In the Olympic year, continue to shine.
In April, Paris basks in the Olympic atmosphere. In front of the Palais Brongniart, six orange statues vividly capture the moments of athletes in competition. This building, which has witnessed the passage of time and was once home to the Paris Stock Exchange, now observes an even grander scene—under the inspiration of the spirit of sport, the pursuit of power and wealth is temporarily set aside.
The Nike brand inaugurates a grand showcase for the Paris Olympics here. Bringing together world-class athletes including American tennis legend Serena Williams, Kenyan long-distance champion Eliud Kipchoge, and Chinese tennis star Li Na, they jointly demonstrate to the world the innovation and creativity prepared by Nike. They, with different skin colors, from different countries, and with different backgrounds, collectively showcase the global presence of the Nike transnational corporation.
With its global supply chain, Nike enables design, manufacturing, and sales to be coordinated across multiple locations around the world, shaping a profitable business model that has made it one of the most lucrative sportswear corporations in the era of globalization. Not only excelling in division and cooperation, Nike also strives for a balance where it not only produces products the general public can afford, but also, through product innovation and limited-edition collaborations, gives its products the characteristics of luxury goods. This strategy has proven effective in today’s consumer society, especially validating its success in the Asian market.
Since accelerating globalization in the 1990s, Asia has rapidly replaced Europe as a new growth engine for Nike. Particularly since 2010, the rise of China’s sportswear market has made the Greater China region one of the most critical markets for Nike. Over the past thirty years, Nike’s P/E valuation has generally remained between 10 and 30 times, and since 2017, it has further increased to over 30 times. All this is no coincidence; growth seems to have come with the wind. However, the consumer market is undergoing new changes, and factors such as unsold inventory, inflation, and regional turmoil, are testing this industry giant.
The Paris Olympics is seen as a stage of long-awaited reunions and undoubtedly the most powerful marketing platform for all sporting goods brands. Sporting equipment loaded with the latest technology often makes its debut on the Olympic stage, setting the tone for sports trends over the next four years. On April 11, at the Palais Brongniart in Paris, Nike held the “Nike On Air” event, unveiling the new Nike Air footwear and national team outfits in preparation for the summer sports feast.
At the “Nike On Air” summit, Nike showcased not just the strong influence of several well-known athletes but also technical breakthroughs in product innovation. As Nike CEO John Donahoe said, Nike is willing and planning to “get back on the offensive.” This statement was widely interpreted as a positive attitude from Nike in response to market concerns.
However, shortly before this showcase in Paris, Nike released a financial report that caused market anxiety. On March 22, Nike announced its third-quarter results for the fiscal year 2024, showing revenue of $12.4 billion, a 0.3% increase over the same period, exceeding market expectations; however, the net profit was $1.172 billion, a 5% decline compared to last year.
Amid signs of a weakening global economic growth outlook, Nike is prudently planning its development blueprint. Chief Financial Officer Matthew Friend warned that Nike expects a low-single-digit decrease in its revenue by the first half of the fiscal year 2025. In response to this challenge, he told investors that the company would reduce the supply of classic styles including Air Force 1 and Pegasus running shoes. Meanwhile, Nike will double down, focusing on promoting and developing brand-new shoe styles about to hit the market.
Market analysts are heaping criticism on Nike. They believe that Nike has overly relied on retro shoes like Air Jordan, Air Force 1, and Dunk in recent years while neglecting core performance products. This approach allowed competing brands such as On Running and Hoka to step in and take market share. Additionally, Nike’s lack of innovation is one of the focal points of Wall Street’s criticism. Since the launch of Nike React foam technology, Nike has struggled to make significant breakthroughs in disruptive innovations, casting uncertainty on its financial growth.
In view of concerns about innovation and development, Nike brand official Donahoe stated that working from home during the pandemic indeed posed challenges to innovation. “Collaborating on Zoom to develop new shoe models, such as Air Max DN, was indeed a daunting task,” he added, “Since the team has returned to the office, we’re giving it our all to ensure that we deliver the freshest experiences and ideas at the top level.” He also emphasized that Nike’s innovation channels are still strong and promised to accelerate the launch of new products.
For the upcoming Paris Olympics, Nike’s product design team had undergone intense remote collaboration, and the postponement of the Tokyo Olympics forced the innovation team to work day and night to ensure that the design and development at each stage could proceed smoothly.
In the two years when the consumer market was impacted by the pandemic, Nike successfully mitigated many risks through the Direct To Consumer (DTC) marketing model. Since 2017, DTC has been a key strategy for Nike. By mid-2020, Nike announced it had entered a new phase called Consumer Direct Acceleration (CDA), the positive effects of this strategy included cultivating loyal online consumers during the pandemic, promoting full-price product sales, increasing profits, and making inventory management more effective.
