What's happened to Nike?
The news out of Nike is bad.
If you're a holder of the company's script you'll be swearing like a drunk sailor at the moment with the share prices currently half of what it was just three years ago. The value destruction here is staggering and apparently all the blame needs to be directed at the Nike executive team.
What's influencing this dramatic collapse of the business? A few things apparently:
- DTC: A few years ago, Nike did some maths and determined that they were giving away far to much margin and leverage in their wholesale business. So they made the logical decision to cull 50% of the retailers that sold Nike products, in favour of securing that trade for themselves through their own DTC channel. It was a nice idea in theory (one that at the time made good sense to us too), but effectively the move killed the physical availability of the brand in crucial outlets and put a bullet through the head of sales volumes.
- Competition: The competitive landscape in the athleisure category has become incredibly crowded and dynamic since the pandemic. Just here in South Africa there are an army of new, innovative brands now competing vigorously for the same market share. Perhaps Nike didn't see this as a credible threat; maybe their arrogance is somewhat to blame, but they were caught napping on the job.
- Fearful: It's difficult to point to hard evidence of it, but the Nike brand seems to have become increasingly fearful of failure. To prevent this unbearable pain the brand has resorted to focusing on legacy ranges that their historical data tells them will sell, rather than boldly exploring the unknown with new innovations and ideas. Even their advertising seems like a rinse-and-repeat of the old recipe. Nothing new, nothing interesting to see.
What might be made of this?
Obviously Nike is still a fantastic brand and we certainly wouldn't be writing them off as has-beens just yet. But perhaps this well documented fall from grace is proof of something bigger that poses a significant danger for other businesses that are being lulled down the same path.
Nike built their business on innovation, creativity and boldness in the face of uncertainty. Like many other businesses however they have become more scientific in their approach to optimising their operations and marketing function (the company has been very public about its significant investments into firms like Zodiac), using data, AI, analytics - all the modern scientific wizardry that we hear about constantly. But there may certainly be a case to be argued here that they might have gone too far down that scientific road to the detriment of their more intangible, esoteric roots.
Philosophy and science need to work together to unlock the future. Heightened consciousness without appropriate action is dreaming; a focus on hard facts without a bold futures-orientation results in a never ending repetition of the present. When 'the mental and the physical' skilfully combine in interesting ways, that's when you get the building of what's truly desired.
We seem lately to have been banging increasingly loudly on this particular drum, but the risk is also revealing itself more frequently these days.
THE WARNING THEN IS THIS! Data is historical and reliance on data doesn't create anything new, no novelty is found in it. It's sterile, dead. When judgments are made purely on data, without the influence of conjecture, the result is nothing new.
Human being are inquisitive creatures, when you just serve them what they already know, they get bored and move on. Don't bore your customers towards your competitors. Keep shit spicy and new.
Nike will come back, but they'll need to find balance in their approach.
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