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Nike
Business Strategy
Brand Decline
Market Trends
Data Vs Creativity
ARTICLE #114
Sneaker giant in a slump: What happened at Nike?
Nike
Business Strategy
Brand Decline
Market Trends
Data Vs Creativity
Written by:
3 min read
Updated on: October 2, 2024
Toni Hukkanen
Head of Design
Creative Direction, Brand Direction
Toni Hukkanen
Head of Design
Creative Direction, Brand Direction
Toni Hukkanen
Head of Design
Creative Direction, Brand Direction
Nike, the world's largest sportswear brand, has been experiencing sluggish growth after 53 years of dominance due to some missteps in its strategies.
Under the leadership of John Donahoe, a tech consultant turned CEO, the company has moved away from its core strengths—creativity, innovation, and bold marketing—towards a data-driven approach. Though data provides valuable insights, Nike's overreliance on it has left the brand struggling to maintain its edge with competitors.
As a consequence, Nike lost a staggering $28 billion in market capitalisation in just one trading session, and this drop occurred after its shares plummeted by 20%. To simply put this loss into perspective, the amount Nike lost in a single day was enough to buy its smaller competitor, Under Armour, ten times over. Nike and some analysts have been dissecting the numbers to find reasons while Elliot Hill is preparing to start as the CEO of Nike at a critical time. This situation offers valuable lessons not only for Nike but also for businesses of all sizes, including yours.
Nike, the world's largest sportswear brand, has been experiencing sluggish growth after 53 years of dominance due to some missteps in its strategies.
Under the leadership of John Donahoe, a tech consultant turned CEO, the company has moved away from its core strengths—creativity, innovation, and bold marketing—towards a data-driven approach. Though data provides valuable insights, Nike's overreliance on it has left the brand struggling to maintain its edge with competitors.
As a consequence, Nike lost a staggering $28 billion in market capitalisation in just one trading session, and this drop occurred after its shares plummeted by 20%. To simply put this loss into perspective, the amount Nike lost in a single day was enough to buy its smaller competitor, Under Armour, ten times over. Nike and some analysts have been dissecting the numbers to find reasons while Elliot Hill is preparing to start as the CEO of Nike at a critical time. This situation offers valuable lessons not only for Nike but also for businesses of all sizes, including yours.
Nike, the world's largest sportswear brand, has been experiencing sluggish growth after 53 years of dominance due to some missteps in its strategies.
Under the leadership of John Donahoe, a tech consultant turned CEO, the company has moved away from its core strengths—creativity, innovation, and bold marketing—towards a data-driven approach. Though data provides valuable insights, Nike's overreliance on it has left the brand struggling to maintain its edge with competitors.
As a consequence, Nike lost a staggering $28 billion in market capitalisation in just one trading session, and this drop occurred after its shares plummeted by 20%. To simply put this loss into perspective, the amount Nike lost in a single day was enough to buy its smaller competitor, Under Armour, ten times over. Nike and some analysts have been dissecting the numbers to find reasons while Elliot Hill is preparing to start as the CEO of Nike at a critical time. This situation offers valuable lessons not only for Nike but also for businesses of all sizes, including yours.
Why is Nike’s stock price down?
Why is Nike’s stock price down?
Why is Nike’s stock price down?
There are pacesetters in every industry that other companies envy and then emulate. Nike has built a massive business by connecting with athletes and culture, backed by iconic advertising campaigns executed through a long-standing partnership with Wieden + Kennedy. But now, it is at risk of becoming a wake-up call because the company's stock is down this year.
The reason is poorly executed reorganisation that bears the hallmarks of McKinsey’s influence. The company has placed too much emphasis on its DTC strategy, which has strained its important wholesale relationships. Nike has also shifted its focus to performance marketing at the expense of broader brand-building efforts.
People are comparing CEO John Donahoe with John Scully, the former CEO of Apple, who was known for steering the company into trouble. Former Nike executive Massimo Giunco didn't hold back in a semi-viral LinkedIn post, where he criticised the company's leadership for a series of self-inflicted mistakes. Another former Nike executive, Jordan Rogers, who warned in July that “Nike will die a death of thousand paper cuts”, suggested that the decline of the brand is the result of many small but damaging missteps rather than one major failure.
Too much focus on direct-to-consumer sales
A few years ago, Nike did some math and realised they were losing too much profit and control in their wholesale business. To address this, they made the strategic decision to cut ties with 50% of the retailers selling Nike products and shift focus to their own DTC channels.
