Nike’s new Olympics campaign, narrated by Willem Dafoe and featuring longtime brand stalwarts such as LeBron James and Serena Williams, takes a bold and cheeky stance on “winning”—that it is an exclusive art that is not for everyone. But it’s a message at odds with the losing position the brand has found itself in of late.

For more than half a century, Nike has dominated athletic footwear, tapping into culture with innovative offerings such as the Nike Cortez, Air Jordan and Nike Dunk. And the Beaverton, Oregon-based brand’s marketing has been just as iconic, with campaigns including “Is it the shoes?” with Michael Jordan and Spike Lee and Colin Kaepernick’s “Dream Crazy” lauded as textbook examples of marketing genius. With revenue near $50 billion and an advertising budget in excess of $4 billion, Nike has long seemed untouchable—until now.

Recent developments have painted a different tale for the sportswear giant, with reports of mass layoffs, sales declines and a lack of product novelty threatening Nike’s clout.

“Historically, Nike has been one of the largest sellers of discretionary goods, but beyond simply being the largest, Nike has been one of the strongest marketers—there’s always been stories to tell about the stories Nike tells,” said Simeon Siegel, a managing director and senior analyst at BMO Capital Markets. “But it seems like in the last several years, Nike has become more obsessed with where it’s selling than what it’s selling.”

Indeed, Nike’s pandemic-era shift away from wholesale accounts like Macy’s, Footlocker and DSW to focus on a direct-to-consumer sales model has led to many of the brand’s current struggles. Nike has since reversed course, bumping up its wholesale business in recent months, with executives admitting the need for “adjustments.” But the door was already left open for footwear rivals to steal market share, including brands such as Hoka and On, as well as established competitors including Adidas, New Balance and Asics. For example, many rivals are attracting young millennials and Gen Z consumers in a way that Nike has been unable to do in recent years as it struggles to find the right mix of innovation and trendiness with its products.

“They went back to the well for the same thing too much,” said Sam Poser, an equity analyst at Williams Trading who covers the company. “What Nike’s problem is, they overcooked the classics,” he added, citing an overreliance on new versions of shoes like the Air Force 1, Air Jordan 1 and Dunks.

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Experts say the path forward involves a focus on research and development and product creation, a values-driven marketing strategy that includes athletes who resonate with younger shoppers and a narrative that refutes obsoletism.

“Everyone knows Nike exists,” said Nathan Poekert, a marketing consultant and CMO advisor. “From a perspective of upper-funnel marketing, the challenge for them is shifting the gear from ‘We are dependable and reliable and we have products that are technologically advanced and innovative’ to ‘We are cool and relevant again.’”

Nike declined to make executives available for an interview for this story.

DTC shift

When Nike started to invest more in DTC under the leadership of CEO John Donahue, who took the helm four years ago, the strategy made sense. Consumers, under pandemic lockdown, were shopping online more and apps like Nike could offer them targeted and personalized incentives to buy. But as it focused more on DTC, middleman sellers such as department store chain Macy’s were less involved. And Nike absorbed more selling costs, leading to a losing battle that ended with an inventory surplus and few places to sell it, even at a discount.

“They always talked about developing a pull model,” said Poser, noting a supply and demand strategy in which demand exceeds supply. “But they’re pushing a lot more than pulling these days,” he said, adding that Nike also “got rid of a lot of talented product people so the product and innovation wasn’t as good as it had been.”

In addition, by selling to fewer stores, Nike lost out on its ability to market itself by being present in more shopping situations, some experts say.

“We don’t often think of distribution as a marketing challenge, but it’s one of the biggest deciders of consumer sentiment,” said Anjali Bal, an associate professor of marketing at Babson College.

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Last month, Nike saw its share price plummet when it reported that it expects fiscal 2025 sales to decline in the mid-single digits, as opposed to the slight increase the company, and analysts, had previously anticipated. The revised guidance came on the heels of a rocky spring that included the reduction of 2% of Nike’s global workforce, or 732 jobs. Nike’s fourth-quarter revenue declined 2% to $12.6 billion year over year. Net income, at $1.5 billion, was up compared with the $1 billion Nike earned in the fourth quarter of fiscal 2023.

Results also appeared to demonstrate that Nike’s shift back to sporting goods retailers is the right move. In the fourth quarter, Nike direct-to-consumer sales declined 8% to $5.1 billion; in contrast, wholesale revenue for the period was up 5% to $7.1 billion. On a late June earnings call with analysts, Nike executives took an optimistic tone, drawing on Nike’s 60-year history as helping to navigate the new market pressures.

“We’ve gone through these product cycle transitions before,” said Donahue on the call. “And while this is challenging, and it’s going to be challenging over the next couple of quarters, our history has demonstrated that when we take action and we do it aggressively, and we get behind the things that are new, and we build marketing and storytelling around it, we move the consumer fairly quickly to a new place.”

Boosting ad spend

As it reinvigorates its marketing, Nike is spending more on advertising. Worldwide advertising and promotion costs—what the company calls demand creation expense—reached a record $4.29 billion in the year ended May 31, 2024, up about 6% from the previous fiscal year, according to Ad Age Datacenter’s analysis of company filings. Nike also has a new top marketer leading the charge. The footwear seller hired Nicole Hubbard Graham as chief marketing officer late last year. Graham, who worked for Nike for nearly two decades in positions that included directing brand marketing in Europe and basketball and VP of global categories and consumer direct marketing, rejoined the company in January after a two-year stint at Adopt, a creative agency she co-founded.

