Nike Buys Analytics Firm Celect. Are Retailers The Next Mar Tech Acquirers?

Nike continues to build out its digital platforms.

On Wednesday, the athletic apparel giant revealed it had purchased the analytics startup Celect for an undisclosed price. Read the release.

Celect marks Nike’s second analytics acquisition, following its 2018 purchase of customer analytics startup Zodiac Metrics, which was folded into Nike’s data science group, now led by the former CEO. Celect will be integrated into Nike’s global operations team, and its founders will serve as consultants.

While Zodiac forecasts lifetime customer value, Celect, founded in 2013, helps optimize inventory by making predictions based on local demand.

A Nike spokesperson declined for competitive reasons to specify how Celect’s toolkit would align with the technology inherited from Zodiac.

In the press release, however, Nike COO Eric Sprunk noted that the acquisition gives Nike “world-class data scientists.”

“As demand for our product grows, we must be insight-driven, data-optimized and hyperfocused on consumer behavior,” Sprunk said. “This is how we serve consumers more personally at scale.”

Celect joins Nike’s three other digital acquisitions – the digital design studio Virgin Mega (2016), Invertex (2018) and Zodiac (2018) – as part of what Nike calls its “consumer direct offensive.”

“We’re looking for ways to get closer to consumers and respond to their needs,” said Nike’s spokesperson. “You can tie the analytics piece of this back to Virgin Mega. And Invertex is within the scope of using world-class science to build out our capabilities.”

Nike declined to say if it intends to make more digital acquisitions.

Are brands the next mar tech and data strategics?

Nike isn’t the only major brand that has decided to own its own digital platform through acquisition.

McDonald’s and Walmart, for instance, have both made major investments, buying Dynamic Yield and Polymorph Labs, respectively, which caught the attention of investors.

When McDonald’s said it would buy the personalization startup Dynamic Yield in March for $300 million, it “perked everyone up” to potential retailer deals, said Eric Franchi, partner at the VC fund MathCapital, which invests in ad tech and data companies.

While enterprise software giants like Google and Oracle used to be the logical destination for ad tech or mar tech startups, brands have become strategic options, as they transition from being pure clients to owners of their own technology.

But their motivations for acquisitions are very different, and retailers have a different perspective on tech valuations.

For instance, “strategics” like Adobe or IBM could promise to scale a hypothetical retail ad tech acquisition to many clients across quick-service restaurants (QSRs) or other brick-and-mortar categories. If Nike, McDonald’s or Walmart were to buy the same company, however, it is more likely to stop working with competitors.

“If anything there’s a higher bar on retail from a valuation standpoint, because they may need to shut down external revenue generators,” said Terry Kawaja, CEO of the digital media and tech M&A advisory firm LUMA Partners.

The brick-and-mortar exit ramp

Retailers like Walmart are also starting to embrace a new role as media sellers. This line of business isn’t just an additional revenue source, it’s primarily a way of boosting sales for products that they stock.

Walmart recently moved away from WPP’s Triad Media in favor of managing more of that inventory itself.

“We are definitely moving this advertising business in house,” said Stefanie Jay, VP and general manager of Walmart Media Group, the retailer’s data-driven ad business, when Walmart acquired Polymorph in April. “We feel we need to own that end to end.”

Amazon has spurred retail investments in technology, Kawaja said.

The ecommerce giant started buying and building media and ad tech years ago, believing those upper-funnel assets would lift sales and overall customer lifetime value.

“That theory has proven out nicely,” Kawaja said.

Retail road maps

Nike and McDonald’s are different from Walmart, as they’re not making tech investments to support a media selling business.

But retail brands that spend hundreds of millions or even billions of dollars per year on marketing could justify spending tens of millions on a point solution if that tech will improve overall returns, Franchi said. Hiring data and engineering talent is also difficult and time-consuming, he said, and that delay can be a heavier cost than acqui-hiring an existing team.

Nike’s acquisitions tend to get folded fully into its operations, but McDonald’s takes a different route with Dynamic Yield.

“One thing about McDonald’s is that from the very first time they said to me, ‘What do you think about getting acquired?’ they also said, ‘We don’t want to screw it up for you guys, so how can we let you continue just being you, just the way you are without destroying the magic of a tech startup?’” said Dynamic Yield CEO Liad Agmon.

Dynamic Yield won’t be working with direct QSR rivals, but McDonald’s wants the business to continue operating in the market. “They know innovation does not only happen in their own building. It can happen elsewhere, and they can learn from that and get challenged,” Agmon said.

Retailers are still trying to find the balance between buying, building or renting technology capabilities.

“That McDonald’s deal had some people scratching their heads,” Kawaja said. “I could see McDonald’s using (Dynamic Yield), but the question is whether they need to own it.”

Ryan Joe and Allison Schiff contributed to this report

 

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