Channel Cannibalization

I get that channel strategy is difficult for businesses. If you sell only wholesale, like the ethical-and-stylish shoe company Novacas, you lose out on a direct relationship with your customers. Still, it’s a popular strategy especially for smaller companies that need the publicity and marketing stockists can do, and/or don’t have the size to run its own retail operation.

If you sell only direct, you’re doing all the work of both building your product, and also running the retail business. American Apparel, for example, used to sell only wholesale, but eventually opened its own retail line as well. But they now have to deal with running an entire retail operation, with all that real estate, all those leases, all that payroll, all the liability that comes with running a high-turnover, image-focused company.

And if you sell wholesale and direct to customers, you compete with your stockists. This was a major concern for Novell when I worked there: Many of their customers bought direct from Novell. Others bought from independent systems vendors or consulting companies. Novell was in the awkward position of trying to balance running a consulting team that sold its software to customers, a sales team that sold its software to customers, and then partnership teams that competed with those two teams to sell the consulting and software indirectly to similar customers. Lots of companies, especially big companies, wind up in that situation, for very good reasons. Most of your customers will fit clearly into one of the appropriate channels… but there are cases where the channels compete with each other instead of with your actual rival companies.

And then there’s Nike, which seems to have dozens of overlapping but incomplete channels for everything, so that no one place has access to their entire product line, not even their official direct stores. You can buy Nikes at any online or offline athletic goods store, or any shoe-selling website, or Nike.com or their official Niketown retail locations.

But you can’t get all the shoes at any of those places. Zappos sells more than 500 different Nike shoes, but that’s far fewer than the number of models Nike makes. If you want the unusual exclusive ones, you have to go to an unusual exclusive store, like BDGA in Boston. Not too surprising.

What’s somewhat more surprising is that even Nike.com carries a pretty limited selection of Nike shoes! Click “Sports” at the top of that page: There are 10 sports they offer gear for, including the very general “Training.” Everyone knows Nike makes shoes for more than 10 sports.

If you want, say, the Romaelos 2 weightlifting shoe, which is a pretty specialized shoe but not THAT weird, you’d have to go to their retail channels – the specialized powerlifting shops like Eastbay and Again Faster, or the more general shops like regular old FootLocker.

I assume there’s a very specific set of reasons that they use to determine which channels will get a given product. Obviously, the Kanye West collab will be limited release, because the whole point is that it’s hard to get. Obviously, a plain Nike Free running shoe will be wide release, because it’s for everyone who puts one foot in front of another. But what’s the justification for not selling all your specialized-sport shoes on your official website?

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