Nike has long been a leader in the sportswear market. It has dominated the market for a long time that it has hard to imagine it having any important competitors. However, two brands are growing fast to challenge Nike: Under Armour and Skechers USA. Nike’s biggest challenge thus is how to maintain its fast growth in previous years. While the company is expected to grow in 2015, the rate will not be as a high as that in 2014. It is expected to post $8.2 billion in revenues and have earnings per share price of $1.19, slightly higher than the previous year’s $7.9 billion and $1.09. Meanwhile, Under Armour is expected to post $7.5 billion in revenues in the next three years.
Citigroup research notes that the company posted a 15% growth in 2014 over 2013 revenues. Citi says that Nike should be able to maintain a two-digit growth rate; otherwise its earnings per share value would suffer or decline. In 2015, Nike posted its highest growth—about 19%—in stock price value. It was the “second-best performer in the Dow Jones Industrial Average after UnitedHealth Group Inc”.
Nike’s had been strong in traditional sportswear, particularly footwear, in North America. However, much of its growth is coming from a new segment of the market: athleisure. The trend has become phenomenal and the biggest one since “skinny jeans”. However, Nike is facing much competition in this market. Competition in this market includes not only traditional sportswear makers but also and more importantly from high-end fashion designers. Athleisure, especially Spandex-based designs, has become part of New York fashion runways.
Nike is also facing tough competition in its home market of traditional sports and footwear. Competition has been eating up part of its share in the running shoes market. Skechers in particular has been growing fast largely a result of its sales in casual and family-style stores. As a result, Nike’s sales of mid-priced footwear had slowed down. It shows that while this is a market that the brand has dominated and practically defined, it does not completely control it.
Advertising and sponsorships are the chief strengths of Nike’s other competitors. Under Armour sponsored three major athletes: golfer Jordan Spieth, basketball point guard Stephen Curry, and football quarterback Tom Brady. Although its US market share has been declining, German-based Adidas AG signed up as endorsers NBA all-star James Harden and NFL MVP Aaron Rodgers. The brand will be outfitting the NHL league in the next two years.
Internally, Nike may be facing up to some difficulties. Its founder and chairman Phil Knight will be retiring in 2016. The company might undergo some succession difficulties as his son Travis takes over.
Factors for Nike Dominance
Nike was able to dominate the world market because it dominated the US market which is the biggest market in the world. The US practically dictates trends in other countries. Nike understood the US market’s needs in the sportswear and sports footwear market that some of its early competitors like Adidas failed to do. Some of its early competitors insisted on pushing European-style and other styles of footwear rather than adjust these and cater to the US market.
In addition, the brand has maintained its appeal to the youth market which brings in some of the growth in sales. Competition has also forced Nike to continually improve its products, improving over its previous best so it is perceived to have some of the best products. Comfort is another dimension of Nike’s products which also increased its appeal to women. With the US spearheading trends, Nike’s leadership in this market helped the brand succeed in the world market.
The Athleisure Market
While it overlaps with the sportswear market, the athleisure market may be something really different. It is more fashion oriented. It has a wider range of competitors that include high fashion designers and houses. These are clothes and footwear that are meant to be used at the gym or sports places and as well as the office and even clubs. Products will have to be really trendy. A key to succeed and continue to grow in this market is to remain trendy. It will also have to understand the ‘Millennials’ very well and appeal to this demographic group as it is the one driving the athleisure market.
Market Research Recommendation
Nike should frequently—as every four months—do focus group discussions with male and female millennials. It will need to regularly consult this demographic group for trends, and changing preferences and tastes. It is important to probe into this group’s fashion and not just sports preferences. In addition, it should occasionally consult with other demographic groups to compare with the findings among millennials.
Instead of quantitative research, Nike should do market and product testing in select outlets in geographic locations with strong millennial following. Advertising could be tested as well in this market. These market and product tests should be done quickly. Product launch of the successful items should be launched as quickly as possible since competitors worldwide can copy the ideas as fast as Nike could launch.
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