One of Graham’s first large-scale campaigns for Nike is the current Olympics push, which was created with longtime agency Wieden+Kennedy. The “Winning Isn’t For Everyone” work includes an anthem film, extension films from individual athletes, TikTok content and out-of-home ads debuting across the globe in Asia, Europe, and the U.S. In April, Nike executives said that the company is spending more on the Games this year than it has ever spent on the Olympics previously.

Check out more Olympics marketing news here

Marcus Collins, a marketing professor at The University of Michigan who previously worked at Wieden, pointed out that Nike has seen its share of challenges before.

“It’s not the best time for Nike at the moment, but sometimes you gotta take a step back to take a step forward,” Collins said. For example, he said that during its Michael Jordan era, Nike was celebrating athletes, essentially putting them on a pedestal. Yet the brand pivoted in 2012 with “Find Your Greatness,” a lauded campaign that celebrated the athlete in everyone.

“Nike has always found a way to shift with the cultural zeitgeist,” Collins said. “We might be in an era where Nike could benefit from telling stories of athleticism in a culturally contemporary manner.”

Increased competition

Yet as Nike tries to find its footing, rivals are stepping in. Last week, Fleet Feet, a specialty running shop with more than 270 U.S. locations, published its inaugural Running Report, highlighting the footwear brands its customers like the most. The Top 10 list of bestselling shoe models were from Hoka, Brooks Running, Asics and New Balance; Nike did not make the cut.

“Technology has evolved so much —you have brands like Hoka and On that are relatively new compared to Nike and Adidas,” said Joey Pointer, CEO and president of Fleet Feet. “They’ve really upped everybody’s game at every level.” He noted that Hoka in particular is resonating with both teenagers and seniors. “It’s a brand that is hot right now both from a performance as well as a look and design perspective,” Pointer said.

In its recent fourth quarter, Hoka, a 15-year-old brand owned by Deckers Brands, reported a whopping 34% rise in net sales to $533 million compared with the year-earlier period, continuing its yearslong upwards trajectory.

From a social media perspective, Nike appears to be losing relevance, according to Poekert, who last year worked as head of social media content and digital innovation at teen retailer American Eagle Outfitters. While Nike has a reputation as dependable and reliable, newer brands such as Hoka and On are seen as trendy with younger consumers at a time when such consumers look to brands as outfitters of their identities. Even long-established rival Adidas is seeing bright spots of trendiness, specifically with its Samba as celebrities such as Olivia Rodrigo gravitate to the retro style. Adidas last week increased its 2024 sales guidance to a high single digit increase, following better-than-expected second-quarter results.

“The problem is Nike is not trending as a brand that Gen Z loves on social any longer—it’s more so seen as a brand that happens to maybe be in content that you are seeing,” Poekert said, adding, “We all know the power that social can have on influencing people’s perception of a brand right now.”

Along with a lack of trendiness, Nike’s product issues extend to quality, in some cases. A recent Ad Age-Harris Poll found that of the 60% of U.S. adults who report having purchased a Nike product in the past year, 45% of them at least somewhat agree that the quality of the brand’s products has decreased over time. In February, the brand was criticized for its new uniforms for Major League Baseball teams as many complained of performance problems with the new apparel, including cheap materials. The uniforms were manufactured by Fanatics on behalf of Nike. 

Athlete roster

Nike has long commanded an impressive roster of athletic and celebrity collaborators that date back to its Jordan and Spike Lee days. Yet cracks in the strategy have started to emerge, as some sports stars turn to other brands. For example, both Olympian gymnast Simone Biles and runner Allyson Felix publicly broke with the brand in recent years over a disconnect in values. Felix now has her own shoe line, Saysh, and Biles, arguably one of the hottest athletes in this year’s Olympics, is starring in a new campaign for Athleta.

“Companies aren’t as interesting to athletes when they don’t represent their values and athletes have so much choice now with brands,” said Bal, noting Coco Gauff and Shohei Ohtani are both with New Balance and Ben Shelton is with On.

Meanwhile, Adidas’ recent social campaign with NBA star Anthony Edwards appears to diss Nike sneakers, and New Balance increased its influence in women’s sports by signing a multiyear with the WNBA last week. (Adidas, Nike, Puma and Under Armour still have WNBA sponsorships, CNBC noted.) The collaborations extend beyond athletes as well, as some newcomer shoe brands ramp up their fashion and lifestyle appeal. For example, On last month brought on Zendaya as a brand partner, involved with both campaigns and product design for the Roger Federer-backed Swiss brand. Nike and Tiger Woods parted ways earlier this year. 

“Increasingly, we are seeing some of our top athletes are choosing other companies and that’s not great for Nike,” said Bal. “Part of their brilliance is the fact that they’re so closely tied to the sports and when you lose the athletes, the tie to the athletes also diminishes.”

Athletes are not the only ones looking for brands that align with their values. Younger consumers, and Gen Z in particular, are known to prioritize socially and environmentally conscious brands as they seek authenticity with their consumer relationships. While Nike is still listed on Kantar’s Brand Inclusion Index, which focuses on the perception of DE&I, it lost its top U.S. position, which it held last year, to Amazon this year. The company ranks third globally.

When Nike made its layoffs earlier this year, The Oregonian/OregonLive and ProPublica reported that the cuts included the elimination of the Sustainable Innovation team, a group tasked with decreasing Nike’s carbon footprint through things like using plant materials and recycling. Nike’s layoffs reportedly included 20% of the staffers who worked on sustainability as the company tries to save on costs and reverse its sales declines. Such backtracking could be problematic as Gen Z customers look to brands that keep their promises.

“This is about authenticity and Nike saying these are our values and following through on it,” said Bal. “Saying you care about something and doing the opposite is no longer acceptable in 2024.”