Nike Purchases AI Startup Celect For US$110 Million.
Nike, the sports shoes and apparel company that is worth more than US$ 127 billion, announced the acquisition of a retail predictive analytics and demand sending startup called Celect.
Celect is a Boston based AI Startup founded by MIT Academic Professors Vivek Farias and Devavrat Shah in 2013 and its AI-driven analytics platform gives retailers the ability to better predict and meet inventory needs, working specifically to increase full-price sell-through, reduce out-of-stocks and decrease markdowns. The company had in the past raised more than US$ 30.2 million in four rounds of fundings with the last one in 2018, where it raised US$15 million in a Series C Funding led by NGP Capital (Nokia Growth Partners) and Fung Capital. The Celect team will immediately be integrated into Nike’s global operations team. Celect’s co-founders will continue working as tenured professors at the Massachusetts Institute of Technology and plan to consult with Nike on an ongoing basis as conditions of the deal.
Nike’s Chief Operation Officer, Eric D Sprunk in a press release said the acquisition was part of the shoe giant’s efforts to “be insight-driven, data optimized and hyper-focused on consumer behavior” so it could “serve consumers more personally at scale.”
After years of acquiring brands like Converse and Hurley, Nike shifted its focus toward buying start-ups that could help it behind the scenes. Nike’s acquired two tech firm in 2018, aimed at direct-to-consumer business improvemens, Invertex a 3D scanning company and Zodiac, a data analytics startup. Invertex was ultimately behind the recent rollout of Nike Fit: a new 3D scanning feature within Nike’s mobile app that’s able to accurately predict what size shoes people should buy.
Sales from Nike’s Direct business rose 12% on a currency-neutral basis to $10.4 billion in fiscal 2018 from $9.1 billion in fiscal 2017, according to SEC filings. Direct revenue now makes up about 30% of total Nike brand revenue, fueled by online growth.
With Celect’s technology integrated into Nike’s mobile apps and website, the shoemaker should be able to better predict what styles of sneakers and apparel customers want, when they want it and where they want to buy it from. Nike expects Celect to help reduce out-of-stock rates and run into fewer situations where demand of sneakers and apparel comes unplanned. This could also lead to less pressure on profit margins, if Nike can control inventories better and not have goods overflowing in warehouses that shoppers are not buying.
Nikes goal is to serve consumers more personally at scale, and anticipate demand. This feeds directly into how Nike is trying to sell more directly to consumers, shifting a bigger portion of its business away from wholesale channels.
Celect acquisition marks Nike’s marks a string of deals to bolster its direct-to-consumer strategy. Although financial terms of the deal were not disclosed, sources close indicated the deal was worth about US$ 110 million.