“Nike’s product pipeline is fairly stagnant,” says Research Analyst Drake MacFarlane, who oversees the Consumer Products sector for M Science. “Nike benefits from the core customer who buys religiously. But you need to be able to grab the incremental new customers, too. Yet, we are seeing them go toward newer brands.” The mid-tier and challenger brands can seize these new buyers, taking share from Nike. “Nike pulled away from a lot of wholesale partners right when new challengers were coming onto the field. If you pull away, even on a relative basis, that’s where competitors can pull in,” he adds.
It may take a while to correct this trajectory for Nike. Footwear lead time moves slowly, for fashion standards. From pitch to prototype to product, the development cycle of a shoe can last one to two years. This remains a challenge for Nike, as online trends move quickly, and it can be unpredictable which trends might stick. Conversely, fast-fashion brands can capitalize on social media movements to meet consumers in the current moment.
To further complicate matters, Nike also participates in the athleisure space. So, while Nike is struggling with footwear innovation, it must also compete in a saturated apparel segment filled with contemporary designs and styles. “There’s a lot of surface era for competitors to take Nike’s market share across both footwear and apparel,” MacFarlane explains. “The concept of brand loyalty is more nebulous these days for consumers – there’s just more fashion options available than before.”
Consumers are not the only ones with other options – so does talent. MacFarlane describes how these mid-tier and challenger footwear brands have set up shop in the same area, specifically around Portland, only a few minutes from Nike headquarters in Beaverton, Oregon. Both On and adidas’ North American headquarters are in Portland, and as of May, HOKA has reportedly leased office space in Portland as well. “From an employment ecosystem perspective, there’s just other options available. If you are not able to get cachet at Nike, and you want to innovate, the competitors are innovating literally next door.”