However, with the recovery of the offline market in the later stage of the pandemic, Nike lost the support of some global distributors and partners, and flaws in product positioning and offline sales strategies became increasingly apparent, leading to increased inventory pressure. Nike’s latest financial report revealed various issues behind the DTC model.
In a media interview in Paris, Donahoe admitted that the neglect of the wholesale business in the process of digital transformation exceeded the company’s expectations. Nike is currently actively adjusting its strategy and heavily investing in collaborative relationships with retail partners.
Marketing expert Cheng Shaoshan offered his perspective on Nike’s DTC (Direct-to-Consumer) model. He pointed out that the logic of DTC itself is not flawed, but there may be some imperfections in its implementation.
Among many sports brands, Nike once led the market with its product strength and cost-performance advantage. However, with the rise of the “replacement” trend, the competitive pressure Nike faces has also increased. Analysts note that Nike’s innovation capability has not diminished; it’s rather that the innovation capabilities of its competitors have greatly improved, disturbing the market balance.
Moreover, after the pandemic, the polarization of the consumer market has become more severe, and the consumer base for sports brands has gradually focused on specialized and niche tracks. In this change, due to its lower average selling price compared to other niche high-end brands, Nike is no longer synonymous with luxury for many professional and semi-professional runners. Therefore, whether Nike can stand out in product innovation has become a key basis for the capital market to assess its market competitiveness.
Digital innovation has become an important tool for Nike to meet challenges. Nike’s Chief Innovation Officer has showcased the company’s innovative efforts for the upcoming Paris Olympics. Using 2D, 3D, 4D, and other digital technologies, Nike’s innovation team continuously simulates on computers how products can fit the body smoothly, precisely controlling every detail, striving to achieve near-perfect operational efficiency in design.
Nike is about to launch a product series named “Blueprint Collection” in tribute to the company’s founder Bill Bowerman, which includes 13 different categories of sports shoes. The series is all equipped with Nike’s Air technology, intended to enhance the performance of athletes. Notably, the Nike Alphafly 3 features a dual Nike Air Zoom cushioning unit and an integrated sole design, providing excellent shock absorption and stable motion transition, indicating that it will shine in the marathon event of the Paris Olympics.
Since its inception, innovation has been the core strength of Nike’s brand. In 1978, when Nike and aerospace engineer Rudy explored the application of “air” technology to soccer shoes to enhance comfort and support, they could not have imagined that this technology would bring such immense success to Nike in the sports shoe market. Nike’s Air technology is famous for its unique “walking on air” comfort and has become one of the best-selling products over the past decades.
After more than forty years of continuous innovation and development, Air technology has now made significant progress in multiple aspects such as design philosophy, tactile experience, and cushioning performance, establishing an insurmountable barrier in the industry with its outstanding lasting resilience. The commercial partnership with basketball superstar Michael Jordan further led Nike’s Air technology to create one legendary story after another in the basketball shoe market.
According to the analyst Tang Xiaotang, the Zoom Air technology introduced by Nike in 1995 completely revolutionized the concept of traditional running shoes at that time with its excellent elasticity, breaking the technological monopoly of Japanese brands such as ASICS. However, with recent market doubts about Nike’s innovation, Tang Xiaotang believes that real innovation is not just the increase in the number of products or minor changes to the logo.
Tang Xiaotang emphasizes that true innovation should be consumer-oriented, stating that once consumers’ buying habits change, they will turn to those products that really have innovative power. Nike’s proactive strategic deployment for the upcoming Paris Olympics indicates that the so-called “innovation hibernation” is about to end. Based on past experience, the most competitive athletes and teams often set a trend with the latest technological innovations they wear when standing on the medal podium.
Just like at the 2008 Beijing Olympics, the Nike Hyperdunk 2008 worn by American basketball star Kobe Bryant became the focal point of fans’ pursuits, with its application of Flywire and Lunarlite technologies changing the public’s general perception of basketball shoe design. This year, the American men’s basketball team will compete for glory on the Olympic stage with the support of Air technology, and will also become the focus of sneaker collectors.
In an interview, Nike’s Regional Business and Market Development President Craig Williams was full of confidence in the innovation of Air technology, mentioning that these innovations related to Air are Nike’s most cutting-edge achievements to date, and will ensure that Air continues to be favored by consumers of different ages and those involved in various sports for the next decade.
Craig Williams also discussed Nike’s “anxiety,” pointing out that in addition to innovation, meeting the needs of the general consumer is equally important. He believes that Nike has the ability to showcase the highest-end and most competitive products at the top of the product pyramid, while at the bottom, it is also very focused on cost-effectiveness and operational efficiency. He considers the Chinese market to be an ideal testing ground, where the consumer culture incorporates many elements beyond innovation, such as discounts, market penetration, and online shopping.
