Nike Is Having a Really Bad Year

Summary

This video explores the recent challenges faced by Nike, once the unassailable leader in athletic footwear and apparel. Despite a $50 billion annual revenue, Nike's share price has plummeted 60% in three years due to strategic missteps and competition from innovative brands like On Running and Hoka. The company's shift to e-commerce under CEO John Donaho initially seemed successful, but post-pandemic consumer behavior and a saturated resale market have led to a decline in revenue. The video examines Nike's digital strategy, the importance of product innovation, and the rise of competitors focusing on functionality, suggesting that even the top dog in the industry must innovate to remain relevant.

Takeaways

• 📉 Nike's share price has fallen by almost 60% over the past 3 years, erasing over $100 billion of market capitalization.
• 🏃‍♂️ For the fiscal year 2025, Nike projects a revenue decline by a mid single digit percentage, marking their first decline in over a decade excluding the pandemic.
• 🤖 The video is sponsored by Nvidia AI, which offers a service to create publish-ready videos from text-based prompts.
• 🛍️ Nike's business model involves three main sales channels: wholesale, owned stores, and e-commerce, with varying profit margins.
• 👟 Nike's dominance in the athletic footwear and apparel market is attributed to its massive revenue, allowing for extensive athlete sponsorships and marketing.
• 💡 The appointment of John Donaho as CEO indicated a strategic shift towards digital strategies and technology to maximize profits.
• 📲 Nike's apps aim to engage consumers and drive sales, with some targeting specific consumer segments like sneaker enthusiasts.
• 🔄 Donaho's strategy involved reducing reliance on the wholesale channel to increase direct sales and profit margins.
• 🚀 The pandemic initially boosted Nike's e-commerce sales, tripling their revenue from e-commerce between 2019 to 2022.
• 💸 The secondary sneaker market's speculative bubble benefited Nike, but as the bubble burst, so did the demand for their limited edition shoes.
• 🚫 Nike's focus on digital strategy and collector appeal may have overshadowed the need for functional product innovation, opening opportunities for competitors like Hoka and On Running.

Q & A

What is the main focus of the video?

The video discusses the challenges faced by Nike, including a significant drop in share price and market share, and analyzes the strategic missteps and competitive threats that have put the company on the back foot.

How much has Nike's share price fallen over the past 3 years according to the video?

Nike's share price has fallen by almost 60% over the past 3 years, which has wiped out well over $100 billion of market capitalization.

What is the projected revenue decline for Nike in the fiscal year of 2025?

For the fiscal year of 2025, Nike is projecting that their revenue will decline by a mid single-digit percentage.

What is the significance of the video sponsor, Nvidia AI, in the context of the video?

Nvidia AI is presented as a tool that can help content creators produce videos with just text-based prompts, showcasing how technology can assist in the creation and editing process, which is relevant to Nike's digital strategy discussed in the video.

What are the three main channels through which Nike sells its products?

Nike sells its products through a wholesale channel to third-party retailers, through its own stores, and via e-commerce on its website and mobile app.

How does Nike maintain its top-of-mind presence among consumers?

Nike maintains its top-of-mind presence by sponsoring hundreds of professional athletes worldwide and through celebrity endorsement deals, which潜意识地 makes Nike a default brand for athletic shoes.

What was the unusual choice for Nike's new CEO in 2020, and what was the reason behind it?

John Donaho, a technologist with experience in e-commerce and enterprise software, was an unusual choice for the CEO of a sportswear company. Nike wanted him to focus on their digital strategy and leverage technology to maximize profits.

What are the four apps that Nike currently has, and what is the purpose of each?

Nike has the main Nike app and the sneakers app for e-commerce, the Nike Run Club for tracking running activities, and the Nike Training Club for providing pre-made workouts. The apps aim to keep the Nike brand top of mind and potentially convert users into paying customers.

How did the COVID-19 pandemic affect Nike's e-commerce sales?

The pandemic led to a significant increase in e-commerce sales for Nike, as people were forced to stay at home and traditional retail was disrupted. E-commerce revenue tripled from $3 billion in fiscal year 2019 to $11 billion in fiscal year 2022.

What are the two new competitors that have gained significant popularity in the athletic shoe market, and what is their main selling point?

Hoka and On Running are the two new competitors that have seen a massive surge in popularity. Both brands focus on functionality and comfort as their main selling points, with Hoka known for its thick soles and On Running for its cloud-like cushioning technology.

What was the main issue with Nike's strategy during the pandemic, and how did it affect their product innovation?

Nike's strategy during the pandemic focused heavily on digital engagement and e-commerce, which led to an overemphasis on limited edition releases and color variations. This took their focus away from product innovation and functionality, creating an opening for competitors to offer more innovative products.