Remember July 28th, 2024? That was the day the Nike swoosh turned into a frown as the company reported its Q2 financial results. In a single day, Nike lost a jaw-dropping $25 billion in market cap and a staggering $70 billion over nine months – the stock was in free fall. Picture this: 130 million shares changing hands—thirteen times the average daily transactions—and the stock hitting its lowest price since 2018, marking a -32% drop since the beginning of 2024. So how did we get here? How did one of the most recognisable brands lose its way? Let’s take a look.
Our story starts way back on January 13th 2020, when John Donahue took the reins as CEO of Nike, sending Mark Parker off on a well-deserved vacation. Teaming up with Heidi O’Neill, the new President of Consumer, Product and Brand, they embarked on a grand transformation plan for the company. It wasn’t long before they sent out a motivational paradigm shifting email, kicking things off with: “Dear Nike Colleagues, this is what you asked for!”
What followed was a bold new strategy that read a lot like the plot of a corporate thriller:
- Cutting Categories: Goodbye, brand categories! Say hello to a streamlined operation that promised to save money and operate on data-driven insights. Unfortunately, this led to hundreds of layoffs, and with them, decades of experience in sports and manufacturing walked out the door. The result? The product development engine got a makeover that turned it into a generic fashion brand instead of the innovative sports giant we all loved.
- DTC Takeover: Nike decided to pull the plug on their wholesale leadership model. Yes, they ended a long-standing era where partnerships thrived and shifted into the world of Apple-style direct-to-consumer (DTC) sales. The mission? Transform ‘Nike Direct’ into the new kingpin of revenue, and Nike.com would wear the crown, limiting third party retailer access and partnerships.
- Digital Marketing Revelation: In a digital-first frenzy, the Nike team decided to trade storytelling and athlete inspiration for digital marketing spend. With an emphasis on serving existing customers over inviting new ones, Nike shifted focus to funnel money into performance marketing—spending billions to essentially “buy” traffic instead of earning it. The former CMO seemed to have thrown out the marketing playbook that emphasised emotional engagement and brand building.
Now, let’s take a moment to unpack the repercussions of these pivotal decisions—because, clearly, they weren’t just a little off the mark, they were a full blown false start.
The Aftermath
- Category Cutbacks: This decision opened the floodgates to competitors as Nike desperately reintroduced categories they had abolished. Now called “Fields of Play” (cute, right?). Whatever the strategy, the fact that Nike was playing in fewer categories hit sales hard.
- Wholesale Meltdown: By dumping long-standing partners and slashing support, Nike’s former wholesale business partners were questioned more than a contestant on a reality show. They didn’t just close the door; they locked it and threw away the key. Customers, especially casual buyers, migrated away like they were on a long holiday, making Nike’s once-thriving outlets look like ghost towns. This could have been mitigated by decisive spending on the new consolidated channels like the DTC site and Nike store. But, as we’ll go on to see, with the focus being on conversion rather than customer experience, Nike failed to pull these consumers into their new consolidated channels, leaving the market share up for grabs for challenger brands like ON Running and Hoka.
- Price Wars: With e-commerce stealing the spotlight, Nike discovered the hard way that online competition is all about pricing. The hefty price tags of iconic sneakers didn’t translate to loyalty in the digital marketplace, leading to promotional sales that made Black Friday look like a quaint little discount event. The lessons of ASOS are relevant here. Even brands as lofty as Nike will falter when they abandon brand building and prioritise conversion at the expense of customer experience.
Reflecting on these decisions, one must ask: did Donahue—the CEO who ran in from outside the industry—underestimate consumer behaviour? Did O’Neill, a seasoned veteran, drop the ball too? In the end, what we saw was a self-inflicted wound that stripped away Nike’s brand equity, product creativity, and market share, all thanks to a duo—John and Heidi—who entire teams of talented executives would find to be a bit of a head-scratcher.
What next for Nike?
But fear not, dear sneaker enthusiasts; the story doesn’t end with disaster. Yes, Wall Street may be throwing some serious shade, but the fanbase still loves “the swoosh.” Nike remains a top player in the industry, raking in $5 billion in annual earnings before interest and taxes, all while sitting pretty with zero debt. The brand has a knack for comebacks.
However, the journey back to greatness will demand investments, innovations, and the reestablishment of connections with those abandoned wholesale partners. To my mind, Nike must detox its reliance on performance marketing and rediscover its spirit of creativity that made it extraordinary in the first place.
So, to John and Heidi: it’s time to remind yourselves—and the world—why we fell in love with Nike in the first place. It brings to mind the tagline from one of my favorite ads in the Nike locker: it’s time to ‘Find your greatness’ again.
