Nike大放异彩的野心，雄心和未来Nike Flexes: Ambition, Swagger, and the Future

"In the face of raw, absolute dominance, even brand loyalty gets rewritten."

Part 4

Every four years brings the sporting world's grand festival; and every four years, just before the Olympics, Nike drops all its newest tech in one big showcase. In the early hours of February 6, Nike unveiled the breakthrough innovations it's bringing to the 2020 Tokyo Summer Games. Nike didn't use its old "Innovation Summit" branding this year, but that hardly means it came without jaw-dropping new product.

Last year, the day after his 64th birthday, Nike President and CEO Mark Parker announced he'd step down in January 2020. John Donahoe — former eBay CEO and current CEO of Silicon Valley cloud-computing company ServiceNow — would take over. This marks the second time in Nike's 47-year history that it's hired a CEO from outside. (Although John joined Nike's board back in 2014, he wasn't heavily involved in day-to-day operations over the past five years.)

In 2004, Nike's founder and first CEO Phil Knight was thinking about stepping back and retiring, and the idea of bringing in an outsider to run the company took shape. William Perez, CEO of consumer-goods company SC Johnson, was the first pick, but he couldn't adapt to the company culture and left in a hurry less than a year in. At Knight's direction, Parker replaced Perez, kicking off a 13-year run at the helm. From Parker's 2006 appointment to today, Nike's stock has climbed over 800%, and annual revenue has grown from $15 billion to nearly $40 billion.

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▲ Back when Donahoe (right) was CEO of Bain & Company, Nike was already a major Bain client.

So this is also John Donahoe's first summit attending as Nike CEO and President. At this Future Forum, even as Nike once again showed shareholders, consumers, and rivals its formidable tech reserves and product muscle, it also turned more of its gaze toward sport — and toward the future of humanity itself, living up to the "future" in Nike Future Forum.

The showcase drew its highest interest for one full lineup of performance shoes: applying its exploration of the all-new Zoom across different sporting contexts — marathon, sprinting, basketball, soccer — to represent Zoom's boundless possibilities. Different sports, but very consistent silhouettes and colorways. The standout, naturally, was the Nike Air Zoom Alphafly NEXT%: last year Kipchoge pulled off the Breaking2 feat in a prototype of this shoe, and now Nike has brought the official race version — two brand-new Nike Air Zoom units paired with more ZoomX foam, a more breathable upper, and an improved carbon-fiber plate, for even better cushioning.

The Space Hippie line, built from "production waste," is Nike's shoe series for this spring/summer. The whole line has a unified, distinctive look, rooted in the fact that the product itself is made from scraps left over on factory floors — which paradoxically makes it look all the more sci-fi. And it's not just the shoes: from production methods to packaging, Nike thought it all through, chasing sustainability in every detail, ultimately pushing "total carbon emissions to an absolute minimum." It signals the brand's action and resolve to protect the planet's future.

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Space Hippie line

Skateboarding enters the Olympics as an official event for the first time this year, and the Nike SB skateboarding line will show up at the Tokyo Games too. Team USA, France, and Brazil will compete in the new Nike SB Skateboarding Kits — beyond shoes, the range includes apparel, socks, hats, and more, all made from recycled polyester, with graphics drawn by Dutch artist Parra — and each one is different, "to reflect the distinctive sporting culture of each country."

Beyond competition gear, Nike also announced collaborations with five designers this time: Yoon Ahn (of AMBUSH), Jun Takahashi, Chitose Abe (of sacai), Matthew M. Williams (of 1017 ALYX 9SM), and Virgil Abloh. The collab is built largely around the Tokyo Olympics as inspiration, under a "future of sport" concept.

If the Zoom line is Nike's exploration aimed at the future, then the collab lineup on display was more of a show-off flex over the glory of the past few years. As an "off-court sideshow," Nike rounded up a circle of streetwear gods, designers, and celebs for a group photo — which became the single most-shared, most-influential image of the whole summit: Matthew M. Williams, Virgil Abloh, Hiroshi Fujiwara, G-Dragon, Drake, Travis Scott, Tom Sachs, Edison Chen, and a dozen-plus heavyweights all showed up, each a traffic magnet in his own right. Feel a pang of sympathy for Ye for a second? The parade of streetwear, collabs, and projects, capped by that streetwear-god group shot going viral, once again showed the world Nike's absolute dominance over the intersection of sport and street style.

