Nike Won’t Just Do It In India
The Cult Of Nike
The Nike swoosh looms large over the footwear industry. This uncontested giant of the field has built itself up through high-profile endorsements, sleek designs, and PR campaigns successful enough to etch its way into pop-culture history. But the brand of Lebron James, Tiger Woods, and Michael Jordan didn't come from somewhere.To understand Nike requires understanding a story that began with a self-described average track runner coming out of college and a coach truly obsessed with the link between speed and design.
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| SNEAKER MARKET SHARE |
But during the 1960s, it was Germany’s Adidas and Puma sneakers that dominated the global arena on every level and in every sport. American entrepreneur Phil Knight was convinced that the way to compete with the Germans was to introduce cheap but high-quality running shoes from Japan. But though he had a great idea and a solid plan, Phil didn’t have the money to achieve his goal.
This native Oregonian – who, according to Forbes is the 56th richest person on the planet and the 24th richest in America, with an estimated net worth of $16.3 billion – back then was nothing more than a young man with a freshly minted MBA from Stanford University. As a former middle-distance runner in college, he was dreaming of a way to combine sports and business, and make a living at it.
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| Timeline of Nike Events |
During a world tour in 1963, Knight landed in Japan where he managed to make an appointment with Onitsuka, the parent company of Tiger running shoes. Tiger Shoes was interested in selling sneakers to American runners, and gave Knight samples, which he sent to the man he trusted most- his former coach at the University of Oregon, Bill Bowerman. Bowerman was known for his experimentation in matters concerning track racing. When manufacturers didn’t listen to his advice, he went to his garage and altered existing models to create the lightest, and most comfortable shoe for his runners.Today Nike, Inc. dominates the global sports footwear market with a 38% market share. The company employs more than 70,000 people around the world and generates more than $29 billion a year in sales. The brand born just a relatively short while ago with a $1000 investment and a handshake is today worth more than $37 billion.
Nike is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment. In 2020, the company employed over 75 thousand people worldwide.
The Indian Saga
Nike entered directly in June 2004, about six years after its main competitor Adidas. In addition to monobrand stores, it has presence through 150-odd multi-brand stores and over 600 mom-and-pop stores.
Nike is back to square one in India. The world’s largest sportswear maker has slashed no of stores to 150 & May further bring it down to 100.The global behemoth which had a strong quarter on back of sales from mainland China has withdrawn most of its franchise agreements with India and will focus through its online partners , from 350 stores to 100 it looks like Nike is withdrawing from most populous and growing economy to developed countries currently,its rivals Puma and Adidas run around 360 & 600 stores in India.The chart clearly shows that even if we add a quarters revenue the company lags behind its major competitors , there are several factors which we will discuss in detail as to why India does not figure amongst the priority business.
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| The cult of Jordan |
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| The Iconic Sole (1972) |
Future Trends In Sneaker Business:
1. Increasing health awareness
Nike's revenue and profits have steadily climbed over the last decade. One key factor pushing the swoosh brand is the increasing interest in active lifestyles, particularly among millennials.
Morgan Stanley expects the market to reach about $355 billion in sales by 2021, representing a single-digit annual growth rate.
2. Demand for athleisure will continue to drive sales
With athleisure looking like a trend that is here to stay, demand for sneakers is increasingly being driven by fashion tastes as much as for performance. This trend is pushing Nike and its peers to collaborate with celebrities to design exclusive sneaker styles, which helps increase demand.
Adidas has collaborated with Kylie Jenner, Beyonce, and Kanye West, while Nike has tapped the creative thinking of Travis Scott, Justin Timberlake, and luxury designer Louis Vuitton, just to name a few.
3. Wooing customers with a flurry of releases
Nike's Double strategy, which involves cutting in half its production time to double the speed with which it releases new products, should make it a go-to destination for those who want the latest styles.
4. More styles should fuel demand
Nike is also doubling down on innovation. There is strong demand coming from those who want a good running shoe and from others who just want a shoe for everyday wear. Nike is starting to create new styles that meet both needs.
One example is the recent launch of the Air Max React 270, which fuses the popular Air Max lifestyle sneaker with Nike's React cushioning technology designed for runners.
In the year ahead, it will also launch a new cushioning system called Joyride, which management believes has the potential to be successful for both performance and lifestyle.