As one of the first foreign brands to enter the Chinese market, Nike is well aware of the importance of using a localized strategy. Nike CEO John Donahoe, when talking about the Chinese market, has always shown a firm confidence in this strategic market. He mentioned, “Our investment in China has never stopped, even during the pandemic, when many companies were cutting costs, Nike has continued its annual investments. Strengthening our local capabilities has always been our top priority, which we call ‘In China, For China’.”
At a vibrant and innovative Paris show, “Nike On Air” was particularly eye-catching, with one of the highlights being the stunning appearances of several athletes. Especially the young fencer from Hong Kong, China, Cheung Ka Long, whose outstanding performance made him the focal point of the event.
The commercial value of athletes is increasingly valued, reflecting the brands’ close attention to specific sports and even specific markets. Since the 1980s, Nike has forged a deep connection with China. In 1981, Nike sponsored the Chinese national athletics team, marking their first team sponsorship globally. That same year, Nike also manufactured its first pair of shoes in China, despite not meeting the sales standards for the American market. Official container exports began in 1984. Nevertheless, Nike’s founder Phil Knight has continually held high hopes for Chinese manufacturing.
This confidence has garnered solid returns. China’s vast labor market and outstanding industrial chain have consistently provided Nike with high-quality products. Taking Shenzhou International as an example, not only did they complete an order of tens of thousands of Nike jerseys in 16 hours, but their perfect industrial chain also prompted Nike to establish a design center here, rapidly transforming designers’ modification recommendations into reality.
For Nike, the Chinese market is both a production base and a vast ocean of consumers. Financial reports indicate that the domestic sports consumption market in China remains vigorous, with Nike’s revenue in the Greater China region growing for six consecutive quarters. Revenue in the Greater China region for the third fiscal quarter reached $2.084 billion, with a growth rate of 6% when exchange rate impacts are not considered. Sales of footwear, apparel, and equipment have also shown robust growth.
Analytical reports point out that since 2004, the consumption power of the Chinese market has significantly increased. In the following five years, the rise of the Asian economy, particularly China’s, brought limitless value-added potential to the sportswear market, with Asia’s income growth outpacing Europe’s. Following the financial crisis, as demand in the American and European markets gradually recovered, Nike’s growth accelerated once more, crucially driven by the rapid advancement of the Chinese market, providing vital momentum for Nike’s global expansion and rise in market value/valuation.
Today, as the Chinese consumer market is transforming, Nike’s growth model in China is also changing. Nike deeply cultivates the market through its 6000 single-brand stores in China and various innovative concept stores. Moreover, to counteract the slowing growth of offline channels, Nike started to focus on expanding their online channels this year, committing to a new situation of integrated online and offline marketing.
During the Spring Festival period, two of Nike’s official flagship stores—the NIKE Huaihai Trend Flagship Store and the NIKE Guangzhou Brand Flagship Store—announced their debut live broadcasts on the Douyin platform, signaling Nike’s attempt to further broaden its market using popular media platforms.
Nike’s offline sales channels are also starting to show subtle changes, such as consumers now being able to enjoy personalized services like adding custom patterns or embroidered names when purchasing Nike products, highlighting the unique characteristics of Nike products. Market experience suggests that the appeal of standardized products in environments like shopping malls is gradually waning, while Nike products themselves, integrating trends and technology, and customization services are expected to become a new growth point.
Beyond continuously focusing on classic sports areas like running and basketball, Nike has long started to pay attention to and develop the women’s sports market and emerging areas such as street dance, aiming to meet these consumers’ pursuit of unique labels. The market’s maturity and this development direction are closely related—in the high-end market, wearing Nike is largely a “safe choice.” However, with market saturation and popularization, differentiation becomes particularly crucial.
In terms of innovative designs that emphasize value, Nike’s connection with China has strengthened and become more proactive. The eye-catching Air Max Scorpion in silver and the new year products released every Spring Festival have been widely acclaimed in the international market and are particularly loved by Chinese consumers. The popular Citywalk concept in China has also brought inspiration to the design of the Motiva shoes, and the upcoming Nike Sports Research Lab (NSRL) in Shanghai underscores Nike’s high regard for the innovation capabilities in the Chinese market.
The adjustments Nike has made in the Chinese market indicate that even a leading brand needs constant innovation to maintain its competitiveness. In China, the competition in the sports consumption market is not only extensive but also fierce, far surpassing other markets worldwide. Although Nike has not yet encountered a true rival in China, strong potential competitors are gradually closing in. However, the current market space is still vast, and there could still be hundreds of millions of consumers contemplating what to wear after taking off their Nike shoes or planning to buy their first pair of Nike shoes.