"At Nike, we see the world's most influential sporting stages as the best opportunity to show the world the limitless potential of humanity," said Nike Group President and CEO John Donahoe. "After all, what we care about isn't just results, but the future of sport. On the Tokyo stage, we'll use groundbreaking tech to help the world's elite athletes push sport to new heights. And given how fast the global climate is changing, we're also bringing real, effective solutions to the actual problems athletes will face." — John Donahoe

A Tech Company Dressed in Athletic Clothing

Shanghai, China — 60% of consumers wear shoes in the wrong size, mismatched to the shoe's model too. Nike realized this was a big pain point — and one it could do a lot with.

Around 2012, with competitors on the rise (chiefly Under Armour) and profit-margin growth in decline, Parker spearheaded a large-scale DTC (direct-to-consumer) strategy and a digital transformation. Under the DTC model, the share of sales reliant on distributor channels was drastically cut, while revenue from Nike's direct sales has grown double digits every year from 2013 to now. Per the FY2019 report, direct sales already make up a third of full-year revenue.

Along the way, the Nike board that Parker led also did a corresponding "blood transfusion." Executives from tech companies like GE, IBM, Microsoft, and Apple joined the Nike board one after another, including Apple CEO Tim Cook, who came aboard in 2016. John, then eBay's CEO, joined as an independent director around this time too. According to the FY2019 report, aside from the three executives holding standing positions at the company, of the remaining 12 independent directors, more than half have a tech background, including two women. This reflects Nike's hoped-for shift from being driven mainly by product innovation to being driven by digital technology.

A brand-new tech originally slated to launch after the Chinese New Year has apparently been affected to some degree by the epidemic: Nike Fit. This unique technology uses computer vision and machine learning to help consumers find the shoe size that fits them. It'll eventually show up in the Nike App and in Nike's brick-and-mortar stores.

The app prompts the consumer to use their phone's camera to capture a scan of their foot, then generates a recommended size range that gets tied to that user's Nike+ profile. In the future, whether buying Nike in a physical store or online, the system will automatically recognize their size. Nike Fit doesn't just solve a shopping pain point and improve the user experience — its real value to Nike is getting more consumers to register for the Nike App, feeding Nike richer data, letting Nike know which sizes and styles are more popular, and thereby optimizing inventory and supply-chain management.

Even before this, Nike's app portfolio was already quite complete. But those earlier apps were all about "winning over" users, not aimed at getting consumers to pay directly — for fitness lovers, Nike offered a huge library of pro workout tutorials in NTC (Nike Training Club); for runners, there was the dedicated NRC (Nike Run Club). Both apps focused purely on content, with no embedded purchase ads or redirect links. Nike Connect, built around the NBA, and Nike Adapt, for self-lacing shoes, emphasized interactive experience and functionality respectively. SNKRS, meanwhile, focused single-mindedly on being the go-to for copping authentic sneakers at retail. Stake out the turf, win over users, and thereby keep strengthening the brand's direct-to-consumer business while reducing dependence on the traditional wholesale business — that's been the core of Nike's digital transformation these past few years. Per the target Parker set earlier, by 2023 Nike's digital-marketing division will account for 30% of the company's total business, versus 15% today.

"In the future, when you buy a shoe online, there'll no longer be a size or a gender — just your name. That's our goal," Martin said.

Nike currently has over 185 million members worldwide. By the close of FY2020, DTC is expected to hit $16 billion in revenue, up from $11.8 billion last year. The boom in the internet and e-commerce has sportswear brands placing more and more weight on building out online channels and optimizing the in-store shopping experience. They want to keep consumers inside their own direct-run stores — so in a sense, retailers that merely distribute and constantly discount are gradually losing their reason to exist.

