Sport distribution
centre.
Rebel Sport now
owns the physical
inventory, although
may be later
distributed to end-
users, in which
case ownership
would transfer.
Rebel Sport takes
ownership of
inventory.
Promotion  Advertising
 Website
 Online Store
 Publicity
 Online store
customer
No promotion
undertaken on
firm’s behalf.
No promotion
undertaken on
firm’s behalf.
 Personal
selling
 Customer
service
 Sales
promotion
 Website
 Advertising
 Online store
customer
service
No promotion
undertaken on
firm’s behalf.
 Personal
selling
 Customer
service
 Sales
promotion
 Catalogues

service
 Individual
store
Facebook
page
 Publicity
Negotiation/
Financing
 Costs of
personal time
and legal
costs when
negotiating
contract with
manufacturer,
retailer,
franchisor, and
distribution
centre.
 Credit terms.
 Account
keeping fees.
 Costs of
personal time
and legal
costs when
negotiating
contract with
Nike, Inc.
 Account
keeping fees.
 Cost of
personal time
and legal
costs when
negotiating
contract with
Nike Australia.
 Account
keeping fees.
Cost in personnel
time to negotiate
order.
 Cost of
personal time
to negotiate
payment
terms.
 Cost of
personal time
to negotiate
with
distribution
centre.
 Terms and
conditions of
sale.
No negotiation or
financing costs
directly resulting
from Nike channel
operations.
Cost in personnel
time to negotiate
order.
Risking  Nike assumes
full risk of
product until
Rebel Sport
take
ownership.
 Business
interruption
insurance.
 Product
insurance.
 After-sales
service costs.
Nike assumes full
risk of product.
Nike assumes full
risk of product.
Nike assumes full
risk of product.
When Rebel Sport
takes ownership,
they assume full
risk, including
product insurance
and cost of product
returns.
Nike assumes
limited liability of
product as Rebel
Sport takes
ownership.
Nike assumes
limited liability of
product as Rebel
Sport takes
ownership.

Figure 4. Allocation of Channel Flows
Ordering/
Payment
Collections and
bad debt costs.
Collections.
Order processing
costs received
from online store
and retail stores.
 Store manager
orders
merchandise
through online
portal Nike Biz
 Order
payment by
Retail Prodigy
Group.
Order-processing
costs associated
with Nike product
orders.
Order-processing
costs associated
with Nike product
orders.
Store policy
recently evolved so
now Head Office is
responsible for all
ordering and
payment.

Efficiency Template
Refer to Appendix C: Efficiency Template for an overview of how effective Nike Australia’s
channels are performing with the various channel flows.
Efficiency Template Commentary
The following three (3) channel flows represent a significant cost for Nike Australia’s channel
framework: Physical Possession, Ownership and Promotion.
Physical Possession
The physical cost of selling Nike products is high because goods are mass produced overseas
and imported to Australia, requiring transportation by third parties over large geographic distances. This
activity primarily encompasses shipping costs, freight, tariffs, importing fees and other associated costs.
Nike may also experience delays in production, which can require the use of faster, but more expensive
transportation methods such as an aircraft (Nike, Inc. 2012). This cost is covered by the channel captain,
Nike Australia. Once the goods have arrived in Australia parties encounter transportation and stocking
costs associated with getting the product to the final consumer.
Ownership
The cost of ownership is relatively high because Nike makes use of retailer’s distribution
frameworks which requires the transfer of ownership. This necessitates inventory carrying costs to be
shared by both the retailer and the channel captain. When retailers with large distribution frameworks
take ownership of Nike products, there is greater availability of products and Nike is better able to meet
the service output demands of consumers.
Promotion
Promotion is the second most significant cost, owing to the highly competitive nature of the
sporting apparel and footwear industry and Nike’s aggressive marketing and brand-leadership strategy.
Nike Australian executes extensive pull integrated campaigns yearly, as well as some push promotional
tactics. An example of a recent pull campaign is 2013’s She Runs the Night which used advertising,
website integration with Cosmopolitan magazine and publicity (Marketing Magazine 2013). Retailers such
as Rebel Sport also incur promotional costs to promote the availability of Nike products at their stores.

