Under Armour follows Nike into major D2C push as retailers embrace video

retailers embrace video

Add Under Armour to the growing list of retailers embrace video as it looks to restructure its brick-and-mortar business to leverage a direct-to-consumer (D2C) model that will help it reduce costs and reach younger, mobile consumers who do much of their shopping online.

CEO and President Patrik Frisk, in a memo obtained by Business Insider, told UA employees that the company intended to focus on cost controls and building the brand, efforts he feels will help UA rebound following the disruptions of the COVID-19 pandemic.

UA is using video as a key ingredient to that recipe, with content including workouts from influencers aimed at its primary consumer, the “focused performer.”

“We must rebuild our brand with our target consumer, the Focused Performer, at the center of everything we do, evolve our operating model to simplify the way we work and collaborate, and shift to a DTC-first business,” said Frisk.

Under Armour this week said it would lay off 600 furloughed employees as part of the cost cutting related to the COVID-19 pandemic.

The company’s board also approved an additional $75 million in restructuring spend. That bump will bring UA’s pre-tax restructuring charges to more than $550 million this year, including $70 million in facility and lease termination costs.

Nike’s D2C Strategy Expands

Sports-apparel giant Nike, meanwhile, has been increasingly focusing on D2C for two years. In June, the company reported a 38% Y/Y sales decline and a $790 million loss as most of its brick-and-mortar stores were closed temporarily due to COVID-19. Digital sales made up about 30% of the company’s revenue in its fiscal 4th quarter, up 75% from a year ago.

 

UA CEO John Donahoe, during a call with analysts, said Nike’s digital business was up by triple digits in June.

“We are continuing to invest in our biggest opportunities, including a more connected digital marketplace,” Donahoe said.

He said its online business would become “central” to the company.

“Consumers want modern, seamless experiences, online-to-offline, so we’re accelerating our approach,” Donahoe said. 

Nike’s “Consumer Direct Acceleration” program (CDA) continues to be tweaked, with changes in the composition of its workforce and leadership announced in July.

“We are announcing changes today to transform Nike faster, accelerate against our biggest growth opportunities and extend our leadership position,” said Donahoe. “Now is the right time to build on Nike’s strengths and elevate a group of experienced, talented leaders who can help drive the next phase of our growth.”

The bottom line

In the United States, online spend with digital retailers increased by more than 30% in 1H 2020, up $60.4 billion. In contrast, total retail sales were up just 4%. Digital Commerce 360 said June saw a Y/Y visits bump of 76%, with July up 55%. The top 2,000 ecommerce sites in the US saw traffic increase 125% Y/Y, the company said.

Sporting goods, not surprisingly, saw some of the biggest Y/Y growth for the period March-June, among North American ecommerce sites, up by 40%, just behind office supplies (58%) and hardware (42%).

That growth is reflected in the amount of retail and marketing video being consumed across the world, too. According to Brightcove’s most recent Global Video Index: Enterprise & Retail edition, retail video views globally were up more than 114% in Q2 over Q2 2019, and the amount of time spent watching video was up 152%. Retail views in North America alone were up 110%.

The big question, of course, is what happens when (if) we return to “normal.”

Looking at the data, it’s obvious we’re seeing an evolutionary shift in how brands are using video to reach – and expand – their audience.

While April saw the biggest increase over last year’s monthly totals, views were up 140% and time watched rose 220%, June also saw big gains, 95% and 99% respectively. We may see a modest decline in Q3 numbers, but they’ll still be up over last year. And Q4 should be a monster as retailers look to use the holidays to restart their sales engines for real.

Some 83% of marketers say video helps with lead generation, with 80% saying video has directly helped sales, according to Go-Globe. A whopping 95% of video marketers also said they plan to increase or maintain video spend this year.

Sam Poser, an analyst with Susquehanna Financial Group, said he expects UA to be “far better prepared for 2021 because of this crisis than if it hadn’t happened. There are a lot of changes that can happen under the cover of the pandemic.”

Retailers who use video are tapping into a resource that virtually every demographic has become comfortable with, something that has become more important as we’ve found less to be at ease with in the world.

Stay tuned and stay well.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn