According to Bloomberg on the 6th, Nike abruptly replaced the president of the consumer, product, and brand division of Heidionil, who had been with the company for 26 years.
At the same time, Amy Montaigne was promoted to the next president of the brand, and Phil McCartney was newly joined as chief innovation, design and product officer, making a large-scale executive reshuffle.
Nike CEO John Donahue vowed to lead the company in the next phase of growth with its new leadership team. Nike’s sluggish performance goes beyond a serious level and is in itself a crisis. Its fiscal third quarter revenue, which was announced in February, shrank 9 percent from the same period last year to 11.3 billion dollars. Its net profit plunged 32 percent and its earnings per share plunged 29 percent during the same period.
Nike has also declined in North America and Europe, which are key markets since the pandemic, as well as in China, which was once enjoying explosive growth.
The strategy of strengthening direct-to-consumer sales (D2C), which previous management had ambitiously pursued during the pandemic, resulted in failure.
At that time, Nike executives stopped signing contracts with major wholesale and retail companies after restrictions on movement were implemented in major consumer countries such as the United States, Europe, and China, judging that consumers would not be able to find department stores, provinces, or retail stores in person.
Nike stopped signing contracts with Amazon, the largest online shopping mall in the U.S., and has grown its own online shopping mall. The intention was to reduce distribution levels to save commission fees and to directly secure consumer data. Under this strategy, Nike’s share of its partners in total sales plunged from 85% to 58% in 2022. However, this strategy conversely gave competitors such as Adidas and New Balance an opportunity to enter additional wholesale and retail stores. During the same period, new brands such as On-Running and Hokaoneone were not included in Nike.
Nike products, which have become hard to find in major online and offline stores, have become increasingly distant from consumers. For this reason, analysts say that the failure of Nike’s D2C strategy should be the reason why the company is struggling, especially in the fashion-conscious shoe sector.
Business Insider analyzed, “Nike dominated the sports industry from the 1990s to the early 2010s with innovative design and marketing, but has settled for past glory without any clear innovation over the past five years.”
Nike also experienced strategic confusion within the company. Its core sports expertise such as running and basketball has weakened in the process of simplifying product categories to men, women, and kids.
The Wall Street Journal (WSJ) pointed out that Nike’s shift to lifestyle brands too quickly rather than focusing on core sports values is also the main cause of the crisis.
While Nike was shaking, competitors quickly penetrated the gap. Adidas has attracted young consumers who are leading the trend by releasing retro sneakers such as Samba and Gazelle. As a result, sales grew by 6 percent last year.
Puma has lowered its price through sustainability campaigns and regional strategies, making it stand out in emerging markets. Reebok signed an exclusive contract with WNBA star player Angelis, and successfully attracted attention from female sports fans.
“In order for Nike to regain its former glory, product innovation is fundamental and it needs to strengthen its connection with key consumers with high Nike brand loyalty,” said Matt Cohen, an analyst at NPD Group, a sports product market analyst. “Brand recovery is key to restoring consumer trust beyond temporary executive replacement.”
JENNIFER KIM
US ASIA JOURNAL