Service Output Demand Analysis
The following section identifies the various service outputs offered by Nike Australia in order to
satisfy their target market. Figure 5 depicts the demand for service outputs within each of the identified
segments.
SEGMENT NAME
BULK-
BREAKING
SPATIAL
CONVENIENCE
DELIVERY/
WAITING TIME
ASSORTMENT/
VARIETY
CUSTOMER
SERVICE
INFORMATION
PROVISION
Brand Loyals High Medium High High High High
Casual
Customers
High Medium Medium Medium Medium Medium
Students High High Medium Low Low Medium
Young
Workers
High High Medium Medium Medium High
Performance
Seekers
High Medium Medium High High High
Figure 5. Service Output Demand Analysis
Bulk-Breaking
Nike products are largely sold and purchased in single units for individual use, especially given
Nike’s premium pricing strategy. All segments have a high degree of demand for bulk-breaking.
Spatial Convenience
Nike’s channels offer moderate convenience for its customers, through a selective distribution
framework with many sporting good chains such as Athletes Foot and Rebel Sport, and online stores that
deliver nationwide. The physical stores are located primarily in shopping centres and complexes.
Brand Loyals and Performance Seekers have a medium demand for spatial convenience, as they
have a strong preference for the product and will generally seek out a store if one is not optimally located.
Casual Customers also have a medium demand, as they may not have a strong preference about where
they will purchase from. Young workers and Students demand great convenience that ideally coincides
with their busy lifestyles.
Delivery and Waiting Time
Face to face segments have minimal waiting time because there is immediate access to products
and staff. Online stores, both Nike’s and Rebel Sports, have a satisfactory estimated delivery time. Rebel
Sport have a delivery time between 2 - 10 business days after dispatch for smaller items, and 3 - 10
business days after dispatch for larger items, depending on the delivery location (Rebel Sport 2013). Nike
Online Store has an expected delivery time of three business days.
Most segments have a medium demand for delivery and waiting time and will wait the required
time for delivery. Brand Loyals represent a segment that has a high demand for a shorter delivery time,
especially in the instance of new product releases.

Assortment/Variety
Nike offers considerable assortment and variety, offering footwear, apparel, and equipment for a
variety of different sports and sporting activities (See Product Offering).
Brand Loyals and Performance Seekers demand a high level of assortment and variety as
demonstrate clear passion for the brand and its product. Students have a low demand for assortment and
variety given their constrained income, and therefore may only seek to purchase smaller sporting items,
or a one-off more expensive item such as footwear.
Customer Service
Customer service is available in all of Nike’s channels. Customer service is offered on the
channels online stores (by both Rebel Sport and Nike)via a direct telephone line and an email contact. In-
store, customer service is offered in the form of customer assistants. Nike employees receive customer
service training as part of their initial training upon employment.
Performance Seekers necessitate a high level of customer service, as attaining the correct fit and
product may be integral to their athletic endeavours. Brand Loyals may require greater customer service
when seeking out new items. As aforementioned, Students will generally purchase fewer items, or
smaller-ticked items like sporting accessories. Therefore, the student segment requires minimal customer
service.
Information Provision
Information is freely available in-stores, with both Nike and Rebel Sport educating sales
assistants on the products stocked. Both online stores offer product information and specifications, as
well as customer product reviews and ratings.

