TECHNOLOGY

Tech Viewpoint: Nike acquires Celect – two pros and a con

BY Dan Berthiaume

Nike has acquired a demand forecasting startup – is it a good idea?

You may have heard that earlier this week, vertical athletic footwear/apparel retailer Nike purchased Celect, a Boston-based retail predictive analytics and demand-sensing firm. Absorbing Celect whole, rather than simply customizing and integrating its technology, is an interesting strategic move. Here are two pros and one con of Nike’s acquisition.

Pro – Nike’s supply chain complexity

No retailer operates a “simple” supply chain, but Nike’s supply chain is more complicated than most. Nike manufactures its own products, which it then sells across the globe through proprietary brick-and-mortar and online channels, as well as through a dizzying variety of third-party retail partners. Third-party channels include dedicated storefronts on retail platforms like Amazon, as well as acting as a wholesaler for numerous physical and digital retailers.

Given how many different streams of demand data Nike has to manage, acquiring Celect as the basis of a truly proprietary forecasting platform makes sense. Nike has some unique fulfillment challenges, and bringing Celect in-house maximizes the technology’s fit to them.

Pro – Competitive edge

Nike is the world’s most valuable apparel brand, according to the Brand Finance Apparel 50 2019 report. However, rival athletic apparel/footwear Adidas, which like Nike operates a thriving omnichannel retail business as well as a wholesale operation, is close behind at number three. Adidas, and other leading vertical athletic apparel/footwear providers, also must find a way to effectively sense, analyze, and predict consumer demand across channels, partners and countries.

Celect was founded and is led by two MIT professors. Living in the area has given me the opportunity to visit their Boston office, and I will vouch they are a good company with good technology. Good technology that Nike can now keep out of the hands of competitors.

This is not to suggest that there are not many other excellent predictive analytics providers available to help Nike’s peers. But as Nike builds and expands upon Celect’s existing capabilities, no other company will benefit (unless Nike decides to license technology out for profit).

Con – A loss of independent innovation

Nike has been active in developing new proprietary digital technology capabilities, going so far as to recently name former Kohl’s technology head Ratnakar Lavu as the company’s first global chief digital information officer. As mentioned above, this push toward in-house IT development certainly carries advantages.

However, small startups are often incubators of truly leading-edge technology solutions and concepts. Freed from the constraints of corporate culture or traditional ways of doing things, startups can have an easier time disrupting the status quo than established organizations. Privately-held startups such as Celect have the added benefit of not needing to meet quarterly stock targets.

Celect should provide tremendous value to Nike’s global operations team, but a certain independent spark that is only found at a true startup (and I have worked at one) will inevitably be lost. In addition, the more Nike brings innovation in-house, the less it will look for the disruptive opportunities offered by other out-of-house providers like Celect used to be.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Do you expect your business to be challenged by the ongoing escalation of the the heightened U.S.-China trade dispute?