Competitive Strategy

Introduction
Adidas is a global corporation that manufactures apparel, sportswear, equipment and
accessories. Adidas is considering adopting the direct to customer (DTC) strategy. This strategy
has been adopted by competitors Nike and has effectively achieved their corporate goals.
Therefore, this report will analyze the DTC strategy by comparing its advantages against
disadvantages, the essence of social media to Nike’s strategy, its importance in satisfying
customer needs, and recommend steps that both Nike and Adidas can use to grow the DTC
strategy.
Advantages and disadvantages of DTC strategy
The Direct to Customer (DTC) strategy allows corporates more control over products’
processes, pricing, and distribution. It removes the need for corporates to have second and third
parties in the distribution chain. Other distribution chains commonly involve wholesalers and
retailers. Manufacturers distribute their products directly to their stores through the DTC strategy
to make purchases. The DTC strategy allows brands like Nike more control over branding
activities. Modern-day branding is very visual and psychological. Nike uses this awareness to
design store appearance, messaging and storage space to ensure a higher sales conversion rate.
Nike can control the prices better to respond to market changes and deal with competition. In
other sales strategies, price controls and changes are difficult to implement quickly due to the
demands of the other parties involved in the distribution process (Modi et al., 2018). DTC
strategy is essential when collecting data. Modern-day corporates rely on customer data to
strategize and implement strategies. DTC allows Nike to have first-hand access and experience

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with customers to make purchases and try products. Nike can therefore get first-hand reviews,
feedback and insight (Li et al., 2019) . Such expertise allows Nike to make better use of their
business intelligence practices.
DTC strategy means that Nike shares in some responsibility and risks that would
otherwise be the distributor’s business. For example, during transportation of merchandise to
Nike stores, freight insurance and risks are borne directly by Nike. Additionally, risks of
operating stores increase with the DTC strategy. It means that Nike has to get licenses for
opening and running stores and pay the costs that come with such operations. In other strategies,
such costs would be borne by other parties such as the retailers.
DTC strategy means that Nike has to invest more heavily in marketing. The retailer’s
advertising strategies would help Nike increase their sales in other distribution methods. For
example, if Nike would stock their products in a known retailer such as Walmart, the advertising
activities of Walmart might help Nike increase their sales. However, Nike is responsible for all
its advertising with the DTC strategy. In addition to getting the merchandise in stores, Nike has
to invest more financial and human resources strategies to attract customers to their stores and
convince them to purchase.
The role of social media in Nike’s DTC strategy
Social media is an essential modern-day marketing platform because it provides a broad
target market and unique customer interaction. DTC strategy and social media activities
complement each other. Nike is active on Facebook, Twitter, Instagram. Social media allows
Nike to interact with their customers regarding their products directly (Gautam & Sharma, 2017).
When Nike post an advertisement or launch a new product, they can get feedback from

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customers even before the merchandise reaches the physical stores. Nike also answers pertinent
questions about their product through social media and recommendations about improvements in
its distribution strategy. Through such interactions, Nike can decide potential locations to set up
new stores. Social media interactions also compliment DTC because it makes it eases market
segmentation strategies (Simkin & Dibb, 2013). Corporates design market segmentation
strategies according to variables such as demographics, location or culture. Social media
analytics give direction on the type of strategy that Nike should adopt in their stores. Nike can
plan or stock its stores according to the trends identified through social media. For example, the
world is preparing to host the World Cup held in Qatar in 2022. Nike manufactures various
sporty apparel, and the global footballing event presents an opportunity to boost sales. Nike can
communicate with customers through social media to let them know which products will be
offered in Nike stores in Qatar during the World Cup.
The youthful generation primarily uses social media daily. Nike has structured its
products and advertising strategies to resonate with the younger generation(Zhavoronkova 2021).
From their catchy mantra “just do it” to their trendy outfit, Nike has captured the attention of
youthful social media users, which makes its DTC strategy efficient and successful.
The role of DTC in solving customer needs
The DTC strategy helps in solving customer needs. First, all businesses aim to create
utility for their customers through production and distribution methods. Nike designs their
products to meet the needs of their users through form utility. For example, Nike launched and
distributes through DTC the specialized Zoomx vaporfly which is designed for running and
exercise. Nike can achieve time and place utility by being through the control they have over
distribution through DTC strategy. They ensure that products reach the customers promptly and

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at a location of their convenience. DTC strategy allows Nike to handle customer complaints and
returns more easily. Through Nike stores, Nike can effectively affect returns and exchanges due
to its simplicity of its distribution strategy.
How Nike can continue to develop their DTC strategy
Nike needs to invest more capital into visibility to develop its DTC strategy. Since DTC
relies heavily on the marketing activities of the manufacturing firm, Nike can invest more to
make its distribution kore efficient and to have more visibility online and through physical
stores. Nike has mastered the art of continuous innovation and improvement of its products. Such
innovations need to ensure that the brand keeps up with the changing customer needs and
preferences (Keiningham et al., 2020) . Nike needs to leverage its existing social media
platforms to deepen customer relations. Nike already enjoys a huge following on all social media
platforms that they are on. With those numbers, Nike can make their interactions more
personalized such that the customer can make an emotional connection with the brand (Liu et al.,
2021). Such interactions and relationships must go beyond sales transactions. Through such
interactions, Nike can demonstrate the value of their products and thereby justify the price tags
for their products. Digital DTC improves business performance (Jeyakumar 2017). Nike needs to
invest more in virtual stores to ensure the continuity of its DTC strategy. Technological
advancements such as artificial intelligence in virtual reality can enhance the quality of
interactions between Nike’s customers and products. Through virtual reality, customers can
interact with the products they are interested in purchasing before making the actual purchase.

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How Adidas can develop a successful DTC strategy
Adidas can grow its DTC strategy by borrowing some of the lessons from Nike. The top
management at Adidas should consider reorganizing their distribution strategy to adopt DTC.
Critical decisions such as eliminating third parties in the supply chain can be considered. Adidas
also needs to ensure that DTC distribution practices deliver utility for their customer base.
Adidas can also communicate such a change of strategy to their customers. Social media
communication is an effective tool in creating brand engagement and reducing uncertainty (Lin
et al., 2017). Adoption of DTC strategy will most likely have an impact on pricing models.
Adidas can therefore communicate that the shift to DTC is to ensure more direct contact with
their customers to increase efficiency and offer more competitive prices for their products.
Additionally, such communication needs to include essential information such how
customers can locate the closest physical store. Adidas has an already established social media
community. Adidas can use its online community for marketing its products to enhance DTC
through more regular and personalized interactions with customers. Adidas can invest more in
social media marketing through analytics and data to identify gaps in marketing and branding
that they can fill in and be more visible and attractive as a brand (Jacobson et al., 2020). One of
the modern ways used by many corporates is influencer marketing. A significant percentage of
the youthful population identifies with certain popular individuals such as music artists, athletes
and sports personalities. Since Adidas is in the apparel business in the sports sector, they can
have some popular personalities influence for their brand to drive sales. Through such
affiliations, some customers may just get the conviction they need to purchase Adidas and help
grow its DTC strategy.

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