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Although I’m seven pounds down and four weeks into my wellness journey, I haven’t quite embraced the runners aesthetic yet. But in talking to my friends who are seasoned runners, I’ve noticed something interesting: They all love the Nike Run Club app—it's their top choice for tracking miles, planning routes, and sharing on social. But here's the twist: when they hit their local run clubs, they're showing up in ASICS, Hoka, or On Running shoes. This trend highlights the core issue Nike's dealing with: strong brand loyalty in tech, but a clear shift away in what runners are actually lacing up.
In the 90s, Nike redefined sports marketing with bold campaigns and relentless innovation, connecting with athletes and everyday people alike. Nike wasn’t just a brand; it was a movement. 'Just Do It' wasn't a slogan—it was a call to arms. But times have changed, and so have the challenges. What was once an untouchable giant is now anxiously navigating an era where fashion communities are decentralised and Instagram is advertising on TikTok - a eco-system that demands so much more than just great stories.
The Back Story: From ‘Just Do It’ to Just Surviving
In June 2023, Nike appointed John Donahoe, former CEO of eBay, as its new Chief Executive Officer, signaling a strategic shift towards digital transformation and consumer engagement at scale.
But since Donahoe's appointment, Nike has experienced a series of financial twists and turns. Despite initial optimism around his digital-first strategy, aimed at accelerating Nike's direct-to-consumer (DTC) initiatives and enhancing its e-commerce platform, the company has faced significant challenges. While Donahoe's expertise was expected to boost Nike's digital sales and streamline operations, the reality has been more complex.
Nike, the giant forged on the principles of the iconic 'Just Do It' ethos, bold 90s campaigns, and unforgettable storytelling that redefined sports marketing, is now contending with a period of intense challenges. The brand has seen its stock value plummet by over 30% in the first half of 2024 alone. The digital sales growth that Donahoe championed has slowed to just 3% in the most recent quarter—far below the pandemic-era double-digit gains—while cracks have emerged in the Direct-to-Consumer (DTC) model, particularly in inventory management and fulfillment. Now, Nike faces a critical need to re-evaluate its retail and marketing strategies to regain its footing in an increasingly volatile marketplace.
Stock Drop: A Reality Check
Nike’s stock decline is particularly stark when juxtaposed against the performance of up-and-coming competitors like Hoka, ASICS, and On Running. While Nike has long been the standard-bearer for innovation and brand power, these rivals have shown that agility and focus can outpace even the most established names.
Hoka has seen a staggering increase in popularity, with its parent company, Deckers Brands, reporting a 48% year-over-year increase in net sales for the third quarter of fiscal 2024. Hoka's unique cushioned running shoes have resonated particularly well with long-distance runners and ultra-marathoners, helping to drive this growth.
ASICS, traditionally a favorite among serious runners, has also seen a resurgence. The brand's focus on technological advancements like its GUIDESOLE™ technology and the continued popularity of its GEL-Kayano line have bolstered its market position. ASICS saw its running shoe sales increase by 26% globally in the first half of 2024, a testament to its strong brand loyalty in the performance running segment.
On Running has been another rising star, especially after its IPO in late 2021. The Swiss brand, known for its sleek design and innovative sole technology, reported a 44% increase in net sales for the first half of 2024 (On Running H1 2024 Financial Report - https://www.on-running.com/en-us/investors). On Running has effectively capitalised on the premium market, attracting both serious athletes and casual wearers.
Why the drop for Nike? A combination of factors is at play, but a significant issue has been the company's over-reliance on its product-led marketing strategy. For years, Nike could rely on the sheer brilliance of its product innovation to drive sales and maintain its market dominance. However, with market saturation and the rise of digitally native brands, the effectiveness of this approach has waned.
Retail Strategy: Time to Rethink
Nike's retail strategy has also been under intense scrutiny. The shift towards Direct-to-Consumer (DTC) was supposed to be the magic bullet, offering higher margins and more control over the customer experience. Yet, as it turns out, this shift has been more complicated than anticipated. The recent drop in digital sales, compounded by issues in inventory management, has exposed cracks in the DTC model. Nike’s digital sales growth slowed to just 3% in the most recent quarter, a sharp decline from the double-digit growth rates seen during the pandemic. Meanwhile, the company’s overall revenue growth was only 2% year-over-year in the fourth quarter of fiscal 2024, indicating that the DTC strategy isn't delivering the expected returns.