At the same time, the DTC strategy has delivered real, tangible upside for Nike. Currently, two-thirds of Nike's revenue comes from retail partners. Steadily increasing DTC's share lets Nike bypass middlemen like wholesale channels, sell product at higher prices, and gain more control over merchandising and discount handling. It also reduces reliance on third-party channels, especially some precarious department stores. From FY2011 to FY2019, Nike's direct-to-consumer business grew double digits for nine straight years, reaching 30% of group revenue in FY2019. The latest report shows that in Q1 of FY2020, Nike's gross margin ticked up to 45.7%, mainly thanks to higher average selling prices for Nike products globally and the higher profit from the worldwide expansion of the DTC business.

Nike wants to hold consumers in its own grip. By 2021 it will stop supplying dozens of independent retailers, aiming to cut down the number of resellers and funnel more users to its own website and apps, further building out its e-commerce platform and executing on the "direct-to-consumer" strategy. So the companies whose business runs on Nike and Adidas product got hit with a sudden black swan — they simply can't find other product to replace the business they had. For the major retailers, Nike and Adidas are a crucial source of revenue.

At an investor meeting in October 2017, former Nike brand president Trevor Edwards said, "Undifferentiated, mediocre retailers can't survive." With Nike once again adjusting its supply strategy, the survival space for these "undifferentiated retailers" keeps shrinking. As Nike, Adidas, and others push the "direct-to-consumer" strategy further, the conflict between "undifferentiated retailers" and sportswear brands will only sharpen. But it's not that Nike will abandon third-party retail entirely — rather, it's applying stricter screening to its retail partners. Foot Locker became the first third-party retailer integrated into the Nike App this August, where consumers can scan a product for stock and product info and get a shot at free merchandise or exclusive releases. And in November, Nike announced it would stop selling its products on Amazon.

"For our company, the most important goal isn't to get consumers to buy product, but to provide consumers with product that meets their intended goals. To do that, we have to create a seamless Nike consumer experience. If you're just an undifferentiated retailer, merely selling Nike product without offering added service, then I don't think that has value for us — and by value I mean value in terms of serving our consumers," said Michael Martin, currently Nike's VP and GM of direct-to-consumer retail for Greater China, in an interview with BoF.

Although several sports giants recognize the importance of pivoting to DTC, no one comes close to Nike on returns. In Nike's Q2 FY2020 report (for the period ending November 30, 2019), released last week, revenue hit $10.3 billion, up 13% year-over-year on a currency-neutral basis, beating expectations; Greater China revenue for the quarter was $1.847 billion, up 23% year-over-year currency-neutral — already 22 straight quarters of double-digit growth for Nike in China.

Before 2018, we once thought the e-commerce platform build-out represented by Adidas Confirmed was basically complete. But the new lay of the land is this: Adidas has gone quiet, while Nike has caught up and established a top-of-the-industry system. Right now, SNKRS is the world's best, most integrated sneaker-release platform, with the strongest user stickiness and loyalty. This past quarter, with more resources tilted its way, SNKRS sales grew 50% — unmatched across the entire industry.

Parker's departure was a bit sudden — everything had gone smoothly for him — but bringing in John, with his tech background, to succeed him shows Nike's resolve and execution on digital transformation. If Parker excelled at design and infused it into the company's products, then John's tech background will lead Nike further down the digital road. Parker once projected that by 2023 a third of Nike's business would come from digital channels. Now, handing the CEO seat to the deeply tech-savvy John is undoubtedly the wiser move.

In the Face of Raw Dominance, Even Brand Loyalty Gets Rewritten

"Our strong start to FY20 highlighted the depth and balance of Nike's complete offense. Nike's strong product innovation, combined with our industry-leading digital experiences, continue to deepen our consumer relationships around the world."

The depth and breadth of Nike's product lines made for Nike's strong start to FY2020, letting us sound the horn for a full-on offensive across the entire market. Strong product innovation, backed by digital retail experiences that lead the whole sportswear industry, keeps deepening our relationships with consumers worldwide.