Though the idea seemed smart at the time, it backfired. After reducing its presence in key retail outlets, Nike limited the physical availability of its products, which severely hurt sales volumes.
For Nike, stepping away from wholesale partners meant competitors could fill the void and take Nike's abandoned shelf space.
Not keeping up with trends fast enough
Nike, once a trendsetter, has now fallen behind in several areas. As athleisure continues to dominate, competitors like Adidas and Lululemon have been quicker to adapt and innovate in this space, while Nike's responses have often been slower, resulting in missed opportunities.
Analyst Jessica Ramírez pointed out that during an earnings call, Nike emphasised running as a key sport they are targeting, which felt outdated. She told CNBC, “We've known that for a long time,” suggesting Nike is chasing trends that competitors have already capitalised on.
Fear of failure stifling bold moves
It is hard to pinpoint evidence, but Nike seems to have developed a fear of failure. To avoid risks, the brand has relied heavily on its legacy product lines, using historical data to guide decisions rather than adopting bold innovations.
Nike has been sticking to what is familiar rather than pushing boundaries. Their advertisements even feel repetitive because they use old strategies instead of offering fresh ideas.
Over-reliance on data, neglecting creativity
Another reason for Nike's downfall is its overreliance on data to drive marketing and product decisions. Instead of leading with bold, creative campaigns that define culture, Nike started focusing on chasing clicks, conversions, and data points.
So, their marketing became less about building a brand that matched emotionally with consumers and more about optimising brand assets to fit into ad-tech algorithms.
Data can help improve customer experiences by keeping the right products in the right place, but it is only a small part of the equation. Data describes what has worked in the past, but it doesn't inspire groundbreaking ideas or make a brand iconic.
Nike's legendary ability to surprise, inspire, and innovate lost in favour of safe, data-driven decisions.
There are pacesetters in every industry that other companies envy and then emulate. Nike has built a massive business by connecting with athletes and culture, backed by iconic advertising campaigns executed through a long-standing partnership with Wieden + Kennedy. But now, it is at risk of becoming a wake-up call because the company's stock is down this year.
The reason is poorly executed reorganisation that bears the hallmarks of McKinsey’s influence. The company has placed too much emphasis on its DTC strategy, which has strained its important wholesale relationships. Nike has also shifted its focus to performance marketing at the expense of broader brand-building efforts.
People are comparing CEO John Donahoe with John Scully, the former CEO of Apple, who was known for steering the company into trouble. Former Nike executive Massimo Giunco didn't hold back in a semi-viral LinkedIn post, where he criticised the company's leadership for a series of self-inflicted mistakes. Another former Nike executive, Jordan Rogers, who warned in July that “Nike will die a death of thousand paper cuts”, suggested that the decline of the brand is the result of many small but damaging missteps rather than one major failure.
Too much focus on direct-to-consumer sales
A few years ago, Nike did some math and realised they were losing too much profit and control in their wholesale business. To address this, they made the strategic decision to cut ties with 50% of the retailers selling Nike products and shift focus to their own DTC channels.
Though the idea seemed smart at the time, it backfired. After reducing its presence in key retail outlets, Nike limited the physical availability of its products, which severely hurt sales volumes.
For Nike, stepping away from wholesale partners meant competitors could fill the void and take Nike's abandoned shelf space.
Not keeping up with trends fast enough
Nike, once a trendsetter, has now fallen behind in several areas. As athleisure continues to dominate, competitors like Adidas and Lululemon have been quicker to adapt and innovate in this space, while Nike's responses have often been slower, resulting in missed opportunities.
Analyst Jessica Ramírez pointed out that during an earnings call, Nike emphasised running as a key sport they are targeting, which felt outdated. She told CNBC, “We've known that for a long time,” suggesting Nike is chasing trends that competitors have already capitalised on.
Fear of failure stifling bold moves
It is hard to pinpoint evidence, but Nike seems to have developed a fear of failure. To avoid risks, the brand has relied heavily on its legacy product lines, using historical data to guide decisions rather than adopting bold innovations.
Nike has been sticking to what is familiar rather than pushing boundaries. Their advertisements even feel repetitive because they use old strategies instead of offering fresh ideas.
Over-reliance on data, neglecting creativity
Another reason for Nike's downfall is its overreliance on data to drive marketing and product decisions. Instead of leading with bold, creative campaigns that define culture, Nike started focusing on chasing clicks, conversions, and data points.
So, their marketing became less about building a brand that matched emotionally with consumers and more about optimising brand assets to fit into ad-tech algorithms.
