By Mark Wyatt, Money blog reporter
The market for trainers is now more diverse and competitive than ever before, and its biggest player has felt it.
While new brands have emerged and taken market share, Nike saw its largest single-day drop in share price on record at the end of June.
A whopping $28 billion. (£21.6bn) was shaved off in market value overnight after the company’s management reported an expected sales decline in early 2025.
But why has this happened?
Nike remains the largest sports retailer in the world and still has the largest share of the market. But analysts say strategic decisions at board level have contributed to a decline in its fortunes – with consumer concerns and the rise of new competition also at play.
Change in strategy
John Donahoe became Nike’s new CEO in January 2020 and was tasked with updating the company’s online operations and bringing in more digital revenue.
Mr. Donahoe arrived from one of the world’s biggest e-commerce companies, eBay, and quickly began shifting Nike’s focus towards its digital sales efforts and away from the high street.
Soon after, the COVID pandemic hit and the world’s shoppers were forced online whether they liked it or not.
Since people didn’t go into offices to work, there was no need to buy smart, formal footwear. Sales of comfortable everyday shoes rose, and Nike’s profits rose beyond expectations.
All seemed to be going well, so Mr. Donahoe doubled down, accelerating the digital strategy and moving Nike out of hundreds of brick-and-mortar stores.
Soon, Nike had severed a third of its relationship with sales partners.
“The consumer today is digitally grounded and simply won’t go back,” Mr. Donahoe said on a 2020 earnings call.
Nike believed they were the best to deliver their vision directly to consumers, and they didn’t need retailers like FootLocker and JD Sports to dilute it as intermediaries.
But as lockdowns ended around the world, people returned to stores and online sales slowed, and the decisions that had been made began to be questioned.
“I think they underestimated the cultural aspect of physical shopping as part of the social life of young consumers,” Daniel Herval, who worked at Nike between 2017-20 on some of its biggest trainers, including Air Max, Jordan and Air Force 1, the Money blog told.
“Nike thought people had moved online and had left the physical experience behind.
“But as soon as things started to reopen, the social aspect of shopping, the community aspect of shopping returned, and Nike wasn’t really there.”
Nike had begun to divest as people returned to stores, but they had lost pace to other brands.
Competition and innovation
Nike’s rivals weren’t going to stand still while this happened, and sure enough, retailers who had once had Nike shoes front and center on their shelves looked for other brands to fill the space.
Newer brands such as Asics, Deckers Outdoors HOKA and Roger Federer-backed On emerged and took a steadily growing share of market share.
And these companies quickly began to show off new ideas, especially in a corner of the market that Nike has long dominated – performance running.
HOKA’s thick foam soles are a huge draw for runners, while On’s well-marketed (and now patented) cushioning system technology has proven popular with casuals and pros alike.
Nike, it is perceived by some, has also lagged behind on the sports scene. Adidas’ Samba and Gazelle lines and New Balance’s 990s have grown in popularity – even then Prime Minister Rishi Sunak owned a pair of Sambas…
So where has Nike’s innovation been in this time?
The air cushioning inside the sneaker soles – known as the Air Max bubble – debuted way back in 1978.
Released back in 2012, Mr Herval says, the Flyknit material is the last major performance innovation to seep into the lifestyle brand in a major commercial way.
A survey of American teenagers by Piper Sandler earlier this year supported the idea that, while Nike remains the favourite, it has lost “mindshare” to innovative brands such as Hoka and On.
Nike appears to have recognized the problem, announcing a “multi-year innovation cycle” in April.
Two important complaints from the streets
To find out how consumers feel about Nike’s shoes in 2024, there are few better places to look than The Basement.
Launched on Facebook more than a decade ago, the online group of streetwear fanatics has just over 150,000 members from around the globe and is a go-to authority on all things street fashion, including trainers.
Need to check if that hoodie you just bought on eBay is really a vintage Ralph Lauren? Ask the Cellar. Want to launch your own line of custom sunglasses, but need advice on starting a small fashion business? Ask the Cellar.
Looking for consumers to tell you why fewer people are buying Nike shoes in 2024? You get the picture.
When we asked The Basement members for their thoughts on Nike, there were two issues that came up with almost every response.
