Nike: How the Business Strategy Gone Wrong

Cutting Categories and Innovation

Nike decided that it would eliminate core divisions. These included brand, product development, as well as sales. Because of this, hundreds of its experts were laid off. This might have seemed a cost-cutting measure, yet it cost the company innovation at its core. Product developments came to a standstill, yet Nike found itself unable to keep outpacing the competition in fast-changing markets.

Direct-to-Consumer Business Model

The firm shifted away from its wholesaling strategy, cutting ties with majors like Footlocker and Macy’s, to sell directly to consumers through Nike-owned stores and online platforms to boost margin sales. This short-term win actually created long-term problems. By reducing its physical availability, Nike inadvertently pushed customers toward competitors. Retailers, eager to fill the gap, replaced Nike products with those of rival brands, many of whom had been waiting for this opportunity for years.

Over-Reliance on Digital Marketing

Nike centralized its marketing efforts, making them data-driven and digitally focused. This may have seemed like the logical step in a digital age, but the privacy changes brought about by Apple iOS 14.5 rendered data tracking and targeted advertising less effective. Billions invested in loyalty programs and performance marketing began to show diminishing returns, leaving Nike with less visibility and impact.

Restructuring Operations

The company transitioned from focusing on specific sports to broader categories like men’s, women’s, and children’s sales. This diluted Nike’s connection with the athletic communities and sports enthusiasts that had been its backbone for decades. Instead of being the go-to brand for athletes, Nike became just another option in an increasingly crowded market.

Declining Market Share

Nike’s problem of losing to the younger generation is further compounded with the rise of competitors that are taking away market share based on innovative designs and fresh ideas in marketing. Four months ago, Nike’s price fell to the lowest ever that wiped out $27.5 billion in one day and wiped out a staggering $70 billion in nine months. It was the lowest valuations that the company would have since 2018, a breathtaking fall for a former market leader in its own right.