24Channel Member Behaviour and Coordinating Mechanism
Channel Member Behaviour and Coordinating Mechanism
Channel Conflict
There are three (3) key sources of potential channel conflict within Nike’s Australian distribution
channels.
Multi-Channel Distribution Conflict
Nike Australia’s multi-channel strategy has inherent potential sources of conflict, with particular
regard to online availability. Nike’s product is stocked on its own online store as well as on its retailer’s
online stores. Customers can free-ride, gaining service from one of Nike’s channels while placing its
business with another channel. These notions are supported by the research report Managing Conflict to
Improve the Effectiveness of Retail Networks (Bradford et al 2003), which suggests that complex
distribution networks can result in competition between business networks rather than competition
between individual firms. This overall presents the possibility of downstream channel members to lose
motivation, provide preferential treatment to Nike products (in the case of retailers) or even retaliate.
Intra-Channel Conflict
Although Nike operates a selective distribution framework, conflict can occur when multiple types
of channels represent Nike’s products to the same geographical market. This occurs frequently, as Nike
products are often available from two or more retailers in large shopping centres. The potential for
competitors to have the same brand can erode market share and subsequently establishes danger of
channel conflict.
Degree of Category Exclusivity Conflict
Rebel Sport, like Nike’s other retailers, is never completely exclusive to a single vendor. Rebel
Sport carries a large assortment of brands including many of Nike’s competitors such as adidas and Asics.
This creates an inbuilt source of conflict in the channel as manufacturers would prefer more exclusive
coverage.
Channel Cooperation
Although Nike Australia’s multi-channel strategy imbues a potential source of conflict within the
channel, Nike’s channels have achieved cooperation by attempting to minimise the effects of such a
strategy. All stores’ that stock Nike products have consistent pricing of product with minimal sales
promotion, and this means that the channels do not compete with each other on price, which could
exacerbate the conflict. They promote the location of physical stores with ‘store finders’, emphasising the
potential to purchase products through other channels (Nike 2013). Nike Australia ultimately aims to
lessen the potential for conflict to arise by encouraging channel collaboration.
Further effort has been taken to minimise conflict, with specific regard to gift cards. Nike’s online
store offers the end-user the option to purchase a voucher that is either redeemable online or in a Nike
retail store, and not both (Nike 2013). Online vouchers are not valid at a retail outlet, and vice versa. The
agreement not to use the online vouchers at a retail outlet is to remove the conflict, as the up-front
payment of these vouchers is paid directly to Nike Australia through their online channel. Therefore the
retailer would be out of pocket if they were to service this group of customers. Moreover, the promotion of
physical store vouchers on the online store further promotes cross-channel cooperation.

25Channel Member Behaviour and Coordinating Mechanism
Channel Control
All products are sourced from the major company of Nike, Inc. which means that Nike, Inc. will always
control the channel at some point of the transaction. Nike Australia is the channel captain, coordinating all
channel activity in Australia. Worldwide marketing and promotion schemes sourced from Nike Inc. are
adopted by the local arms of the company.
Nike products can be purchased from various vendors, such as Rebel Sport. After the products are
passed on into the vendor’s inventory, the market & distribution channel of the product is their sole
responsibility.
Nike’s physical retail stores are controlled by Retail Prodigy Group, who holds the master franchise
agreement with Nike Australia.