In comparison, competitors have been thriving by leveraging multi-channel approaches. Hoka and ASICS continue to utilise strong wholesale partnerships while selectively enhancing their DTC channels, providing a balanced retail approach that caters to both loyal customers and new market entrants. For instance, Hoka’s strategic partnerships with specialty running stores have allowed it to maintain a strong presence in key markets, contributing to its significant growth.
On Running, with its mix of flagship stores and an engaging online presence, has created a brand ecosystem that feels both accessible and exclusive—an area where Nike, with its sheer scale, struggles to balance. On Running’s direct-to-consumer sales grew by 53% in the first half of 2024, highlighting the success of its hybrid retail strategy.
On Running’s Quiet Revolution
I first encountered On Running sneakers a few years back at the Cannes Lions International Festival of Creativity—a place where industry leaders and cultural tastemakers converge. On stage was a highly influential figure, someone whose words carry weight across the entire marketing industry and beyond. When they speak, the ripple effects are felt not just in boardrooms, but across cultural spheres. As they spoke, I noticed something unusual: instead of the expected designer loafers or polished Oxfords, they were wearing a pair of sleek, minimalist running shoes. Intrigued, I discreetly snapped a photo and ran it through Google Images. The result? On Running.
Whether this was an official influence partnership or simply an investor lending a hand, the effect was undeniable. On Running had positioned itself on one of the world’s biggest stages for innovation and creativity, solidifying its cultural relevance. This moment was emblematic of the brand’s strategy—crafting associations that resonate deeply with influential circles. On Running’s ability to transcend traditional marketing boundaries and embed itself within the cultural zeitgeist is reflected in its impressive 44% increase in net sales during the first half of 2024. It’s a strategy that Nike, despite its resources, seems to have lost sight of.
Association vs. Innovation: The Way Forward
So, what should Nike do next? The answer lies in the power of association-led marketing. For a brand that has traditionally relied on star power—from Michael Jordan to Serena Williams—Nike's current marketing feels, ironically, less personal. Product-led campaigns, no matter how innovative the products, lack the emotional resonance needed in today's market.
Nike must also pivot towards more personalised, community-driven content, embracing curated posts and user-generated stories that reflect the authentic experiences of their customers. By highlighting real runners, athletes, and fitness enthusiasts who embody the brand's spirit, Nike can re-create deeper connections. This shift towards curated, authentic content will allow Nike to build a narrative that resonates on a more personal level, fostering loyalty and engagement in a way that traditional marketing campaigns no longer can. Engaging with niche communities, promoting grassroots efforts, and featuring influencer-driven content will be crucial for Nike to re-establish itself as a brand that understands and cares about its customers' real-world experiences.
Brands like ASICS have embraced association-led marketing, aligning themselves with community-driven initiatives and niche athletic groups. ASICS, for instance, has heavily invested in local running clubs and events, particularly in markets like Japan and Europe, where running culture is deeply ingrained. This strategy has contributed to a 26% increase in running shoe sales globally, reinforcing the brand’s connection with the running community.
Hoka has also tapped into this by aligning with ultra-marathon communities, fostering a deep, almost cult-like, brand loyalty. Hoka’s association with events like the Western States 100-Mile Endurance Run has not only enhanced its brand image but also solidified its position within the trail running community.
For Nike, moving back to association-led marketing is more than just a pivot; it's a return to form. It’s about going beyond the product to re-emphasise the values and aspirations that made Nike a cultural icon in the first place. The brand needs to reconnect with the communities that have driven its success, whether that means doubling down on grassroots sports, urban street culture, or digital communities.
Time to Reconnect: Nike's Next Move
As Chief Marketing Officers and business strategists look at where Nike's heading, one thing's obvious: it's time for a major shift. The stock market's brutal, and Nike's competitors aren’t just catching up—they're leading. For Nike to succeed, it’s not just about pushing out the next big product. It’s about reconnecting with consumers, building real relationships. In today’s fragmented, competitive world, association-led marketing isn’t just a strategy—it’s survival.
Nike’s current predicament might just be the wake-up call the brand needs to rediscover what made it legendary: not just the products it sells, but the stories it tells and the communities it inspires.
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