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The Swoosh Paradox

Rookie Contract is a column here on The Sideline Sports. It provides analysis on business deals and decisions in the world of sports, as well as reports on revenues, endorsements, and contracts. Read more here.

Tyler Blake, a famous “Youtube Sneakerhead,” recently brought a very interesting discussion to his channel. Blake explained and analyzed the balance (or lack of) in Retro footwear releases and innovative footwear. Nike’s sales expanded so heavily in 2008-2013, that many believe they lacked the hunger to expand on prior success. In 2013/2014, Nike released sneakers that many thought were overpriced and didn’t meet expectation.

In March of 2016, Nike provided an extensive release of footwear and apparel that will be used primarily during the 2016 Rio Summer Olympics. Soccer cleats which repel mud, jerseys that weigh “little to nothing,” and Kevin Durant’s “sock/sneaker,” show  Mr. Blake, market analysts, and myself that Nike are no longer sitting atop prior successes.

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“Pioneering Nike Vapor basketball uniforms impose a new order on the court by pairing progressive knit jersey and shorts featuring Nike AeroSwift technology with innovative base layers to minimize game-time distractions and maximize performance.” Info/Image Courtesy of Nike

 

Nike’s “slip-up” in 2013/2014 exposed an opportunity for competing brands. In the basketball industry, Adidas and Under Armour have made leaps and bounds over the past three years.

Adidas: Their success began in 2013 with the creation of Boost Cushioning. Upon the creation, RunnersRoost provided Adidas with significant praise. “Preliminary data shows the Boost material does provide a statistically significant decrease in oxygen consumption when compared to the exact shoe without the boost mid-sole.” Adidas were able to create a compound that absorbs joint impact and allows the consumer to exercise more efficiently . In my opinion, Boost is the greatest sneaker invention in recent memory.

Boost’s success did not stop at running shoes. In 2014, Adidas debuted the “Crazy Light Boost” and “D Rose 5.” These were the first two basketball sneakers to utilize Boost. The cushion began as a cult-favorite in the running community, made the transition through the “sneakerhead” community and are now featured on sneakers that “sell out” on the weekends.The sky is the limit for Boost as it’s the greatest innovation in sneaker history.

Under Armour: In 2013, Nike decided to let Steph Curry join Under Armour. Curry displayed flashes of brilliance during his first four years in the NBA, but Nike didn’t see neither the popularity nor consistency worthy of a signature sneaker.

Curry’s fearless work ethic has led to his emergence as the NBA’s best scorer. This season, Curry is at the forefront of the Warriors’ 69-8 record. After winning the 2015 NBA Finals, Under Armour’s basketball sales are rising at a meteoric rate. Over the past year, Under Armour’s US Basketball sales have increased by 350%.

CurryGraph

Steph Curry’s shoes are flying off the shelves. Graph Courtesy of Bloomberg’s Luke Kawa.

Nike’s Ideal Balance

In 2016, Nike has taken a similar approach to 2008 and 2012. Both of these years featured Summer Olympics (2008 in Beijing, 2012 in London). The sheer size and attention provided to this event makes it a perfect opportunity for sportswear companies to display their best products. In 2016, we’ll see Nike increase the amount of “innovative” product sales and decrease the amount of  “Retro” releases.

Retro sneakers have become over-produced. “Jordan Retro” production increased to satisfy demand,  prices increased as materials became more expensive. A once thriving resale market is now dead. The resale market did not create losses for Nike. If anything, it led to Nike’s ability to release  ANY “hyped” sneaker and have it instantly sell out shelves. While news companies were criticizing the riots at malls and violence behind Jordans, but it inversely increased the demand for sneakers.

Nike can’t “sell-out” retro releases like they once could. But in 2016, they can increase their sales through new products during the Summer Olympic cycle. NikeLab has also been a new-found source of revenue. It allows free-lance designers to use previous sneaker models and “put their own take” on the shoe. For example, they’ve placed a  running shoe’s sole on soccer cleats. It allowed creativity in many forms, there’s a reason why it’s quickly become a popular sector in Nike’s arsenal.

Ultimately,  Nike will succeed if they continue to evolve as a brand rather than “sit” on what made them successful. Although, if they continue to focus on “Retros,” they’ll let a “Steph Curry” or “Adidas Boost” fall through the cracks.

Michael Anders View All

Born in NYC x Raised in VA

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