How Nike is using its new New York store to drive memberships

Nike’s new Manhattan store is a 68,000 square-foot, six-story membership play.

Called the House of Innovation, the store includes a number of experiences and service offerings aimed at members, who are Nike customers and app users that have signed up for NikePlus, a free loyalty program that offers perks like free shipping and early access to products.

Experiences include a one-floor Sneaker Lab, Nike’s biggest collection of footwear focusing in on high-value and limited-edition brands and styles; an Expert Studio, where members can make appointments to meet with a Nike employee and find the best products for their activity level as well as customize orders; the Nike Speed Shop, which turns the ground level into an online-offline platform for features like buy online, pick up in store and reserve in store; and the Nike Arena, which highlights seasonal and exclusive product. To tailor the store to local customers, Nike is also using customer data to build out trending product collections and “New York favorite” collections that will change out on a regular basis.

It’s a loyalty game: According to Heidi O’Neill, president of direct to consumer at Nike, members spend three times more overall than non-members. Other member perks include free shipping, free delivery from stores and early access to new products. In exchange, Nike can learn more about the customer behavior of its most active consumer set, including shopping and product preferences.

Members are also driving growth for Nike’s direct retail business, which grew by 12 percent in the last quarter. Digital sales from increased by 36 percent. The thinking is that driving new members will drive sales for Nike’s direct business.

“We’re in the business of building direct relationships because we have to be. For as much as a consumer has a choice to buy things at a lot of places, there are fewer brands who want to create the deep connection that we do,” said O’Neill. “By getting to know our members, broken down walls with marketing, experience and transaction, and that’s our competitive advantage.”

Opening Thursday, the store is the brand’s second House of Innovation. The first opened in Shanghai in October and has seen 600,000 visitors since, according to the company. O’Neill said that the idea for the store was to test and establish the blueprint used to improve and rethink all of Nike’s nearly 2,000 global retail stores.

“What I asked myself and my team as we were thinking of this space is how could we build a store experience as personal and responsive as a mobile experience,” said O’Neill. “We’ve become accustomed to experience brands online, where it learns your behavior, so we need our physical stores to operate on the same level.”

At the core of the in-store experience, O’Neill said, is the Nike app. If customers have the app, it will go into in-store mode upon entering. New in-app store features include Shop the Look, which lets customers scan mannequins QR codes, pulling up all items in the look, pricing, and where they’re located in stores. Instant Checkout is also new to the House of Innovation store in NYC: Customers can scan items in the app, pay and leave. The app is meant to make shopping the expansive Nike store easier: Customers can scan items to find more sizes and colors in store and online, send items to fitting rooms and reserve items to buy in the store ahead of visiting.

But being a NikePlus member unlocks even more features, including concierge services, exclusive product and pick-up lockers, where members can buy or reserve an item online and find it in one of the store’s easy-to-access lockers, ready to take home or try on. Members-only content and offers are heavily featured throughout the store, to clue in visiting customers that they’re missing out on certain in-store capabilities by not being a member. There are also two membership desks in the store, which are there to act as customer service hubs for existing members, as well as introduce non-members to the program, which is free to register and use.

By the end of the fiscal year, Nike’s in-store app features will be available at all of Nike’s existing retail stores as well as its retail partners. Nike still has a sprawling third-party retail business, selling everywhere from department stores to Amazon to, so the goal is that looping in the Nike app no matter where customers interact with the brand will be introduced to member benefits and driven back to Nike’s direct channels.

“Brands like Nike are competing on customer loyalty, which today means giving people something in return,” said Cooper Smith, principal analyst at Gartner L2. “Focusing on direct business strengthens the overall brand.”

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