The U.S. footwear market is stagnant. Traffic at the malls and retailers it relies on has plummeted. And Nike's two largest rivals, Adidas and Reebok, are three years into a merger that ought to transform them into a more imposing threat.
|Photo: Pascal Lauener|
NIKE'S VISION THING: And that vision focuses on marketing, re-emphasized by CEO Mark Parker.
Nike's U.S. sales climbed 4% to $6.4 billion in a difficult market environment during the recently completed 2008 fiscal year, while most of its competitors saw declines. Globally, Nike posted gains of at least 19% in every region outside the U.S. Global revenue rose 14% to $18.6 billion.
"They have so many resources and such clarity of vision," says Matt Powell, a footwear analyst at SportsOneSource. "They've had a laser focus."
share puts Nike at an all-time high in its market
Nike's global revenue in fiscal 2008, up 14%
Number of China's 28 Olympic teams that had Nike deals
The recent resurgence of Nike's vision is generally attributed to CEO Mark Parker, who succeeded former S.C. Johnson & Son CEO William Perez at the helm of Nike in 2006. Mr. Perez reportedly clashed with Nike founder Phil Knight over Mr. Perez's plans to de-emphasize marketing at a company that boasts perhaps the most iconic American brand. Mr. Parker, who had been Nike's top marketer, doesn't have that problem.
Not to mention that his employer is willing to spend. Nike increased U.S. ad spending 7.4% to $702.9 million in 2007, according to Advertising Age estimates. Benefiting from that largesse was longtime primary Nike agency Wieden & Kennedy, Portland, Ore. Nike worked briefly with Crispin Porter & Bogusky, Miami, on its running-shoe business (including Nike Plus) before parting ways this year. R/GA, New York, is another Nike mainstay agency that has supported the groundbreaking Nike Plus.
Under Mr. Parker -- and assisted by John Slusher, VP-global sports marketing; Charlie Denson, president-Nike brand; and Trevor Edwards, VP-global brand and category management -- Nike has focused like never before on the power of its iconic Swoosh. The company is concentrating its efforts tightly on two dozen narrowly defined consumer segments and also drilling down into categories in which it hadn't previously competed, such as skateboarding.
While the brand has always done well with casual athletes and folks who treat sneakers as fashion accessories, Mr. Parker pushed more aggressively to appeal to hard-core athletes as well. That paid enormous dividends in the basketball category, where its Jordan imprint is the only growing brand, and in running, where Nike expanded its already dominant market share to 60% from 57%.
Nike's success in the running category was largely driven by the Apple iPod-linked Nike Plus, which now ranks as the world's largest running club. The technology not only motivates runners with music and tracking their pace, but it also uploads their times and distances into a global community of runners online, a social-networking innovation that lets runners race in different countries.
In September, Nike drew 1 million runners all over the world to compete virtually in a "Human Race" 10K. Runners could compare their results to competitors all over the world or view how their cities and countries fared.
Nike's major marketing platform for the year was the Beijing Olympics, which it carpet-bombed with deals involving individual sports federations, including 22 of the 28 Chinese teams and the high-profile U.S. basketball teams. This approach gave the Swoosh a constant presence at the games and was thought to be more cost-efficient than Adidas' top-level International Olympic Committee sponsorship. It helped fuel explosive international growth at Nike, led by a market-best $1 billion revenue in China that's doubled in two years. And it often leads to massive exposure for the brand when its athletes dominate the games, as sprinter Michael Johnson so famously did in 1996.
The latter benefit didn't pay off this year, however, as swimmer Michael Phelps -- a Speedo endorser -- and Puma-wearing Jamaican sprinter Usain Bolt dominated the Summer Olympics, while many of Nike's top athletes disappointed due either to injury or underperformance.
'Tiger Woods of swimming'
Speedo's LZR Racer suit so ruled the pool, in fact, that Nike actually gave its own swimmer-endorsers permission to wear them during the games. Nike, which declined to comment for this article, is widely expected to offer Mr. Phelps an eight-figure endorsement deal when his arrangement with Speedo expires next year. That would follow a footprint Nike used successfully in golf with Tiger Woods, a bigger-than-his-sport athlete who turned Nike into a huge force in the category immediately.
"They will view Phelps as the Tiger Woods of swimming," says Paul Swangard, president of the University of Oregon's Warsaw Sports Management Center. "If you have Michael Phelps, you have a big presence in swimming, just like with Tiger in golf."
Indeed, going back to Michael Jordan in basketball, few marketers have so reliably been able to identify and sign athletes who transcend their sports to such great effect. The 2008 Wimbledon tennis championship match between stars Roger Federer and Rafael Nadal, each cloaked in Nike, was in essence a five-hour Nike commercial. The sponsorship evaluation firm Joyce Julius & Associates estimated that the Nike Swoosh received 35 minutes of airtime during the riveting five-set match, valued at about $10.6 million -- more than three full-price Super Bowl ads at prices for this year's game.
In skateboarding, Nike entered the category four years ago as an outsider. Skateboarding has been long dominated by insular players such as Vans, DC Brands and Etnies. But thanks to a steady drumbeat of key athlete endorsements, advertising in niche magazines and websites, key event sponsorships and promotions, and -- of course -- the rollout of a credible product, Nike now has 8.5% of this fast-growing market.
Nike's only significant disappointment this year came in the cross-training category, which it tried to revive with a campaign starring athletes such as football star LaDainian Tomlinson. The campaign was linked to a larger, Nike-endorsed training regimen. Its launch drew notice because it competed with Under Armour's first non-cleated shoe, the Prototype, and Under Armour's launch fared better.
Mr. Powell attributes Under Armour's success to the fact that it was the first UA-branded shoe that teens who worship the brand could wear to school, and not necessarily to any real prospect of reviving the moribund cross-trainer category, which had been declining since the early 1990s.