How Nike dominated the Sports industry
There is a high chance that you have a pair of Nike sneakers relaxing in your closet right now. Nike's iconic swoosh logo and JUST DO IT slogan are known by almost everyone, no matter where you live. Nike is valued at more than $100 billion as of 2020, making it one of the most valuable brands on the planet. The brand has been at the top of the sportswear industry for decades and is practically untouchable. Thanks to a couple of successful business strategies such as controversial advertising, the Air Jordan and its lucrative exclusive contracts with some of the biggest sports leagues in the United States. But trouble maybe brewing for Nike, its sales growth is slowing down and the sneakers, the crowning jewel of its portfolio, aren't growing in terms of sales as fast as they used to. Meanwhile, it has also faced heated criticism over its past treatment of female employees. That's something the company certainly has to work on if it wants to make women's apparel and sneakers a bigger part of its business. Now the question is that will Nike be able to build momentum in the US along with expanding into the international market or will Adidas, Vans and other rivals take over?
History of the brand:
First let's take a step back and figure out how Nike reached the position it is now at. Nike wasn't originally called Nike, in the beginning it was known as Blue Ribbon Sports and it was founded by Phil Knight and Bill Bowerman in 1964. Knight took a trip to Japan in his early 20's to find a running shoe manufacturer. The first shoe he sold with the help of a Japanese manufacturer was called Tiger. They later decided to cut ties with the Japanese and take their business as a single entity. In 1971, a graphic design student at Portland university came up with a new logo for them and that's when the Nike swoosh was born. And looking for a new name for the company they went with Nike, referring to Nike herself, the goddess of victory. Nike later went public in December 1980 and that's when it really hit its stride. That was the first year it took down the rival Adidas in terms of market share in the US. In 1982, Nike launched a basketball shoe known as the Air Force 1, which featured its now famous air technology that was said to give people who wore them a little extra bounce. In 1986, Nike surpassed $1 Billion in revenue for the first time. It was still getting into other sports and was planning its physical retail expansion, but Reebok's sneakers took over the Nike's market share in 1987. Nike regained its dominance in the industry in the year 1989. One big help came in 1988 when Nike premiered the first ever advertisement for its now famous the JUST DO IT slogan, that ended up being a hit.
The story of Air Jordans:
It was in 1985, when Nike debut its Air Jordan sneakers. At the time Jordan's career was just getting started and Nike was having a hard time in getting into the basketball market, so it decided to make a bigger, bolder deal with a rookie. He was gambled but it obviously proved to pay off. The first Air Jordan were so different from the standard sneakers, NBA actually banned them from being worn on the court. But in this setback Nike saw a marketing opportunity. Nike aired a TV commercial in 1985, that told shoppers to buy the black and red Air Jordan because fortunately NBA cant keep you from wearing them. The Air Jordan 1 hit the shelf on March of 1985 and costed $65. Nike sold $70 million worth of shoes and by the end of the year the Air Jordan franchise brought more than a $100 million to Nike in sales, a phenomenal feet for a young brand. With the increasing trend of hip hop culture, Nike saw an even bigger opportunity and started selling Air Jordan as a shoe not just for athletes but also for rappers and artists. Even after Jordan retired from professional basketball, his brand remained a big hit for Nike. It accounted for around 9.5% ($2.8 billion) of Nike's total sale in 2018.
The love with Risky Advertising:
Nike's focus on advertising has also been a huge part in its success strategy. It's been known to strategically release controversial ads, maintain polarizing endorsements and make bold statements about its brand and the people who wore it. During September 2018th, controversial ad of Collin Kaepernick lead to a 3.2% drop in Nike's shares at first. People were outraged but ultimately Nike managed to turn them into cash. It generated $163.5 million worth of free press. But this was not the first controversial campaign which Nike did, in-fact the brand has historically taken a stand on issues and it has always resulted into a rise of sales. But the brand has also faced some backlash for some of its endorsements. Both tennis stars Maria Sharapova and Cyclist Lance Armstrong represented Nike only to be a part of the scandal of being in possession of the performance improving drugs. Still, those individual troubles haven't taken Nike down with them. Nike's sales have weathered the storm each time.
Getting into Women's Sports Market:
Nike has actually said that one of its biggest opportunity is to scale its women's business. The company has also said that it sees more women embracing the sneaker culture nowadays and it's not just guys lined up outside the stores to buy limited edition sneakers. But as Nike has been advocating with women, internally it had its own challenges. In the early 2018, ex-employees sued Nike for alleged behavior by top male executives and paid disparity. Nike has since said that its increasing diversity among its leadership ranks and giving executives training on inclusion in the workplace and its sales has still been climbing overall showing that this hasn't been a near term strain on the business.
It's exclusive contracts:
Nike's star status has also a lot to do with its presence in professional sports. In early 2019, the MLB signed a 10-year uniform and footwear deal. When this deal was announced it solidified Nike's dominance as the retailer is now the supplier for three big sports league in US. The MLB, The NFL and The NBA. The NBA signed for an 8 year apparel deal reportedly worth $1 billion in 2018. In 2018, Nike and NFL extended an apparel partnership for 10 more years. In Soccer though, Adidas still has an upper hand with the deal with major league soccer.
Rivals:
Despite facing pressure from rivals, Nike remains a dominant force in sneakers and sportswear. It has been the number one player since the 1980's when it eclipsed Adidas. Nike ranks as the number 1 brand in the US when looking at the dollar sales of athletic footwear and holds 1/3rd of the market (33%) whereas Adidas still holds 11%. It is also number 1 in the active-wear category with 14%, followed by Under Armour with 7%. Teens love Nike's clothes and this is an important group of shoppers to win over as their spending power grows.
What's Next for Nike?
So where does Nike goes from here? How does the company which seemingly ventured into every sport now keep growing? Bankruptcy of several sports companies in US forced Nike to sell their product more directly to consumers meaning that it is investing in its own stores like a massive house of innovation in New York at 5th avenue. And it is continuously adding new technologies like Nike Fit, which scans customer feet to tell the exact shoe size they should be wearing before buying it from their store. At the end of 2018, Nike's direct sale represented about 30% ($10.4 billion) of the total sales, up from 28% the year before. Another growth factor is the Nike's push to sell more to women. Nike's women line still represents less than 25% of Nike's total sales, but the overall US market for shoes and clothing is much larger than men's, giving Nike room to grow. Working with athletes such as Serena Williams, its trying to encourage younger girls to get into sports and stick with it. Ultimately the key to Nike's success rest in its ability to keep growing and sell more merchandise, just as importantly to sell shoes and clothes to men and women. So will Nike be able to "JUST DO IT"?