Yes, you read that right: Nike's innovative force comes from Nike's CEO. Sneakerheads and the hypebeasts chasing limited drops are only a small slice of the actual consumer base; they, and the secondary market, can't keep a sportswear brand strong over the long haul. On the contrary, it's the real investment in the product categories themselves — moving fast in small steps, iterating and pushing out the new, optimizing the overall retail structure — that's the kingly path.

For a sportswear brand, being strong at one point or one facet doesn't make it strong overall, nor does it make it a great company. You have to be strong across many facets and many points to hold a durable competitive edge. And Nike can pull off across-the-board bloom — many points, many facets, many lines.

Before this, Nike was basically in a "spat-upon" position within running circles, only good enough for seventh place:

1. ASICS — dubbed the king of running shoes
2. Saucony — hailed in the US as the "Rolls-Royce of running shoes"
3. Brooks — the specialist brand that pioneered the EVA midsole material every running shoe needs
4. New Balance — crowned the "president's jogging shoe," the "king of jogging shoes"
5. Mizuno
6. Adidas
7. Nike

That's the generally accepted running-shoe pecking order. Nike got looked down on because, back then, in running circles it leaned too hard on hype — running certain shoes purely on marketing to break into a slice of the entry-level runner market. If those entry-level consumers stayed "entry-level" forever, they might keep choosing Nike; but the moment their own level improved even a bit, they'd easily peel away from — even come to scorn — the brand.

You could see it plainly at China's major marathons: stake out the half- and full-marathon finish lines and you'd find Nike shoes making up a very low share. Clearly, in this circle people vote with their feet.

Take AIR MAX — pretty much the peak of Nike's running-line hype. On weight, it far exceeds comparable products. The 2015 AIR MAX, despite various weight-cutting, still hit 12.9 ounces, about 365 grams (US10) — while the same-size ASICS Kinsei is just 330 grams. On cushioning, there's almost no energy return, and no proper compression progression (what people usually call "softness"). And for special conditions like flat feet, overpronation, and supination, there's even less it can do to help. In an era when running-shoe tech is already quite mature, an air unit is arguably completely unsuited to a running shoe — yet Nike, on the strength of its powerful design and marketing, kept the AIR MAX line running impressively.

Flip it around and take ASICS: crystal-clear product lines. Stability series, cushioning series, all-control series, matched to different arch types. Top-tier and sub-top tiers, matched to different weight classes. Last widths from 2A to 4E, wide enough to fit every fat and narrow foot. It also has specialist shoes for various races — the well-known triathlon shoe, and marathon shoes.

But for people running 5K or even within 10K who are naturally lean, the shoe's effect on running isn't that pronounced. If you regularly run long distances and are heavier, Nike's weaknesses show plainly — and that's exactly what specialist running shoes are supposed to have. Unable to break the blockade of ASICS and Brooks specialist running shoes, Nike opened up a whole new lane of running-audience demand through the Nike+ running shoe and the Free.

Then came Flyknit: a tech Adidas had actually developed long before, which Nike successfully commercialized. The Flyknit woven upper is remarkably light with decent support, making for a comfortable, natural ride. So running enthusiasts couldn't take their feet out of Flyknit-woven running shoes. Flyknit gives a shoe sock-like comfort, so Flyknit-infused shoes usually fit snugly and comfortably underfoot — that soft upper is superb foot protection for running fans, and another pleasure of the run itself! When Flywire arrived, who'd have imagined there'd later be a Flyknit too? Now the two techs are combined — an even greater model of an innovation commercialized successfully.

Nike has never positioned itself as a maker of athletic gear, but as a company that uses the power of technology to help people, and pro athletes, get better sporting experiences and results.

Strategy dictates tactics. The heart decides the stage. Shoe Dog is full of details that moved me, one of which goes: "If any shoe would do, why go to all the trouble of selling Onitsuka Tigers, why run around foolishly? Back then I was working to chase Adidas's footsteps, but I was also always chasing Bowerman's, hoping to win his approval. As always, in 1967 I seemed to have no chance whatsoever of catching either of them." That captures, in full, how Knight was truly in it for the love, not just the business. He sold on more than attention — more importantly, he believed Onitsuka Tiger was genuinely born for sport.

