A leader in professional sports, Nike is facing stiffer competition in the running and lifestyle shoe segment.
Earlier this month, Nike returned to the high-end professional athletic shoe race, with marathoner Kelvin Kiptum setting a world record wearing a new version of the Alphafly 3 model. But the company is still losing momentum in other segments, according to the WSJ .
Competitors like Hoka and On are gaining ground in running shoes as well as comfortable shoes for work or school, while Adidas and New Balance are also leading the way in the streetwear market, releasing dozens of new colorways of old models.
Meanwhile, sales in North America — Nike’s biggest market — fell 2% in the third quarter. Higher product prices weren’t enough to offset a 10% drop in sales, the first decline in more than a year.
Nike remains the world’s largest athletic footwear and apparel company, with $48.7 billion in revenue in the fiscal year ended May 31. But some consumers and industry analysts say Nike’s pace of innovation is slowing. The company is also struggling with rising prices that are making consumers rethink their spending plans.
Workers install Nike logo lights outside Wukesong Gymnasium in Beijing, China on August 28, 2019. Photo: Reuters
Del Shaffer, a real estate agent in Charleston, South Carolina, has been wearing Nike running shoes for decades, but last year he switched to Hoka's Mach 4 model because he wanted something softer and more cushioned. The 44-year-old runs every day after dropping his kids off at school and says he feels a big change in the material when he switches to Hoka. "It's more cushioned, and I'm looking forward to not having to have knee surgery when I get older," Shaffer says.
Hoka-owned Deckers Outdoor brand revenue reached $1.4 billion in the fiscal year ended March 31, up from $223 million in 2019, when the company first reported sales for the brand. In 2021, the company dropped the claim that its shoes were only for “ultra-distance runners and athletes,” and now includes “world champions” and “aesthetic leaders.”
On Holding, owner of the On brand, reported revenue of about $1.3 billion last year, up 69% from the same period in 2021. The Swiss company is targeting revenue of $1.9 billion in 2023 and expects to double that figure by 2026.
Footwear industry analyst Matt Powell says all of these brands are taking market share away from Nike. In response, Nike claims a 50-year innovation roadmap that will “bring innovation, performance, style and comfort that will keep consumers excited for years to come.”
In 2017, the company introduced the lightweight Vaporfly, which became a hit in running competitions. Analysts said the shoes were groundbreaking, but they were aimed at athletes willing to spend more than $200, not necessarily those looking for a comfortable shoe.
During the pandemic, Nike focused on new design variations and colorways for some of its most popular lines like the Air Force 1, Air Jordan 1, and Dunk, which pleased some fans but upset others, including sneakerheads and limited edition shoe dealers.
"Nike is really good at innovation, but they keep innovating the wrong things," commented James Hesse, who has owned a YouTube channel about sneakers for decades.
From design concept to store shelves, Nike’s shoe development process takes about 18 months. The pandemic and the resulting supply chain problems have disrupted its manufacturing process. Nike is also dealing with inventory issues caused by the pandemic — initially not enough to sell, then too much. To boost sales, the company is turning back to some of the retail partners it cut just over a year ago.
Nike CEO John Donahoe said the company prioritizes everyday runners who are looking for something new, and reaches that customer whether they’re in a Nike store or not. “We’re focused and aggressively addressing areas where we need to improve,” Donahoe said.
The company released the $80 Nike Interact Run last month as an affordable performance shoe, and it’s rolling out new technology in running shoes that it hopes will be ready for the 2024 Summer Olympics.
Nike’s leadership is also working to improve its marketing and product assortment, while also fostering more meaningful connections with everyday runners. The move into the mass market is a shift from the company’s reliance on limited-edition products to drive sales.
In 2020 and 2021, new limited-edition releases on Nike's SNKRS app often sold out quickly, but some models are still available for weeks now. Average transactions on sneaker resale platforms that specialize in rare shoes, such as StockX and GOAT, have been falling since April 2022, according to data from Earnest Analytics.
Nike is recognized as the top footwear and apparel brand among teens, according to a recent survey from investment bank Piper Sandler. But footwear analyst Powell said young consumers want new and unique products to stand out, and Nike needs to move away from using different colorways of the same sneaker if it wants to get their attention.
Some sneaker enthusiasts and resellers say Nike needs to create new collaborations, similar to the success of the Jordan brand with rapper Travis Scott. A pair of golf shoes from that collaboration released last week fetched around $1,000 on the resale market, or about six times the original retail price.
But that approach isn’t guaranteed to work. Nike’s latest collaboration with hip-hop superstar Drake, released about a month ago, is still selling poorly. Resellers say it’s not making any money on the resale market. You can now buy it on StockX for less than Nike’s list price.
Phien An ( according to WSJ )
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