Data can help improve customer experiences by keeping the right products in the right place, but it is only a small part of the equation. Data describes what has worked in the past, but it doesn't inspire groundbreaking ideas or make a brand iconic.
Nike's legendary ability to surprise, inspire, and innovate lost in favour of safe, data-driven decisions.
There are pacesetters in every industry that other companies envy and then emulate. Nike has built a massive business by connecting with athletes and culture, backed by iconic advertising campaigns executed through a long-standing partnership with Wieden + Kennedy. But now, it is at risk of becoming a wake-up call because the company's stock is down this year.
The reason is poorly executed reorganisation that bears the hallmarks of McKinsey’s influence. The company has placed too much emphasis on its DTC strategy, which has strained its important wholesale relationships. Nike has also shifted its focus to performance marketing at the expense of broader brand-building efforts.
People are comparing CEO John Donahoe with John Scully, the former CEO of Apple, who was known for steering the company into trouble. Former Nike executive Massimo Giunco didn't hold back in a semi-viral LinkedIn post, where he criticised the company's leadership for a series of self-inflicted mistakes. Another former Nike executive, Jordan Rogers, who warned in July that “Nike will die a death of thousand paper cuts”, suggested that the decline of the brand is the result of many small but damaging missteps rather than one major failure.
Too much focus on direct-to-consumer sales
A few years ago, Nike did some math and realised they were losing too much profit and control in their wholesale business. To address this, they made the strategic decision to cut ties with 50% of the retailers selling Nike products and shift focus to their own DTC channels.
Though the idea seemed smart at the time, it backfired. After reducing its presence in key retail outlets, Nike limited the physical availability of its products, which severely hurt sales volumes.
For Nike, stepping away from wholesale partners meant competitors could fill the void and take Nike's abandoned shelf space.
Not keeping up with trends fast enough
Nike, once a trendsetter, has now fallen behind in several areas. As athleisure continues to dominate, competitors like Adidas and Lululemon have been quicker to adapt and innovate in this space, while Nike's responses have often been slower, resulting in missed opportunities.
Analyst Jessica Ramírez pointed out that during an earnings call, Nike emphasised running as a key sport they are targeting, which felt outdated. She told CNBC, “We've known that for a long time,” suggesting Nike is chasing trends that competitors have already capitalised on.
Fear of failure stifling bold moves
It is hard to pinpoint evidence, but Nike seems to have developed a fear of failure. To avoid risks, the brand has relied heavily on its legacy product lines, using historical data to guide decisions rather than adopting bold innovations.
Nike has been sticking to what is familiar rather than pushing boundaries. Their advertisements even feel repetitive because they use old strategies instead of offering fresh ideas.
Over-reliance on data, neglecting creativity
Another reason for Nike's downfall is its overreliance on data to drive marketing and product decisions. Instead of leading with bold, creative campaigns that define culture, Nike started focusing on chasing clicks, conversions, and data points.
So, their marketing became less about building a brand that matched emotionally with consumers and more about optimising brand assets to fit into ad-tech algorithms.
Data can help improve customer experiences by keeping the right products in the right place, but it is only a small part of the equation. Data describes what has worked in the past, but it doesn't inspire groundbreaking ideas or make a brand iconic.
Nike's legendary ability to surprise, inspire, and innovate lost in favour of safe, data-driven decisions.
Nike’s plunging sales reveal the difficult task ahead for incoming CEO
Nike's new CEO, Elliot Hill, faces several challenges as he prepares to take over on October 14. The sneaker giant is going through a tough time due to missteps in strategies, and Hill will need to guide the company through them.
The recent decline in sales has raised concerns, and Nike decided to withdraw its full-year guidance and offer only quarterly updates instead. As shares dropped by 8% after the disappointing results, this added more pressure on Hill.
Even though Hill wasn't present for the earnings call, his first few months will be closely monitored to see how he plans to turn things around. Senior equity analyst David Swartz said, “Expectations are very low.”
However, despite these hurdles, Nike's CFO, Matthew Friend, mentioned that the company is already seeing early wins in key sports categories and is speeding up its focus on innovation, though full recovery will take time.
Nike's new CEO, Elliot Hill, faces several challenges as he prepares to take over on October 14. The sneaker giant is going through a tough time due to missteps in strategies, and Hill will need to guide the company through them.
The recent decline in sales has raised concerns, and Nike decided to withdraw its full-year guidance and offer only quarterly updates instead. As shares dropped by 8% after the disappointing results, this added more pressure on Hill.
Even though Hill wasn't present for the earnings call, his first few months will be closely monitored to see how he plans to turn things around. Senior equity analyst David Swartz said, “Expectations are very low.”
