Sports Brands: The Time is Unfavorable for All, but Nike is Really in Trouble, and It’s Their Own Fault

In the middle of the month, the American sports giant Nike announced that it plans to lay off 1,600 employees, or two percent of its total workforce. The goal is to reduce costs by two billion dollars in order to compensate for the decline in demand and increase investments in innovation. Nike, as well as competing companies like Adidas, Puma, and JD Sports, have predicted weaker revenues this year as consumers are buying less of what is not essential. However, although it seems that due to the unfavorable macro climate all players in the sector are in the same boat, Nike is in a much bigger one.

Bad news about falling stock prices and mass layoffs have confirmed rumors that the foundations of one of the leading global brands are quite shaken and that after a full sixty years at the top, it simply – just can’t do it. Things began to change dramatically when a new CEO, John Donahue, was appointed in 2020. Although he is credited with many good things, including a significant increase in sales at the beginning of his term, the company began to lose some of its best designers, innovators, and marketing experts who, as foreign media report, knew the ‘secret ingredient’ of the brand that made it so successful. Additionally, it is symptomatic that in recent months, popular sports figures, its long-time ambassadors, have also been leaving Nike.

Exodus of Athletes

A few weeks ago, the world was surprised by the news that famous golfer Tiger Woods and Nike ended their collaboration after a full 27 years. The brand had been a loyal companion to him throughout those years – following him in conquering sports peaks, but also in his private dramas. After the image of the perfect father and husband, who turned out to be a sex addict and a serial cheater, collapsed, he launched a campaign with Nike in which he apologized to his wife, father, mother, and the general public. It was a rather awkwardly executed campaign, nowhere near the iconic Nike pieces that are taught in schools, but it helped Woods improve his image. The most successful golfer of all time earned five hundred million dollars thanks to Nike, but neither side explained why this lucrative collaboration was terminated. When it comes to Nike’s image, it would be good if Woods were the only athlete who said goodbye to the company. But he is not.

Footballers Casemiro and Lisandro Martínez have become Adidas ambassadors, Harry Kane has joined the Skechers team, and the trio Jack Grealish, Mateo Kovačić, and Manuel Akanji have chosen Puma. As the Daily Mail commented on this mass exodus, when the best global consumers wear your brand, the biggest problem is that it is noticeable when they stop wearing it. Nike, they continue, has clearly decided not to renew contracts with the mentioned players or could not offer them a little extra if they asked for it. Of course, this does not apply to lifetime Nike partners (Nike for Life) like Cristiano Ronaldo, LeBron James, and Kevin Durant, but for athletes with shorter contracts, collaboration with Nike has become questionable. Although it has not been explicitly explained anywhere why the company stopped collaborating with an unusually large number of consumers (practically simultaneously), many would bet that it is about saving, but also about John Donahue’s wrong strategy.

Boring for Generation Z

Namely, CEO Donahue saw the greatest potential in retro models Air Jordan and Air Force 1 and redirected significant amounts into the development of products with a vintage flair. This move was not bad, consumers liked it, but the problem was that Nike significantly reduced investments in the sports segment and innovations. An interesting thesis about Nike’s endangered position was presented by Luke Hodson, owner of the Nerd Collective agency, in The Drum magazine. Although according to numerous studies, Nike is the favorite sports brand among Generation Z, Hodson claims that in their eyes it is losing its shine and, in fact, relevance. The younger generation is currently obsessed with Y2K aesthetics, which makes recent news from Nike not appealing to them.

The only model or, better said, brand Air Force One, which is an integral part of popular culture, is a timeless classic, a symbol of strength and heroism on the sports field. Although this (sub)brand is indeed powerful, it is not strong enough to carry the entire company on its back. The famous swoosh logo and the unmatched slogan Just do It, Hodson fears, mean so little to younger generations, and that could be, or already is, a huge problem. Moreover, competition has sharpened its teeth in practically all segments where Nike is strong. For example, in the category of quality and performance, brands like HOKA, Cloud Nova, On Running, and Vivo Barefoot are approaching it, while in the lifestyle category, Adidas remains a threat, winning over the audience, especially women, with trendy retro models.

Urgent New Narrative

In the fashion-forward category, writes creative Hodson, unexpected returnees Asics and Salomon are doing excellently, and recently New Balance has been playing the high, exclusive quality card brilliantly. When compared to the competition, it becomes clear that Nike urgently needs to wake up, offer something that is not just okay but worthy of its well-known pomp. Especially among the younger crowd. Or, as the owner of Nerd Collective noted, with a rich archive of products that are living proof of past glory, the brand has the potential to restore its iconic status. For this to happen, it is essential for Nike to develop a new, fresh narrative that will resonate and be heard by contemporary audiences. Until recently, the brand was a symbol of innovation and good design; it set trends and influenced public opinion, being part of culture (let’s remember the campaign with Colin Kaepernick). The current (unfavorable) situation is a clear sign that it is time for serious restructuring and a revision of plans. Because it is simple: if it does not become relevant, Nike is dead.

– Living in London, I perceived Nike as a local brand, and now it resembles some large corporate entity operating out of Beaverton (Nike’s American headquarters, note). The sneaker manufacturer must win over cultural insiders who will help it regain social value. In this way, it will find its ‘secret ingredient’ again, concluded marketing insider Luke Hodson in The Drum.