United States writer Donald · Katz described Nike's dilemma as "revenue is declining, stock prices are falling, retail is not optimistic about its new products, and the debate about a successor is getting louder...... There is a self-sacrificing introspection going on within Nike, with everyone speaking out loud, "in the hallways, in the cafeteria, and in the locker rooms of the fitness center." ”
No one would doubt that this is the current state of Nike. According to the latest financial results for the first quarter of fiscal 2025, Nike's global revenue was $11.6 billion, down 10%.
However, the scene takes place in 1993, when the protagonist is still founder Phil ·Knight, and the focus is now on Elliott Hill · Elliott Hill. On October 14, Hill was officially inaugurated as Nike's global CEO. He spent 32 years at the industry giant, working his way up from intern to President of Consumer Demand & Global Business Markets, leading all commercial and marketing operations for the Nike and Jordan brands until his retirement in 2020.
If you look back from the dimension of time, Nike will experience a trough almost every ten years, and after climbing out, it will often usher in a period of stable growth. This may have something to do with Nike's ability to make timely and drastic stop-losses and corrections.
As Hill said at the plenary session on the first day of the return: "We're in a tough place right now, that's true. But we've been through this before. ”
Now Nike is facing a dilemma again. Since the epidemic, the market environment has been turbulent, consumer confidence is insufficient, and the retail sales of Nike products have continued to decline, and it is difficult to reappear among young people. ·Matthew Friend, executive vice president and CFO of the group, bluntly called "too much investment in direct business" a "mistake" in the earnings call, and there is an urgent need to crack the solution from product, marketing to channel.
Interestingly, no matter how complex the problem is, Nike's underlying solution logic is the same - think about the original self. The footwear giant has experienced many ups and downs since its inception, and although each encounter is different, and the means of solving problems are also different, they all think about the response in the most "Nike" way, going back to the past and looking for the future.
Nike Genetics
In the mid-to-late '70s, Nike was already a sneaker leader, although it was a few years after the official debut of the "NIKE" brand and logo. In 1978, Nike Air technology debuted, and the application of "air cushions" in Nike running shoes greatly improved the comfort of running, and this technological innovation once supported Nike's total revenue.
Founder Phil. Knight explained in "Shoe Dog" that his original intention was to provide a pair of shoes that are more suitable for running, break the monopoly, and reduce the price of sneakers.
Nike, which has tasted the sweetness, is more focused in the field of running technology and product research and development, and wants to be farther ahead of its competitors and increase its market share in running.
But in the late 80s, Nike's sales began to decline, and competitors did not bite themselves tightly on the runway, but caught up with the "aerobic boom". Nike has expanded its business, believing that with its reputation in the field of running shoe technology, even if it designs functional shoes with strange appearances, consumers will definitely pay for them.
As it turned out, they were wrong. In 1987, Nike's sales fell by nearly $200 million, and the company had to make a round of layoffs.
Knight realized that having a product wasn't enough, it needed to tell a story, just like he did when he first sold it with a pair of shoes on his back, and that he needed to give consumers an idea of what the brand they were spending money on stood for.
KATZ WROTE IN "JUST DO IT" THAT WHEN ASKED WHY KNIGHT SPENT SO MUCH MONEY TO SIGN MICHAEL· JORDAN TO THE BIGGEST ENDORSEMENT DEAL EVER, KNIGHT SAID: "IN SIXTY SECONDS, WE CAN'T EXPLAIN MOST, BUT AS SOON AS JENDAN SHOWS UP, ANY EXPLANATION IS SUPERFLUOUS." "The Air Jordan series is Nike's ace to this day.
Air Max is a prime example of both fame and fortune. In 1987, Nike created the first Nike Air Max 1 with a visual air cushion, truly fulfilling the dream of putting air under your feet. That same year, Air Max launched a commercial with the Beatles' "Revolution" as the background music — the first time a Beatles song appeared in a television commercial — that led to a huge increase in sales.
Building on the success of the Air Max, Nike struck while the iron was hot and launched the iconic slogan "Just Do It" in 1988. Subsequently, Nike launched a series of marketing campaigns featuring athlete · Jackson, making the "Bo Knows" slogan popular across the country, helping Nike catch up with its rival Reebok at the time and regain the No. 1 position in the industry.
The developments of the mid-80s and 90s of the 20th century were significant for Nike, helping them create a unique space in the market and build deep relationships with a diverse consumer base, further establishing a fashion-forward image as a symbol of sport, rebellion and coolness. Some of the ads are still in marketing textbooks today, and it's no wonder that some people talk about whether Nike is a marketing company that makes sneakers or a shoe company that makes ads.