After that came ZoomX, React, and the newly deployed Joyride line — all superb value, and recognized by pros and amateurs alike for their performance — Nike's new pioneering trident. As real production capacity scaled up and prices visibly dropped to bring genuine mass accessibility, ZoomX, React, and Joyride are already, and will always be, a great choice for every casual-fitness enthusiast buying a new pair. Same line as before: in this circle, people vote with their feet. The ZoomX Vaporfly NEXT% has ruled the six Marathon Majors and the Hakone Ekiden, and everyday runners in training basically all own a pair of Zoom Pegasus and Zoom Pegasus Turbo.

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A look at the weapons on the feet of the Six Majors runners.

Whose world it is now goes without saying.

Fashion, Trend, and Collabs Have Plenty of Room to Run Too

In an era where sportswear brands are steadily seizing the main say in fashion and street culture, Nike has plenty of allies too. In 2014, Nike officially launched the NikeLab brand, giving Nike a high-end sport product line of its own while providing an entry point and springboard for future collaborations with designers and brands. The vast majority of Nike's current collabs are presented by NikeLab, and released only at NikeLab's physical stores.

And from NikeLab's founding, Nike didn't overuse its previously top-tier "HTM" trio (Fragment Design founder Hiroshi Fujiwara; Nike VP of Creative Concepts Tinker Hatfield; and Nike President and CEO Mark Parker), instead tapping brand-new high-end designer resources: Riccardo Tisci, former Givenchy creative director and now Burberry chief creative officer; Undercover founder Jun Takahashi; Kim Jones, former Louis Vuitton menswear creative director and now creative director of Dior Homme; Balmain creative director Olivier Rousteing, and more.

All these big names — how many do you recognize? Nearly all from high-end luxury brands, not to mention the countless ties between Nike and LVMH. Over the past few years, countless collabs built Nike's glory, and made them value their collab resources all the more, actively fighting for them. After "Ye's defection," the success of YEEZY and "The Ten" made Nike realize more clearly — and grow more willing — to give collab designers greater autonomy; and it's exactly that freedom that, one, kept collabs from being cookie-cutter, and two, drew more top talent to "join" Nike — Donda creative-team members Virgil Abloh, Jerry Lorenzo, Samuel Ross, Matthew M. Williams, Heron Preston, and others all landed in Nike's pocket. Travis Scott's explosive rise, one, countered YEEZY more forcefully, and two, took Nike's collab game up another level.

Compared to Ye's lone-wolf standout act at Adidas (which reads more like desolation), Nike holds more cards, with a richer, more flexible playbook. You could say today's Nike is one of a kind — in collab resources, product, and strategy alike. In the street-style shots from fashion magazines that pop up now and then in the SNKRS app, you can catch faint glimpses of Nike's ambition. From the Paris Fashion Week runways to the streets of New York's SoHo, from Shanghai to LA, Nike is blooming on all fronts and growing wild across casual sport, healthy living, and street fashion.

Over the next half year, to counter YEEZY, Off-White x Nike will drop at an extremely high frequency.

Nike's Future

A company so strong that the IAAF recently had to set up a dedicated study on whether its shoes amount to cheating — one that consistently holds powerful in-house R&D and steadily contributes innovative product to consumers. Versus a company that coasts on past glory, whose 1.0 through 4.0 only swap the packaging without changing the medicine — the biggest difference being "psychological" — shouting a hollow slogan about "getting everyone into them" to brainwash people over and over.

YEEZY went from a lone standout to getting mobbed by an army of Jordans against a lone Yeezy. European streetwear outlet Highsnobiety teamed with the StockX sneaker exchange, and using the latter's real transaction data, released a Q1 2019 sneaker-resale report. In the "market share" section, the patent-leather UNC-blue Air Jordan 1 "UNC" ranked first, taking 19% of the TOP 10 — meaning of every 100 of those 10 shoes resold, 19 were the patent-leather UNC Air Jordan 1. On the bestseller list, the Air Jordan 1 held four spots, more than half once you add Jordan 6, while YEEZY had only the Europe- and Americas-exclusive Yeezy 350.