26Assessment of Channel Performance
Assessment of Channel Performance
Based on the Environmental Review, Channel Profile and Gap Analysis (see following section Key
Problems and Prospects), the most significant factors impacting Nike Australia’s performance can be
summarised as follows:
 Strong competitive environment. This has shaped the structure, members, and flows of Nike
Australia’s channel design. See Competitors section.
 Nike’s operation of a multi-channel distribution strategy. This is a key source of potential conflict
embedded within the distribution chain design. It requires cooperation and interrelation for efficiency
and customer satisfaction.
 The rise and importance of e-commerce as a distribution channel. This drastically influences
Nike’s profiled channels, as highlighted by the Gap Analysis. E-commerce is an increasingly popular
channel and therefore requires company focus and development of their online offering. It also places
pressure on the physical stores to improve their offering (Taylor Woodings 2012).
Gap Analysis
A Demand and Supply Side Gap Analysis (see Key Problems and Prospects) has been
conducted. This provides insight into the channels current performance and its relationship with the above
factors. The main gaps have been identified, and the following section explains the important demand
side gaps.
Spatial Convenience
Service output demanded (SOD) is greater than service output supplied (SOS) for the segments
Students and Young Workers. Students and Young Workers represent busy individuals who have a high
demand level for convenience. Nike’s selective distribution strategy, where physical stores are mainly
located in shopping complexes, can be considered the cause of this gap.
Delivery/Waiting Time
SOD is greater than SOS for Brand Loyals, who have a high demand level. It has been
recognised that this segment has a strong demand for a shorter delivery time, especially in the case of
pre-ordered items, new releases, or limited additions. This segment would be willing to pay an
incremental fee for a faster delivery of Nike’s product.
Customer Service
SOD is greater than SOS for Brand Loyals, Casual Customers and Performance Seekers. These
consumers represent segments that desire a great deal of service. Brand Loyals and Casual Customers
both primarily make purchases through Nike’s e-commerce channels, and thus customer service via this
channel also necessitates attention.
Information Provision
SOS is less than SOS for Casual Customers and Students, who have a medium demand level for
this service output. Casual Customers’ and Students’ main channels of purchase include Nike’s e-
commerce channel.

27Key Problems and Prospects
Key Problems and Prospects
DEMAND-SIDE GAP ANALYSIS
SERVICE OUTPUT LEVEL DEMANDED (SOD) VS. SERVICE OUTPUT LEVEL SUPPLIED (SOS)
SEGMENT
NAME
BULK BREAKING
SPATIAL
CONVENIENCE
DELIVERY/
WAITING TIME
ASSORTMENT/
VARIETY
CUSTOMER
SERVICE
INFORMATION
PROVISION
MAJOR
CHANNEL FOR
SEGMENT
DEMAND
LEVEL
DEMAND
LEVEL
DEMAND
LEVEL
DEMAND
LEVEL
DEMAND
LEVEL
DEMAND
LEVEL
Brand Loyals SOD = SOS High SOD < SOS Medium SOD > SOS High SOD > SOS High SOD > SOS High SOD = SOS High
Nike Retail Stores
E-commerce Stores
Casual
Customers
SOD = SOS High SOD = SOS Medium SOD = SOS Medium SOD = SOS Medium SOD > SOS Medium SOD > SOS Medium Any retail channel
Students SOD = SOS High SOD > SOS High SOD = SOS Medium SOD = SOS Low SOD = SOS Low SOD > SOS Medium
Rebel Sport Stores
E-commerce Stores
Young
Workers
SOD = SOS High SOD > SOS High SOD = SOS Medium SOD = SOS Medium SOD = SOS Medium SOD = SOS High
Rebel Sport Stores
E-commerce Stores
Performance
Seekers
SOD = SOS High SOD < SOS Medium SOD = SOS Medium SOD > SOS High SOD > SOS High SOD = SOS High Nike Retail Stores