However, despite these hurdles, Nike's CFO, Matthew Friend, mentioned that the company is already seeing early wins in key sports categories and is speeding up its focus on innovation, though full recovery will take time.
Nike's new CEO, Elliot Hill, faces several challenges as he prepares to take over on October 14. The sneaker giant is going through a tough time due to missteps in strategies, and Hill will need to guide the company through them.
The recent decline in sales has raised concerns, and Nike decided to withdraw its full-year guidance and offer only quarterly updates instead. As shares dropped by 8% after the disappointing results, this added more pressure on Hill.
Even though Hill wasn't present for the earnings call, his first few months will be closely monitored to see how he plans to turn things around. Senior equity analyst David Swartz said, “Expectations are very low.”
However, despite these hurdles, Nike's CFO, Matthew Friend, mentioned that the company is already seeing early wins in key sports categories and is speeding up its focus on innovation, though full recovery will take time.
What brands can learn from Nike's strategic missteps?
Nike is still a powerhouse brand, and no one is ready to write it off just yet. However, its recent struggles may be a warning sign for other businesses heading down a similar path.
Nike built its success on innovation, creativity, and boldness, thriving in the face of uncertainty. But, like many companies, it has shifted towards a more scientific approach that focuses heavily on optimising operations and marketing through data, AI, and analytics.
Though these tools can be good, there is a growing concern that Nike may have leaned more towards data at the expense of the creativity and risk-taking that once defined the brand. Below are three key takeaways for brands to learn from Nike's missteps.
If you are not constantly innovating and preparing for what comes after your current success, you are already falling behind.
When moving forward, don't forget the relationship that helped you get where you are. Even if those partnerships evolve, they are likely to remain significant in the future.
Everyone has good days and bad days, sometimes even really bad days. The true test of success is how you respond after your worst day.
Nike is still a powerhouse brand, and no one is ready to write it off just yet. However, its recent struggles may be a warning sign for other businesses heading down a similar path.
Nike built its success on innovation, creativity, and boldness, thriving in the face of uncertainty. But, like many companies, it has shifted towards a more scientific approach that focuses heavily on optimising operations and marketing through data, AI, and analytics.
Though these tools can be good, there is a growing concern that Nike may have leaned more towards data at the expense of the creativity and risk-taking that once defined the brand. Below are three key takeaways for brands to learn from Nike's missteps.
If you are not constantly innovating and preparing for what comes after your current success, you are already falling behind.
When moving forward, don't forget the relationship that helped you get where you are. Even if those partnerships evolve, they are likely to remain significant in the future.
Everyone has good days and bad days, sometimes even really bad days. The true test of success is how you respond after your worst day.
Nike is still a powerhouse brand, and no one is ready to write it off just yet. However, its recent struggles may be a warning sign for other businesses heading down a similar path.
Nike built its success on innovation, creativity, and boldness, thriving in the face of uncertainty. But, like many companies, it has shifted towards a more scientific approach that focuses heavily on optimising operations and marketing through data, AI, and analytics.
Though these tools can be good, there is a growing concern that Nike may have leaned more towards data at the expense of the creativity and risk-taking that once defined the brand. Below are three key takeaways for brands to learn from Nike's missteps.
If you are not constantly innovating and preparing for what comes after your current success, you are already falling behind.
When moving forward, don't forget the relationship that helped you get where you are. Even if those partnerships evolve, they are likely to remain significant in the future.
Everyone has good days and bad days, sometimes even really bad days. The true test of success is how you respond after your worst day.
Final Thoughts
Nike's story serves as a cautionary tale for brands that become too reliant on data-driven decision-making while neglecting creativity. If Nike can reconnect with its creative roots, it has every opportunity to regain its position as a cultural leader in the fashion and sports world. But without this shift, it risks falling further behind as competitors continue to innovate and capture the consumer's imagination.
Nike's story serves as a cautionary tale for brands that become too reliant on data-driven decision-making while neglecting creativity. If Nike can reconnect with its creative roots, it has every opportunity to regain its position as a cultural leader in the fashion and sports world. But without this shift, it risks falling further behind as competitors continue to innovate and capture the consumer's imagination.
Nike's story serves as a cautionary tale for brands that become too reliant on data-driven decision-making while neglecting creativity. If Nike can reconnect with its creative roots, it has every opportunity to regain its position as a cultural leader in the fashion and sports world. But without this shift, it risks falling further behind as competitors continue to innovate and capture the consumer's imagination.
ARTICLE #114
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