On Tuesday, apparel giant Nike announced it acquired retail predictive analytics firm Celect. The corporation didn’t disclose financial terms of the purchase agreement. However, research firm PrivCo estimated the startup’s value to be between $100 million and $500 million as of December 2018.
Nike COO Eric Sprunk told CNBC the athletic apparel giant would use its new subsidiary’s technology to optimize its mobile applications and website. The company wants to precisely and rapidly forecast its customers’ purchases and better allocate its inventory.
“Our goal is to serve consumers more personally at scale,” said Sprunk. “We have to anticipate demand. We don’t have six months to do it. We have 30 minutes.”
No More Middlemen
Earlier this decade, Nike adopted a bold new retail strategy. The corporation took steps to pivot away from acting as a wholesaler and instead offer its products directly to consumers. To facilitate that transition, Nike created its own consumer sales platform, SNKRS, in 2016. It also announced plans to reduce its number of retailer partners significantly.
So far, the corporation’s plan has been successful. In 2012, only 4 percent of its revenue came from direct-to-consumer sales. In 2019, 30 percent of Nike’s income, around $3.12 billion, came from selling its products directly to buyers.
However, Nike’s leadership knows that to complete such a paradigm shift successfully it has to understand its customers better. Thus, in March 2018, it purchased a data analytics company called Zodiac. The firm said it made the acquisition to serve consumers on a global scale more effectively. Nike also bought computer vision firm Invertex in April to help its customers by better-fitting shoes.
How Will Celect Help Nike?
Before its purchase, Celect helped a slew of Fortune 100 companies optimize their sales using a combination of predictive analytics and machine learning. The firm’s platform supported its clients in three key ways.
First, the startup’s Plan & Buy Optimization tool uses a company’s sales data to glean key modeling insights. Accordingly, its clients could then direct their capital expenditure towards products their customers want to buy the most.
Along with this, Celect’s Allocation Optimization product gave its customers data on hyper-local demand. Using the tool, companies could see which retail locations are most likely to sell a certain item. As a result, businesses see an uptick in their profit margin by holding less dead stock, needing fewer markdowns, and having more sell-throughs.
Finally, Celect’s Fulfillment Optimization helps retailers transform their brick-and-mortar locations into de facto fulfillment centers. It does this by providing companies with digital infrastructure support that allows them to integrate online and in-store inventory and sales.
Given Nike’s interest in fostering direct relationships with consumers, its acquisition of Celect is a masterstroke. With its new resources, the apparel corporation has the potential to maximize the income generated by its various brands.