I drove down to the Woodburn outlets on Saturday for one pair of running shoes and came home with three, because the third pair was forty percent off and I am a brand strategist, not a saint.
Then Nike posted first quarter results yesterday. Inventory up enormously year over year, a lot of it sitting in transit and in warehouses, and a stated plan to move through it with aggressive promotion into the holidays. Around here the conversation is different, because half of Portland knows somebody in Beaverton, and the question people actually asked me was whether the sales are going to be good.
They are going to be very good. That is the problem.
A markdown is not a logistics event, it is the most credible statement a brand ever makes about what its product is worth, because it is the only claim backed by money moving in the customer's direction.
Everything else in brand is a promise. The ad is a promise. The tagline, the athlete, the film, all promises. The price is evidence. When you tell someone this shoe is worth one hundred and forty dollars and then, eight weeks later, you tell them it is worth eighty four, they do not conclude that your supply chain had a rough quarter. They conclude they were being overcharged in August.
And customers are excellent at learning cadence. Give them two heavy promotional seasons in a row and you have trained a durable behavior: never buy at full price, the discount is coming. Coach spent most of the last decade discovering what happens when the outlet channel teaches your customers the real price. J.Crew learned the same lesson with a permanent thirty percent off code. Once the discount becomes predictable, full price stops being a price and starts being an opening offer.
The alternative is expensive and unglamorous. You eat the inventory quietly. You move it to channels where your best customers are not watching. You take the margin hit in one ugly quarter instead of spreading it across two years of eroded pricing power. Patagonia would rather repair a jacket than discount one, and that is not sentiment, it is arithmetic about what a brand costs to rebuild.
Once the discount becomes predictable, full price stops being a price and starts being an opening offer.
Nike will be fine. It has the deepest brand equity in the category and enough of it to absorb a promotional year without anyone forgetting what the swoosh means. Most companies do not have that balance and spend it anyway.
My karaoke bar in Southeast has a two drink minimum and no happy hour, ever, and the host who calls everyone baby has never once apologized for it. Tuesday I paid full price for a well whiskey and sang Landslide badly. Nobody discounted anything and the room was packed.