“Nike reported a 10% drop in quarterly sales and withdrew its annual forecast this Tuesday.” I rescued this sentence from a Financial Times article in October of this year. If in a classroom, some “eager” student would ask: “But what does this have to do with marketing, Poli? This is a subject for finance class!” In this situation, the mournful silence of that teacher, even if for a few moments, would be enough to generate deep regret in the mind of the “talkative” student. With all certainty that can exist, that student would remember a famous phrase of their professor: “Marketing is the twin brother of finance”, which is justified by the fact that the word “profit” is present in the most classical definitions of marketing.
Who could imagine that a company holding such a potent and admired brand, with such a compelling history, would make headlines for such unfortunate reasons?
I dare to risk, with no intention to value the bones of my profession, that the reasons revolve around issues inherently linked to marketing. When reading and rereading some articles on the subject, certain facts that could go unnoticed, certainly for those who think that marketing only happens in the digital world, caught my attention. Some of them are simply unbelievable.
Part of NIKE’s “corporate” justification in the current situation revolves around the decline in demand for its products, something I suspected right away. A quick Google search reveals the following fact: “Firstly, the athleisure market is expected to grow from $13.00 billion in 2023 to an impressive $16.30 billion by 2028.” Therefore, it is easy to conclude that, almost always, the most obvious answer is the most fragile. Blame always comes from elsewhere or someone else, isn’t that true?
Disregarding the main uncontrollable variable from the equation, one must consider the maxim that ‘today’s result is the consequence of yesterday’s planning.’ In view of this, the aforementioned news reports indicate that the CEO who took over the leadership of NIKE in January 2020, shortly before the famous pandemic, was initially praised for steering the business management, having rapidly accelerated the shift to direct consumer sales.
This is not a new fact, as countless brands have also done so very competently. However, many of them fell into the diabolical temptation that they could grow and thrive without a presence in traditional distribution channels after the pandemic. No longer needing to pay the toll of wholesalers and retailers was truly a siren song for some of them. Even for the brand whose name refers to a Greek mythology goddess. Apparently, even the gods can be mistaken.
Being out of the traditional distribution channels during the pandemic was almost obligatory, even though having a presence in these same channels in its digital form was also. But the temptation came precisely from the possibility of having one’s own ‘electronic’ distribution channels. After all, nothing beats directly engaging with your various target audiences. Once the logistical challenges were overcome, it has everything to succeed, as it did.
The temptation became even more seductive when the so-called ‘new normal’, so widely spread, propagated, and defended by numerous analysts and gurus of the digital world, started to be believed. An idea that this professor pretending to be a writer always doubted, especially after reading some articles of serious anthropologists that depicted historical contexts after past pandemics. I clearly expressed this idea in a sentence present in a consulting project for the largest beverage manufacturer in this country: ‘After the pandemic, people will want their lives back.’
The demand for concerts and tourism are examples, more than evident, that the stubbornness in swimming against the current of obvious ideas was not in vain. Insisting on remaining in digital channels neglecting the return to traditional distribution channels took its toll. After all, people started strolling in malls more than ever. Not being present in physical retail implies that someone else will be. In this specific case, brands like On and Hoka, especially in the lands of Uncle Sam and Greater China. According to the FT article, such brands achieved significant growth in the ‘post-pandemic’ period, the opposite of what happened with NIKE.
As Isaac Newton would say, two bodies cannot occupy the same space. Regaining space on shelves became the great challenge for NIKE. It will take a lot of time, especially when facing the resentment of retailers once abandoned. And time, in this case, is literally money. I would venture to say that it is a good time to buy shares of this company with a view to a good return in two to three years, but it is prudent not to believe me when it comes to this.
Finally, another justification involves portfolio management. Some analysts argue that NIKE was too daring when it comes to the trends of the ‘mid-level’ fashion, a segment that has also been invaded by more premium brands and attractive to consumers of this trend. In view of this, other analysts point out that “the concept of offering everything to everyone” no longer applies to the sector in question, especially for NIKE’s strategic group. In other words, a shock derived from the thinning of some against the elevation of others. I confess that such analysis is complex and requires a very consistent study to reach such conclusions. For now, let’s believe in the analysts.
NIKE has always excelled in its focus on developing innovative products in terms of design and technology. For a long time, it preferred to keep its manufacturing and distribution processes separate from the core business, just as COCA-COLA does to this day.
Meanwhile, “Adidas reports a 10% sales growth in the third quarter and raises projections for the third time this year,” says another article published at the end of October by Footwear News.
In the world of business, just like in life, everything is allowed, but not everything is convenient.