SUPPLY-SIDE GAP ANALYSIS
CHANNEL
TARGET
SEMENT
CHANNEL MEMBERS
AND FLOWS
PERFORMED
ENVIRONMENTAL /
MANAGERIAL
BOUNDS
SUPPLY SIDE GAPS
(AFFECTING WHICH
FLOWS?)
PLANNED
TECHNIQUES TO
CLOSE GAPS
DO ACTIONS
CREATE OTHER
GAPS?
Rebel Sport
Online Store
Students.
Young
workers.
Manufacturer:
Physical possession,
ownership, negotiation,
financing.
Nike Distribution
Centre: Physical
possession,
negotiation, financing,
ordering.
Rebel Sport
Distribution Centre:
ordering.
(M): Rebel Sport use
multiple courier
companies that are
selected based on the
goods being shipped,
the size and weight,
delivery pick-up address
and delivery location
address (Rebel Sport,
2013). This reduces
contractual efficiency
and increases costs, as
opposed to a single
courier.
The costs of physical
possession and
ownership are impacted,
as there are higher costs
associated with non-
exclusive delivery
contracts.
The cost of negotiation
is also impacted as the
negotiation of several
courier contracts is
costly and time
consuming.
One unique courier or
delivery system that is
able to cater for all items
should be employed.
There is a small
potential for demand
side gaps to open if
customers are
unsatisfied with the
delivery time or
customer service that
could perhaps result
from using only one
delivery company.
Nike Online
Store:
Direct to end-user
Students.
Young
workers.
Manufacturer:
financing.
Nike Distribution
Centre: Physical
possession,
ordering.
(M): Nike offers ‘free
delivery’ on orders over
$100.00.
(M): Nike offers ‘free re-
ship’ for replacement
products if the consumer
selects the wrong size.
Returns accepted for
any reason (within 30
days of ship date).
This impacts physical
possession and
ownership costs for this
channel.
(1) Change the flow
responsibilities of current
channel members.
Add a Pick-up In Store,
Check Availability In
Store or Find Nearest
Store function to
decrease associated
costs of delivery.
This would be largely
changing the role of the
end-user in the delivery
process.
(2) Invest in new-low
cost technologies, such
as online fit software, to
reduce this cost. See
Recommendations.
There is potential for
another supply-side
gap to open if the cost
of implementing such a
function is too high.

Nike Retail
Stores:
Direct to end-user
Brand
Loyals.
Performance
Seekers.
Manufacturer:
financing.
Nike Distribution
Centre: Physical
possession,
ordering.
Nike store: Physical
possession, promotion,
negotiation, ordering.
(M): Product selection
and sizing at retail stores
may not be optimal.
Customers may leave
the store unsatisfied
without purchasing
desired product, or there
may be slow moving
products if they do not
meet consumer
preferences. See
Appendix E.
(E): Cost of retail
tenancy lease, fitting out
and maintaining a store
is particularly high. See
Appendix E.
(1) This may increase
the cost of physical
possession and
ownership
unnecessarily:
 Cost of obtaining
and storing slow
moving SKU’s.
 Opportunity cost of
sales that did not
eventuate.
(2) This implicates
promotional costs.
(1) Invest in new low-
cost technology. Tablets
with digital software that
allow the purchase of
Nike products should be
implemented.
Customers would be
able to purchase a
product through this
interface and have it
delivered, ensuring the
sale is made.
This platform could also
track local store
demands, and aid in the
ordering of product.
See Recommendations.
(2) Reassessment of
costs, potential to invest
in new fitting out low-
cost solutions if able.
However, fitting out and
prime locations of retail
stores represents an
integral part of Nike’s
premium image and
branding.
Potential for supply-
side gaps to open if
cost of closing gaps is
too high.
Rebel Sport
Stores
Casual
customers.
Students.
Young
workers.
Manufacturer:
financing.
Nike Distribution
Centre: Physical
possession,
ordering.
Rebel Sport
Distribution Centre:
(E): Rebel Sport does
not exclusively promote
Nike and also promotes
competitors. Rebel
Sport’s promotion of
Nike is also self-serving,
promoting them to bring
customers to their store.
(M): High employee
turnover due to youthful
workforce. See
Appendix E.
(1) Promotional
allowances for Rebel
Sport are potentially
greater than deserved.
(2) Increased
promotional costs due to
staff time and company
resources spent training
new members.
(1) Reassessment of
current promotional
efforts and allowances.
Then, potentially
changing the role of
Rebel Sport to execute
less promotion on Nike’s
behalf if necessary.
(2) Better screening for
new team members in
terms of longevity and
employment horizon.
If promotional costs
decrease, promotion
related demand side
gaps regarding
information provision
and customer service
might open.

ordering.
Rebel Sport Stores:
promotion, negotiation,
ordering.

