Nike is slow to innovate

Leading the way in professional sports, Nike is facing fiercer competition in the running and lifestyle shoe segment.

Earlier this month, Nike got back on the high-quality professional sneaker circuit, with marathon runner Kelvin Kiptum setting a world record wearing a new version of the Alphafly 3 model. But the company is still losing momentum in races in other segments, according to WSJ .

Competitors like Hoka and On are gaining more and more ground in the market for running shoes as well as comfortable shoes for work or school. Adidas and New Balance are also taking the lead in the streetwear market by releasing dozens of new colorways of older models.

Meanwhile, sales in North America - Nike's largest market - fell 2% in the third quarter. Higher product prices were not enough to compensate for a 10% decline in sales, the first decline in more than a year.

Nike remains the world's largest athletic footwear and apparel company, with revenue of $48.7 billion in the fiscal year ending May 31. However, some consumers and industry analysts say Nike's pace of innovation is slowing. The company is also facing difficulties due to rising prices, causing consumers to rethink their spending plans.

Workers install Nike logo lights outside Wukesong Arena in Beijing, China on August 28, 2019. Photo: Reuters

Del Shaffer, a real estate broker in Charleston (South Carolina) has used Nike running shoes for decades but last year switched to Hoka's Mach 4 model because he wanted shoes that were softer and had more cushioning. The 44-year-old runs every day after taking his children to school and said he felt a big change in texture when switching to Hoka. "It provides comfort, and I'm looking forward to not having to have knee surgery when I'm older," Shaffer said.

Hoka-owned Deckers Outdoor brand sales 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 moved away from saying the shoe was only for "ultra-distance runners and athletes", to include "world champions" and "aesthetic leaders".

On Holding, owner of the On brand, reported revenue of about $1.3 billion last year, up 69% over the same period in 2021. The Swiss company targets revenue of $1.9 billion in 2023. and is expected to double this number by 2026.

Footwear industry analyst Matt Powell believes that all of these brands are taking market share away from Nike. In response, Nike announced an innovation roadmap spanning more than 50 years. Accordingly, the company's products "will deliver innovation, performance, style and comfort that will excite consumers for years to come."

In 2017, the company introduced the Vaporfly lightweight sneaker, which became a hit in running competitions. According to analysts, these shoes are groundbreaking, but they are suitable for athletes willing to spend more than $200, not necessarily for those just looking for shoes that are comfortable to wear.

During the pandemic, Nike focused on new design variations and colors for some of its most popular lines such as the Air Force 1, Air Jordan 1 and Dunk. This approach pleases some fans but annoys others, including sneaker enthusiasts and limited-edition shoe dealers.

"Nike is really good at innovating but they keep innovating the wrong things," commented James Hesse, who has owned a YouTube channel about sports shoes for decades.

From design idea to store shelf, the process of developing a shoe model at Nike takes about 18 months. The pandemic and subsequent troubles in the supply chain have disrupted their production processes. Nike is also dealing with inventory issues caused by the pandemic — initially not enough to sell but then too much. To boost sales, the company returned 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 in a Nike store or not. "We are focusing and actively addressing areas that need capacity building," said John Donahoe.

The company released the $80 Nike Interact Run last month as an affordable performance shoe. They are launching a new technology for running shoes, expected to be ready for the 2024 Summer Olympics.

Nike leadership is also working to improve marketing and product assortment, while fostering more meaningful connections with everyday runners. The decision to move deeper 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 editions on Nike's SNKRS app often sold out quickly, but some models are currently available for weeks. According to data from Earnest Analytics, average transactions for sneaker resale platforms that specialize in rare shoes, such as StockX and GOAT, have decreased since April 2022.

Nike is recognized as the top apparel and footwear brand for teens, according to a recent survey from investment bank Piper Sandler. However, footwear analyst Powell said young customers want new and unique products to stand out, and Nike needs to stay away from using different colors of the same sneaker model if it wants them to pay attention.

Some sneaker enthusiasts and resellers say Nike needs to create a new collaboration, similar to the Jordan brand's success with rapper Travis Scott. A pair of golf shoes from this collaboration released last week went for around $1,000 on the resale market, or about six times the original retail price.

However, this method is not necessarily successful. The latest collaborative shoe model between Nike and hip-hop superstar Drake released about a month ago is still selling. Dealers say it makes no profit on the resale market. Right now, you can buy it on StockX for less than Nike's listing.