The people inside the "sneaker circle" make 90% of this market's noise while contributing 10% of a brand's sales. And the people outside it — the silent majority, the majority who walk into stores — make 10% of the market's noise while contributing 90% of the sales.

Is the line "let everyone get into YEEZY" really believable? How rough must a company have it right now, how desperate, to haul out the family treasure from the top shelf and make it available to all comers? A fact plenty of people know deep down but never want to say out loud: at this stage, an amicable split between Kanye West and Adidas is the best choice for both. One gets to fly free, without a professional manager crouching behind him constantly milking his value. The other gets to buckle down and pour resources properly into every direction, instead of morphing into a "yedidas" caterpillar fungus.

Because there's no rival, there's no innovation, no breakthrough. Like Apple — and like the Nike we're talking about today. Behind Apple is a pack of tigers and wolves, but behind Nike is a pack of little brothers following its tempo. Once it opens up a gap, Nike starts doing whatever it wants.

Rewind to 2010. On the financials, Nike and Adidas were still companies of the same tier. In basketball, Adidas's supporting endorsers — Duncan, Garnett, Howard — made the Finals four years running and won two titles. The Nike of that era couldn't do whatever it wanted, and the Hyperdunk, Kobe 4, Kobe 5 of the day (all Mamba shoes, it seems) were Nike's most classic representatives. The Kobe 5 has been praised by countless people: on looks, performance, and sentiment alike, it's a perfect-score work. A quick aside: 10 days before Kobe won his title, Apple released the world-changing iPhone 4; a decade later, the gap Nike opened up further cemented its position as the top dog.

In fact, from the moment the Kobe 5 appeared, it had already begun to gradually lay the foundation for this brand's mastery of basketball shoes: they knew exactly what consumers needed, exactly what design would better suit your sport. But they also recognized clearly that, in this era's backdrop, they were already at the top of the basketball game. From the moment it opened a gap on Adidas, Nike's arrogant attitude was on full display. They started running wild, doing whatever they wanted. Not just Adidas — every sportswear brand today bears responsibility for it.

Why is it that this year we're all anticipating the Kobe 5 retro? That last year everyone was over the moon about the Kobe 4 retro? More than the satisfaction of a classic reborn, it's the voice inside telling us: we don't like or endorse today's basketball shoes, we're longing for the classics of the past — so much so that even when the Kobe 5 Protro came stripped down, we begged Nike to just give us the old product with no changes at all, even downgraded. But when you get this shoe in your hands, you feel like nothing has changed at all — it's still the same young look it had 10 years ago.

Five years ago, Nike was the sportswear world's evil dragon. Complacent, arrogant. It let slip opportunity and possibility one step at a time, until eventually it started losing the market. Five years on, Nike is still arrogant, but it's basically shed its skin — and after all-around improvement, it won back its dignity, won back the silent majority. The North American giant stood back up. The market votes with its feet, the numbers will prove everything, and reality doesn't lie.

Late last year, in that famous Forbes report on Kanye, Kanye said the YEEZY brand hit $1.5 billion in sales for all of 2019. Jordan did $1 billion in a single Q2 2019 quarter. On June 28, 2017 — a year after Kanye dropped that song, the point when the YEEZY brand began helping Adidas take flight — Adidas's market cap was $38.66 billion. Nike's, that same day, was $93.22 billion, a gap of $54.56 billion. A year later, on the same day, the warrior named Adidas sat at $43.53 billion, the dragon's cap at $114.79 billion — a gap of $71.26 billion. Today, the warrior, drained and worn thin, crossed $60 billion with a weary face, reaching a market cap of $62.6 billion. It looks up, and there's the dragon, perched at an all-time high of $154.9 billion, gazing down at it — a gap of $92.3 billion.

This, without a doubt, is an era that belongs to Nike.