31Recommendations
Recommendations
At current there exists a partial fit, where management has implemented a system which reflects
its needs, but there requires more attention to end-user needs. The previous sections of Key Problems
and Prospects (Gap Analysis), Channel Environment and Channel Profile have been used to make
recommendations to move the ideal distribution in line with the existing distribution system.
Improvement of Online Store
Live-Chat Customer Service
It is recommended that Nike Australia expand their contract provision of customer service on their
online store to include live-chat customer service. This will aid in closing the associated demand-side gap.
As consumers increasingly utilise online shopping to make purchases, Nike’s online customer service
offering should improve to reflect this and aim to replicate the in-store offering.
Addition of Online Fit-Technology
To close the gap associated with information provision, it is proposed that Nike implement online-
fit technology. This may also help in closing a supply-side gap associated with the cost Nike bears to offer
a free re-ship when the customer selects the wrong size (See Gap Analysis). The online store should
offer a sophisticated yet user-friendly ‘shoe finder’ software system without any downloading requirement.
Such a system would be relatively low-cost to implement and operate. This system can help the
consumer to choose the appropriate shoes through a visual guide for how the shoes are supposed to fit.
A similar program is currently offered by one of Nike’s leading direct competitors, ASICS.
Social Media Integration
To further help in providing information, it is suggested that Nike Australia integrate social media
functionality to their online store. Given the prevalence of social media and brand-conscious consumers,
this can act as an effective way to communicate with this platform and also increase promotional efforts.
Consumers would be able to ask questions and ‘like’ products. Furthermore, it may also enable the
sharing of purchases with friends when customers link to their recent Nike purchase on their Facebook
page. The option would be available with order confirmation. This would be of particular appeal to ‘status-
brand’ seekers. Instigating this recommendation could ultimately drive awareness and visits to Nike’s
online store, while also providing customers with information.
Delivery Time
The demand-side delivery time gap experienced chiefly by Brand Loyals can be closed by
offering tiered service levels. Nike should provide the option of fast-tracked delivery from the online store.
It is recommended that this is implemented, as it represents a variable cost that can be mostly covered by
the end-user.
Multi-Channel Interrelation
The Supply Side Gap Analysis revealed a supply side gap caused by a lack of optimal product
selection for the consumer in-store. Slow moving stock lines and decreased sales increases physical
possession costs excessively. It is proposed that, in order to ensure optimal stock in regards to consumer
preferences and sizing, Nike instigate a purchasing platform available via a tablet device that enables
customers to purchase the desired product in store and have it delivered. A similar method of purchasing
is already in-place in many large Australian retailers, notably including women’s retail giant Witchery. This

32Recommendations
platform could also track local store demands and consumer preferences, and aid in the ordering of
product. This would overall considerably lessen physical possession costs.
The purchasing platform could feasibly operate through Nike’s existing online store, so it is
suggested that in order to avoid imbedding conflict in the channel, retail store channel members should
receive compensation or a percentage of the sale that is made through their store.
This recommendation is supported by Taylor Woodings Australian Retail Sector Report (2012)
which references that retailers need appropriate systems in place to manage inventory as failure to do
this may lead to having too much inventory or the wrong type of inventory on hand, resulting in
unnecessary costs. Therefore, it is essential for retailers to develop plans to control the purchasing and
stock on hand through the sale of their inventory.
New Intermediary
There is the possibility of partnership with a new channel member to close the identified spatial
convenience gaps. It is proposed that Nike partner with a gymnasium or recreation facility, such as
Fitness First, to enhance channel performance and provide spatial convenience for consumers. Fitness
First is the largest gym, health and fitness club group in the world, with over 1.2 million members. They
offer personal training, classes and general gym facilities. It is suggested that they are provided with a
partial license for selling some Nike products most relevant to gym activities, inclusive of fitness
accessories and fitness technology such as the FuelBand.