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| Futuristic lace less Sneakers |
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| Iconic Jordan Sneaker |
5. Margin improvement should fuel earnings growth
Nike is in a great position to see further margin improvement, as a result of its enhanced supply chain efficiency and speed-to-market initiatives. But digital sales will likely be the key factor that pushes margins higher.
More sales from direct channels , including company-owned stores, apps, and Nike.com. Sales from direct channels increased 16% last year, with sales from digital apps growing the fastest at 35% year over year.
Nike New Strategy & Why No Indian City :
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| Futuristic Store Nike |
The reasons for choosing 12 cities
Per Capita:
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It’s now a common axiom that economic growth significantly reduces poverty & directly improves standard of living but of late post 2014 the way Indian economy is preforming the improvement in per capita has significantly reduced and the Gini coefficient measuring inequality has significantly increased also Nike has moved to cities which are a part of super cities with highest per capita on an average the Nike cites have 6.5 times more income than 2 of the most prosperous metros, in fact China has also shown considerable growth in last few decades resulting in a very high per capita incomes as compared to India.
Discretionary income:
The cities chosen by Nike has highest consumer discretionary spending, its quite evident from the chart that Indians on average spend 6 times more on fuel and 3 times more on mortgages as a result the discretionary income is quite less and in the year 2020 the discretionary income of Indians has contracted by 20 % therefore the focus is more on necessities than spending on aspirational goods.
Green Cover:
The cities chosen by Nike has on an average 21% space allocated to gardens as compared to a mere 6% in Mumbai & Bengaluru also a person in Mumbai has access to 1 sqmt/person as compared to 31.68 sq mt/person in London & 26.4 % in NewYork this lack of space actually is a big strain on Indians developing lifestyle diseases and even psychological disorders. It has been proved that more a citizen is given access to parks the more productive that citizen becomes.
Air Quality:
Sports and environment are two aspects that, generally, go together, being usual to see people exercising in both urban and natural outdoor spaces. In fact, sports practice is one of the main medical recommendations aimed at improving people’s health. But what happens when this physical activity takes place in an environment with questionable air quality? What effect does pollution have on sports performance and the health of people who practice sports?
Football/Soccer
Air pollution has endangered the celebration of football/soccer events in some countries. The FIFA under 17 World Cup held in India in 2017, for example, aroused the concern of both players and spectators because of the high pollution rates shown by some of the venues (2).
In this regard, it should be noted that various publications suggest that suspended particles have a clear negative effect on the performance of players. In fact, Lichter, Pestel, & Sommer (2017), in a study conducted in the German professional football league, suggest that a 1% increase in PM10 concentration leads to a 0.02% decrease in the performance of professional soccer players (measured by the number of passes in a match), also pointing out that “productivity decreases significantly if the concentration of particles exceeds the EU regulatory threshold of 50 micrograms per cubic meter, starting to materialize at around 20 micrograms per cubic meter”.
The cities chosen by Nike hence have a low level of pollutants resulting in better sports conditions unlike Mumbai & Bengaluru where lung & skin infections are on the rise.
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Sports Culture:
The cities identified have a very strong sports culture, the 12 cities have amongst themselves hoisted as many as 15 olympics and Milan has a strong presence in football arena , these mentioned countries have on an average have 44 Olympic medals compared to 2 in India, the cities mentioned are top ranked nations in Olympic Games whereas India is ranked 67th with 2 medals , the correlation of sports and sneakers is markedly strong.
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| Most Expensive Deal for $1Bn |
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| Tiger Woods |
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| JORDAN |
SOME INTERESTING FACTS ON NIKE:
Nike's iconic "Just Do It" slogan was inspired by the final words of a notorious killer in 1970s Utah. ... Dan Wieden, the founder of ad agency Wieden and Kennedy, was inspired to adapt the phrase to "Just Do It" for a 1988 TV ad which introduced the slogan to the world.
- Michael Jordan mania is taking over the auction world, as a pair of Nike Air Jordan 1s sold for $560,000 and became the most expensive sneakers ever sold.
The famous Nike logo, a solid swoosh, was designed for just $35 by Carolyn Davidson, a student at Portland State University. Later on, she was given more than $640,000 worth of Nike products.
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