The first of which is the price point, which is now largely unaffordable for the exact demographic that has historically bought Nike sneakers in droves.
Take a look at Nike’s website and you’ll be hard-pressed to find a newly released trainer that costs less than £120. Most of the “hotly anticipated” shoes sit between the £150-£200 mark.
For the classics, such as the Air Max 95, a new pair starts at £174.99. Some traditionally cheaper options, like the Air Jordan 1s, are now around £130 at retailers including JD Sports, Size? and ASOS.
“£200 is not an accessible price point,” said a member of The Basement. “People have gotten older and wiser.”
“I worked for a shoe retailer for four years,” said another. “Nike’s biggest killer was easily their price increases.
“When I started collecting Jordan they were £105, within 10 years the same model is £190 – you can’t justify that!”
The testimonies go on and on. So do those who raise the second biggest consumer complaint about Nike shoes – quality control.
Anecdotal reports of defective products are not hard to find, and many buyers are frustrated that after spending a lot of money on new shoes, they have received sneakers covered in glue stains, with mismatched logos, missing patterns, misshapen heels and more among complaints.
Quality control is a hands-on process involving both manual and automated procedures, and as such is not foolproof.
But the large number of reports of failures indicates that these are not just a few defective air weapons.
There are tens of millions of hits on TikTok for the phrase “Nike quality control” and – spoiler alert – most videos aren’t of people sharing how happy they are with their new trainer purchase.
“Why would I spend £200 on a pair of Nike shoes that will probably arrive covered in glue stains and fall apart after a month when I could get a perfect pair of New Balance for £150?” asks a member of the Basement.
“The quality has taken a nosedive. Anyone who has ever worked for a place with Nike knows that glue smells way too good off the pallet,” says another.
Going back via Paris
But it’s not all doom and gloom for Nike. There was a golden marketing ace up its sleeve this summer – Paris 2024.
The world’s biggest brands see the Olympics as an opportunity to get in front of a global audience, and Nike is no different. Good publicity and brand image can instill customer confidence and improve the share price – getting things right in Paris was key.
The sportswear giant announced ahead of the Games that it would spend more on it than it had on any previous edition.
“This will be the biggest investment and the biggest moment for Nike in years,” Heidi O’Neill, Nike’s president of consumer, product and brand, told Reuters in April.
Nike secured itself as the official sponsor of Team USA, meaning that as long as the athletes performed as expected, the swoosh would be at the top of the podium.
And so it was. Simone Biles won three golds in gymnastics, Noah Lyles took 100m honors and swimmer Katie Ledecky was on the podium four times.
Lifetime Nike endorser LeBron James laced up some very on-the-nose metallic gold-style sneakers from his own custom LeBron 22 signature line en route to a gold medal.
And it’s not just during the competition that the Nike fleet gets its moment. Each American athlete received a special package containing 50 pieces of clothing, footwear and accessories, including “interview clothes” and “village clothes” to keep branding visible at every possible moment in Paris.
It was important because Paris 2024 broke records for its worldwide audience. In the UK, BBC Sport’s coverage of the games was streamed 218 million times, more than double that recorded in Tokyo.
Across the pond, NBCUniversal’s multi-platform coverage drew record ad dollars and averaged 30.6 million daily viewers.
What did that mean for Nike? In the opening week of the Olympics, from July 26 to August 1, it managed to increase visits to its websites, while its direct rival Adidas saw the number of visits fall compared to the previous week.
Importantly, data from Similarweb also showed that Nike was able to convert many visits to its website into sales. And it did so more than its rivals.
“(Nike is) still a struggling brand overall,” said Drew Haines, merchandising director at retailer StockX.
“But the Olympics, that definitely drives interest in these things. Nike is the one that’s really winning there.”
Where now?
The marketing boost from the Olympics won’t suddenly end all of Nike’s perceived and real problems, but it’s clearly a step in the right direction.
Even now, the share price is slowly starting to recover, rising about 14% in the last month following recent investments by American billionaire hedge fund manager Bill Ackman.
“Nike’s ability to just go beyond the pure product conversation, the ability to connect with consumers, is unparalleled,” Mr. Herval says.
“It’s going to take a few years. But I’m confident that the brand is still capable of a turnaround.”
Nike did not respond to a request to comment on this article.