33Implementation
Implementation
Improvement of Online Store
The E-Commerce Manager and the Social Media Manager (and their teams) will be partly
responsible for enhancing the e-commerce performance. The E-Commerce Manager will oversee the
incorporation of the live chat, online-fit technology and social media integration. The Social Media
Manager will work collaboratively with the E-Commerce manager to set up the social media integration to
the online store, and will be responsible for monitoring the community engagement.
The E-Commerce Manager should also work with an Information Technology (IT) developer to
establish their online fit-technology. Nike should approach an external solutions provider that specialises
in this area.
Delivery Time
An existing channel partner may be involved in being able to service customers that require a
faster or express delivery time. Nike’s third-party distribution centre may be able to step into the position,
with the extra cost largely being covered by the consumer. Alternatively, an express delivery carrier may
be used.
Multi-Channel Interrelation
An internal or external IT developer, Distribution Manager and master-franchisor Retail Prodigy
Group will oversee the actioning of this recommendation. The IT developer would be responsible for
setting up a user-friendly purchasing platform for use on a tablet device in stores. As per the business
model (See Appendix B) Nike have a relationship with enterprise resource planning provider Pronto
Software, and this may be a choice Nike use. The Distribution manager would work with Retail Prodigy
Group to get the devices in specific stores and operating at full function. Their role may also encompass
internal communications about why these devices are needed, how they operate, and service support.
New Intermediary
An Operations Executive, or similar, will need to contact the potential new partner of Fitness First,
to determine the parties interest in the suggested alliance. If agreed, contractual negotiations would begin,
and other legal and distribution team members of Nike Australia will also then be involved.

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<http://www.theage.com.au/technology/sci-tech/nike-releases-famed-back-to-the-future-shoe-
20110909-1k0j0.html>
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viewed 5 May 2013, <http://www.bizjournals.com/portland/print-edition/2012/04/20/blumenauer-
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April 2012, <http://digitalmarketinglab.com.au/index.php/2012/07/21/31-insightful-facts-about-
australians internet-usage>
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2013, <http://www.tollgroup.com/case-study/toll-and-nike-a-supply-chain-partnership>
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<http://www.taylorwoodings.com.au/Assets/Australian-Retail-Sector---4-October-2012.pdf>

36Appendices
Appendices
Appendix A: Nike Product
Nike + FuelBand (Apple 2013) Nike + iPod (Apple 2013)
Nike Dri Fit Line Female Example (Nike 2013) Nike Dri Fit Line Male Example (Nike 2013)
Nike Free Run Shoes (Nike 2013) Nike Equipment (Nike 2013)

37Appendices
INFRASTRUCTURE CUSTOMEROFFER
CORE CAPABILITIES
 Strong brand equity
 Broad distribution network
 Technical product
innovation
COST STRUCTURE
 Low cost, mass
production overseas.
 Economies of scale.
 Significant investment in
promotion.
FINANCE
 Apple
 Pronto Software
 LLamaSoft
 Toll Group
 Rebel Sport
PARTNER NETWORK
CUSTOMER SEGMENTS
 Athletes, women and
men, aged 15 to 35.
 Active people who enjoy
quality sporting goods,
particularly footwear.
CUSTOMER RELATIONSHIPS
 Provides quality sporting
goods to customers via
direct and indirect
channels.
 Many brand-loyals.
VALUE PROPOSITION
We bring inspiration and
innovation to every athlete* in
the world.
(*If you have a body, you are
an athlete).
REVENUE STREAMS
 Wholesale contracts with
sporting g chains (e.g.
Rebel Sport).
 Online and retail stores.
 Factory outlets.
DISTRIBUTION CHANNELS
 Franchised retail stores.
 Nike online store.
 Retailers stores (online
and offline).
 Owned factory outlets.
 Innovative product.
 Premium positioning.
 Strong brand identity and
equity.
 Global brand.
VALUE CONFIGURATION
Appendix B: Nike Australia Business Model