In the 21st century, Nike is still hot in the field of sports fashion, but its sales are gradually hitting a bottleneck. In 2010, growth in North America stagnated. At the time, Elliott · Hill was serving as general manager of the North American market, repositioning the market and focusing on professional sports.
Trends are always changing, but the technological progress that professional sports represent remains the same. After the realignment, Nike achieved double-digit growth over the next four years and laid the foundation for growth throughout the 2010s.
Nowadays, focusing on professional sports is almost the core strategy of domestic sports brands, especially after the national tide dividend, the current consumption is sluggish. Although different brands have different understandings and investments in the profession, and there are differences in products, returning to the profession can be said to be an underlying development logic recognized by managers.
The famous book "Evergreen Foundation" analyzes most of the large companies that have passed through the cycle, and the common point is not the "technique" of enterprise transformation and company operation, but almost all of them fall on metaphysical concepts: corporate culture, values, and innovation.
Today, Nike is still leading the way in sneaker technology, and Nike is a pioneer in lightweight, cushioning, and power feedback. Most sports brands are based on Nike's disruptive innovation to make extended innovations, and not many can come up with another disruptive innovation.
When Nike unveiled the Vaporfly 4% running shoe in 2017 and emphasized that it could significantly reduce running consumption, there was much skepticism, but it didn't take long for all the doubts about the shoe to be validated – the shoe won almost every major marathon in which it participated. Soon, major running shoe companies have developed their own professional running shoes, but the underlying logic of carbon plate + supercritical foaming is similar, and it is impossible to deny the industry-wide changes caused by Nike in the field of running shoes.
The Innovation Center at its Oregon headquarters provides a steady supply for Nike, and some in the industry even claim that it is a decade ahead of the current technology, and whenever the market for a technology is saturated, Nike will launch a new product to wake up the market again.
After the wild run, inertia left problems
In the 2010s, building on successful products and marketing, Nike accelerated its digitalization efforts. From 2008 to 2017, Nike's annual revenue nearly doubled, from $18.6 billion to $34.4 billion, and the digital business grew rapidly.
After 2017, Nike wants to have more control over the distribution channel, cut dealers, improve gross margins, and hope to be closer to consumers.
It backfired, and the sudden epidemic drew a pause. Retail sales across the industry have slowed, customer traffic has declined, and consumer confidence is low. In fiscal year 2024, Nike's revenue will be $51.362 billion, a slight increase of 1% year-on-year on an unchanged currency basis, the worst revenue performance in recent years.
It's hard to support brands in the big picture. In Nike's largest North American market, according to Euromonitor data, the compound annual growth rate of overall footwear sales from 2021 to 2024 is only 1.57%, of which there is little change from 2022 to 2023. On this basis, the sports footwear category is growing at a CAGR of 4.91%.
According to Statista, Nike's compound annual growth rate of footwear in North America in the 2021-2024 natural year is 7.68%, and it is also the most sold footwear brand in North America.
Greater China is Nike's third-largest market and used to be the fastest-growing market, contributing nearly half of the group's operating profit in fiscal 2020. During the pandemic, sales in Greater China fell sharply and recovered slowly. From a macroeconomic point of view, the total retail sales of consumer goods increased by 3.4% from January to July 2024, and clothing, shoes and hats, and knitted textiles increased by 0.3% year-on-year, showing a downward trend from June to August. Consumers are still cautious about "shopping", and the consumer confidence index has remained below 90.
Previously, Seeking Alpha had predicted that fiscal 2025 would be a year of decline in Nike's revenue and profits, with revenue falling by less than 5%. Recovery in 2026 and growth rates of around 5%-6% in the following years is in line with Nike's management's recovery narrative.
The epidemic has also changed the trend of popularity, and the outdoor has seized most of the sports market, while also blowing street trends to the mountains. Although Nike also began to operate outdoor product lines very early, its market influence cannot be compared with that of pure outdoor brands, and many domestic sports brands have increased their investment in outdoor lines, and the competition in this market segment is becoming increasingly fierce. Nike's subsequent layout in the outdoor market deserves the attention of the market.
Finally, let's talk about the retiring John · Donahoe himself. The DCA strategy, which has been criticized by many outsiders at the moment, was promoted during Donahoe's tenure. The so-called CDA is to accelerate the transformation of DTC, and Nike does not deny the importance of DTC internally, but the process of promotion has been questioned.
