Nike’s Crisis: “Air Max is Becoming Air Min”
More consumers are asking themselves whether they should buy On or Hoka running shoes. This has Nike executives worried.
According to Bloomberg, Nike expects revenue to decrease by a low-single-digit percentage in the first half of FY2024 due to growing competition from emerging running shoe brands. On and Hoka generated revenue of $1.99 billion and $521 million, respectively, in FY2023.
Nike’s lack of momentum results from several years of missteps:
- Nike fell behind in the innovation race
- Nike shed wholesale deals when it pivoted to DTC in 2017
Nike has fallen behind in the innovation race, and they know it. Nike announced a series of senior executive changes to reinvigorate its product innovation—something industry analysts like Chris Burnes were starting to question. He said, “There is no newness coming out of Nike.” Meanwhile, On and Hoka credit their cushioning technology, called CloudTec® and Meta-Rockers, respectively, for improving sales and customer loyalty.
When Nike pivoted from wholesale to direct-to-consumer in 2017, it closed several wholesale deals completely and reduced its accounts. Last year, Nike started to reverse course and renewed wholesale relationships with Macy’s, DSW, and Foot Locker. In retrospect, Nike needed to build their direct-to-consumer business, as it accounted for $21.3 billion in FY2023, up 14 percent on a reported basis, but they didn’t need to do it at the expense of their wholesale business. Nike’s direct-to-consumer business is not positioned to capture enough demand, and it’s less resilient to market fluctuations relative to a multi-channel approach.