38Appendices
Appendix B: Nike Australia Business Model Notes
Partner Network
Nike Australia has an extensive partner network beyond its retailers. Key partners include:
Apple
Apple is a key partner in Nike’s activity-tracking wristband ‘FuelBand’, available only through Nike
and Apple. The wristband app is designed exclusively for Apple’s iPhone and iPod products. This
partnership has advanced propelled Nike into the technology business and emphasised the company’s
focused on innovation. Furthermore, Nike’s mobile app has been included on recent generations of
Apple iPods.
bluesign technologies
Nike entered a cooperative agreement with Swiss company bluesign technologies in March of
2013, with the intent to increase the supply of sustainable materials and chemistries for use in Nike
products. This partnership means that bluesign technologies’ industry-leading assessment tools are
available to assess Nike’s material suppliers.
LLamasoft
2012 saw the establishment of a strategic partnership between Nike and LLamasoft, Inc., a
company that produces supply chain design software that aids companies across the world design and
develop their supply chain operations. Nike had been a customer of LLamasoft for two years and entering
this agreement signaled the strengthening of their commercial relationship. Nike and LLamasoft look to
co-develop new international supply chain solutions that offer both logistics and environmental benefits.
Pronto Software
Nike Australia partner Retail Prodigy Group (master franchisor holder) began working with BI and
enterprise resource planning provider Pronto Software in July 2011 (Barwick 2012). Pronto Software tools
were implemented including financials, point of sale, and customer relationship management.
Toll Group
Toll Group is a key Australian partner of Nike. Nike Australia experienced material growth in the
1990s and recognised that in order to sustain their high service levels and to remain operating as
effectively as possible they needed to integrate all of their logistical operations (Toll Group 2013). Their
partnership with Toll Group was established in 2000.

39Appendices
Appendix C: Efficiency Template
Weights for Flow Proportion Flow Performance of Channel Member
Flows Costs Benefit Potential Final Weight Manufacturer Retailer End-user Total
Physical Possession 30 High 33 40 30 30 100
Ownership 15 High 17 50 50 20 100
Promotion 20 High 21 70 30 0 100
Negotiation 9 Medium 10 55 35 10 100
Financing 5 Low 2.5 30 30 40 100
Risking 10 Medium 11 45 45 10 100
Ordering 6 Low 3 50 30 20 100
Payment 5 Low 2.5 40 40 20 100
Total 100 100 370 270 160 800
NPS 0.472 0.324 0.204 1
NPS % 47.2 32.4 20.4 100

40Appendices
Appendix E: Primary research
Personal Interview with Nike Store Manager at Broadway Shopping Centre, Ultimo 2007
(TRANSCRIPT)
Q: Can I confirm the location of your distribution centre?
Yes, it is just the one distribution centre in Victoria.
Q: Where are company headquarters?
We talk to the one’s at Rosebery (provides address). There is also one in Melbourne I believe.
Q: What is the store’s ordering process?
We order from head office through this portal, Nike Biz.net, just an online site.
Q: What is the store’s payment process for goods?
Oh…we don’t really deal with a lot of that.
Q: Can I confirm the location of your distribution centre?
Yes, it is just the one distribution centre in Victoria.
Q: Can I confirm your master franchisor?
Yes, it is Retail Prodigy Group. They are responsible for most of our payment functions to Nike Australia.
They will probably be able to help you with any more payment information.
Q: Are there any costs you believe are too high?
No, we don’t really handle the costs. But I know that the lease on this place is very high and costs a lot to
set it all up.
Key observation whilst undertaking interview: Customer is purchasing many Nike products, and asks
at the counter for a specific item. Staff checks availability but they do not stock that product. They say to
try online. Staff member says that this is a frequent occurrence.
Summary of Key Correspondence with Rebel Sport Employee
 Ordering and payment processes used to be performed by the individual stores but are now
performed by head-office.
 High staff turnover and significant time spent training new employees. Turnover could be due to
the generally youthful profile of workers that are employed.

41Appendices

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