Donahoe only took over in January 2020, but he led the company through the pandemic and accelerated the transition to direct sales and e-commerce with higher gross margins, which led to increased profits. In fiscal 2024, he led the company to meet its overdue revenue target of $50 billion.
However, cutting off distributors is tantamount to giving up this channel to competitors, especially in the current economic downturn, brands need partners to share sales risks.
Not long after taking office, Donahoe announced that he would reposition the product into three parts: men's, women's, and children's clothing, instead of the previous classification by different sports such as foot, basketball, and running. Gender-based classification is a common pattern for large footwear and apparel companies, but it is also seen as "non-Nike", sacrificing Nike's influence and marketing "magic" in a specific sport. As the Financial Times said about him – while Donahoe proved himself good at technology and sales, he lacked an essential ingredient for a footwear brand: knowing what it was cool.
Back to the beginning
Partly because of this, Nike's stock price rose 10% the next day when "Nike's own man" Elliott ·Hill announced his return.
If you want to make Nike "more Nike", Hill is the right person. During his tenure, he led a series of reforms, including downsizing the wholesale business, shifting its focus to DTC, and investing more in digital channels, which led Nike into a quagmire of stagnant growth. What's more, Hill has a strong foundation both internally and externally, and both employees and retail partners speak highly of him.
Regarding the "return of the former boss", it is most likely to be associated with Steve Jobs, whose return reshaped Apple. Starbucks and Disney are also more successful examples.
Along with Hill's appointment, there are two other personnel changes: Dong Wei was promoted to chairman and CEO of Nike Greater China, and global CEO of ACG (All Conditions Gear), an outdoor sub-brand; Tom · Peddie has been appointed Group Vice President and General Manager for North America.
(Wei Dong, Chairman and CEO of Nike Greater China)
In the past ten years, Dong Wei has been the "number one" in Greater China, working at Nike for nearly 20 years, and has led Nike Greater China to achieve positive revenue growth for more than 20 consecutive quarters. Pedy, who had 30 years of experience at Nike, also retired in 2020, and his last position was "Group Vice President and General Manager of North America".
In addition to making personnel changes, Nike is still addressing the core challenge: maintaining its strength as a global retail powerhouse while rebuilding the company's strong influence in a culture of innovation.
There may not be short-term results in the financial report figures, but the transformation in the marketing field can still clearly perceive that Nike is returning to competitive sports and no longer "pleasing everyone".
During the Olympics, Nike launched the brand plan "Not everyone can be the winner", which was a bit offensive in the eyes of ordinary people, but it hit the crowd that engaged in and loved competitive sports and resonated. The latter is Nike's real mainstream consumer group.
And this plan fits perfectly with Zheng Qinwen, the new "queen" of Chinese sports. Zheng Qinwen's image is competitive and wants to win, she mentioned at the event that she has "not hidden her edge" since she was a child, and was even called "cruel" by her opponents.
During the run-up to the Olympics, Nike made a poster for Zheng Qinwen as "a Paris souvenir I want to take away, only medals", which was widely disseminated after Zheng Qinwen entered the semi-finals. After Zheng Qinwen won the championship, her Weibo caption read, "I took away the most wanted Parisian souvenirs".
Nike quickly responded to the traffic, updated the slogan, replaced the "medal" in the poster with "gold", and the word "gold" was highlighted. Zheng Qinwen was interviewed by the media the next day, wearing this T-shirt printed with slogan, and the number of searches related to the T-shirt increased by 111% month-on-month in a week, and the official flagship stores of Tmall and JD.com were in short supply.
In mid-September, Zheng Qinwen returned to China to participate in the China Open, and Nike held a fan meeting event with the theme of "Winner's Home" and "Victory Will Answer Everything". The tennis shoes worn by Zheng Qinwen at the Olympics were also recreated by Nike and widely recommended and disseminated on social media.
With the attitude of returning to competitive sports, Nike has also begun to "regain lost ground" in the field of running, strengthening product design and manufacturing and cultural empowerment in this field.
In September, the brand launched a new campaign, "Winners Love Abuse", which resonated with runners as they struggled to wake up early, sweat profusely, and not give up despite their physical limitations.
On the product side, Nike said on the earnings call that the Alphafly series of professional performance running shoes and the lifestyle "look of running" series dominated by the Vomero 5, V2K and P-6000 have all doubled in the past, and Nike is encouraged by the strong momentum of the running business. It is reported that Nike is currently focusing on promoting the recovery of the running business and building a complete running product matrix to meet the needs of multi-level consumers.
This series of positive changes marks that Nike has started a new cycle, and perhaps the familiar Nike will return.
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