Saturday, September 23, 2006

The Finish Line for Nike?

For a number of years now, I've suffered the slings and arrows of the non-believers. I've stuck to my guns about what makes a brand a real brand, as opposed to an identity with no real value. Along the way, I've made the case against Wal-Mart and Coca-Cola.

People scoffed when I warned them that these weren't good brands. They were successful brands, whose good fortunes were due more to carnivorous sales teams and predatory pricing policies more than any thing else.

I said the same thing about McDonalds, about a year before the company posted its first quarterly loss. But to no avail. I was still labeled a heretic.

I warned how each was going to take a major hit, value-wise, when they ran out of favor, media money or both. A brand that relies on endorsements, celebrities, mass media promotions - anything that distracts the end user from the actual brand values that end users are looking for - is eventually doomed. The party simply can't go on forever. Sooner or later, it all catches up with you.

If you read this blog, you'll recall that one of my favorite victims is Nike, which has been readying itself for a fall in a major key. In my book, Revenge of Brand X, I take Nike to task for it not having any brand. Sure, it has an identity, but just ask anyone, anywhere, why they buy Nike and no two people will give you the same answer. At best, you're going to hear a brand's worst nightmare:

"Because (insert celebrity name here) wears them."

Bummer. Especially when you read articles like the one in the International Herald Tribune, which finally vindicates what I've been saying all along: No-brand Nike is beginning to crack. Sales and profits are down. In typical PR spin, Nike spokesman is quoted thusly:

"We have top teams and top athletes," said a Nike spokesman, Alan Marks. He said the James and Bryant shoe introductions in the past year have been "very successful."

But that's the high point for Nike in that article. According to finanacial analysts, the "let's hitch our wagon to the latest sports guy" strategy is backfiring big time:

Nike sponsors 14 of the world's 25 highest-paid athletes. Yet Nike shoes plugged by Michael Jordan, the retired basketball star, continue to outsell those of newcomers like LeBron James and Kobe Bryant. Revenue might increase in the 12 months through May at the slowest rate in four years, said Margaret Mager, a Goldman Sachs analyst.

Ouch. And believe me, when the financial analysts can see through your brand weakness, it's only a matter of time until the buzz hits the major media. Or has it? Just take a gander at the latter part of the same article:

The Nike chief executive, Mark Parker, faces an industrywide slowdown in sales of basketball shoes. Teenagers have been increasingly attracted to thin-soled sneakers for casual use, Spanbauer said.

Uh-oh. And if this wasn't bad enough, it seems the future isn't looking so rosy, either. Turns out that even with the latest overblown, hyped up young athletic talent, there just ain't enough star power to move the shoe-buying public anymore:

None has had the impact of Jordan, who helped propel the company to the top of the shoe industry in the 1980s. Retro styles of Jordan's signature models are the five top sellers in the basketball segment this year, according to SportsOneSource. James's shoe ranked 18th. "They are not resonating as well with Carmelo, Kobe and LeBron," said John Shanley, a Susquehanna Financial Group analyst. "There aren't any big guys out there."

Not exactly what you want to hear when your entire operation hinges on the hype of celebrity athletes. Tiger Woods get someting like $40 million a year from Nike, which sounds like a swell investment until you figure out that golfers aren't like your typical urban basketball fan. Golfers buy shoes for function, not fashion. Which means they buy far fewer pairs than the traditional Nike hype believer.

No brand. Oblique advertising. Declining fortunes with a burned out strategy.

Maybe there is a finish line after all.


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