Nike acquired startup company, Celect to understand consumer preference better and clean up its inventory

Nike acquired Celect, an AI-driven startup company that manages retail analytics to further strengthen the growing Consumer Direct Offense plan of the sneaker company.

”As demand for our product grows, we must be insight-driven, data-optimized, and hyper-focused on consumer behavior. This is how we serve consumers more personally at scale,” Nike COO Eric Sprunk said in a statement.

Nike’s Consumer Direct Offense strategy aims to develop products faster with personalization at scale.

Popularly, sneakers are accessed and bought through a variety of platforms available on the Internet like Foot Locker and GOAT.

Even though these online outlets drive demand for the company in terms of purchasing bulk orders, it does so little for Nike in helping them understand their consumers.

Nike wants to focus on selling direct and owning the customer relationship to create and develop products that would truly cater to them.

However, understanding the retail industry is not an easy task to do. Not even for giants like Nike, which banked $36.4 billion in revenue last year.

This is where Celect’s cloud computing AI technology comes into the picture. The startup’s technology focuses on delivering data insights after being trained from structured and unstructured retail data. These insights allow retailers to see cost/benefit analysis of arranging their inventory.

According to Nike, Celect’s team will be integrated into its global operations.

Nike opted to acquire Celect versus “spending two to three years” trying to develop the same platform in-house, Sprunk said. “It’s really difficult work … predicting the retail shopping patterns and behavior. … This [acquisition] gets us much more accelerated.”

In a nutshell, Celect does computations based on customer behaviors regarding products offered by a particular retailer.

In this case, Celect’s cloud computing platform is used to determine possible outcomes based on sales data that Nike will be feeding to train it for reliable results. In particular, the AI tech will be ingrained into Nike’s mobile apps and website.

These data may come in various forms such as goods bought, received, and returned. With Celect, Nike can better prepare its inventory systems.

Specifically, optimization will be improved for areas including order management systems, allocation systems, planning systems, and even for in-season decisions.

Based on results produced by the Boston-based predictive analytics system, the shoemaker should be able to have a better understanding of what styles of sneakers and apparel customers want, when they want it and where they want to buy it from, Sprunk explained.

”Our goal is to serve consumers more personally at scale,” he said. “We have to anticipate demand. We don’t have six months to do it. We have 30 minutes.”

Notably, Celect is only one of the many AI startup companies that Nike has been purchasing recently to develop its direct-to-consumer approach.

The purchase of Celect follows last year’s acquisition of Zodiac, a consumer data analytics company. In April, Nike also acquired a computer-vision company, Invertex, which was ultimately behind the recent rollout of Nike Fit — a new 3D scanning feature within Nike’s mobile app that’s able to predict what size shoes people should buy accurately.

Doing so has made Nike reaping the benefits. Sales from Nike’s Direct business rose 12% on a currency-neutral basis to $10.4 billion in fiscal 2018 from $9.1 billion in fiscal 2017, according to SEC filings. Direct revenue now makes up about 30% of total Nike brand revenue, the company said, fueled by online growth.

Nike shares are up about 8% year to date, bringing the company’s market cap to $127 billion.

Regarding the terms of the deal between Nike and Celect, none were explicitly disclosed.

Founded in 2013, Celect raised over $30 million from investors including August Capital, NGP Capital, and Activant Capital. The company most recently closed a $15 million Series C in December of last year.

The Massachusetts Institute of Technology-born startup’s co-founders—who are also tenured professors there will remain professors at MIT and will be doing consultative work for Nike.

“We’re thrilled to be joining the Nike team, adding our unique and innovative capabilities to the data and analytics foundation they’ve been building over the years,” said Celect CEO John Andrews.

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