Money blog: Has the Nike sneaker bubble burst? | News from the UK

By Mark Wyatt, Money Blog Reporter

The sneaker market is more diverse and competitive today than ever before, and its biggest player has felt the effects.

While new brands emerged and gained market share, Nike suffered its biggest single-day share price drop ever at the end of June.

The market capitalization shrank by a whopping $28 billion (£21.6 billion) overnight after management reported an expected decline in revenue in early 2025.

But why did this happen?

Nike remains the world's largest sporting goods retailer and still has the largest market share, but analysts say strategic decisions at the board level have contributed to the company's downturn, as have consumer concerns and the emergence of new competition.

Change of strategy

John Donahoe became Nike's new CEO in January 2020 and was tasked with modernizing the company's online operations and generating more digital revenue.

Mr. Donahoe came from eBay, one of the world's largest e-commerce companies, and quickly began shifting Nike's focus away from retail and away from the high street and toward digital sales efforts.

Shortly thereafter, the COVID pandemic broke out and shoppers around the world were forced to shop online whether they wanted to or not.

As people stopped going to the office to work, there was no longer a need for elegant, formal footwear. Sales of comfortable everyday shoes increased and Nike's profits exceeded all expectations.

Everything seemed to be going well, so Donahoe doubled down on his efforts, accelerating his digital strategy and moving Nike out of hundreds of brick-and-mortar stores.

Soon, Nike had severed a third of its relationships with distributors.

“Today's consumer is digitally anchored and simply won't switch,” Donahoe said on a conference call about the 2020 quarterly results.

Nike believed that the best way to bring its vision to consumers was to sell it directly, without retailers like FootLocker and JD Sports acting as middlemen to dilute it.

But as lockdowns were lifted around the world, people returned to stores and online sales dropped, leading to questions being raised about the decisions that had been made.

“I think they underestimated the cultural aspect of brick-and-mortar shopping as part of the social life of young consumers,” Daniel Herval, who worked at Nike on some of its biggest sneakers like the Air Max, Jordan and Air Force 1 between 2017 and 2020, told the Money blog.

“Nike believed that people had now switched to online shopping and left brick-and-mortar stores behind.

“But once stores reopened, the social aspect of shopping came back, the community aspect of shopping, and Nike wasn't really there.”

Competition and innovation

Nike's competitors were not deterred by this trend, and in fact, retailers whose shoes once dominated the shelves began looking to other brands to fill the gap.

Newer brands such as Asics, HOKA by Deckers Outdoor and the Roger Federer-backed On entered the market and captured an ever-growing market share.

And these companies quickly began to present new ideas, especially in a market area that Nike had long dominated: performance running.

HOKA's thick foam soles are a big draw for runners, while On's well-marketed (and now patented) cushioning system technology is popular with both recreational and professional athletes.

Nike, some believe, is also lagging behind in the sports lifestyle scene. Adidas' Samba and Gazelle lines and New Balance's 990s are growing in popularity – even then-Prime Minister Rishi Sunak owned a pair of Sambas…

So where was Nike’s innovation during this time?

The air cushioning in the sole of sneakers – known as Air Max Bubble – was introduced as early as 1978.

The last major innovation in Nike sneakers, according to Mr. Herval, was the introduction of the new signature material Flyknit in 2012.

A survey of US teenagers conducted by Piper Sandler earlier this year supported the assumption that Nike remained the favorite but was losing popularity to innovative brands such as Hoka and On.

Nike seems to have recognized the problem and announced a “multi-year innovation cycle” in April.

Two main complaints from the street

To find out what consumers think about Nike shoes in 2024, there's hardly a better place to look than The Basement.

Founded on Facebook over a decade ago, the online group of streetwear fans has just over 150,000 members from around the world and is an authority on all things street fashion, including sneakers.

Want to check if that hoodie you just bought on eBay is really a vintage Ralph Lauren product? Ask The Basement. Want to launch your own line of custom sunglasses but need advice on starting a small fashion business? Ask The Basement.

You want to know why fewer people will buy Nike sneakers in 2024? You know what I mean.

When we asked members of The Basement for their opinions on Nike, almost every response brought up two themes.

The first problem is the price, which is now largely unaffordable for precisely the target group that used to buy Nike sneakers in droves.

Take a look at Nike's website and you'll be hard-pressed to find a new sneaker that costs less than £120. Most of the “highly anticipated” shoes are between £150 and £200.

For the classics, like the Air Max 95, a new pair starts at £174.99. Some traditionally cheaper options, like the Air Jordan 1s, now cost around £130 at retailers like JD Sports, Size? and ASOS.

“£200 is not an affordable price,” said one member of The Basement. “People have gotten older and wiser.”

“I worked for a shoe retailer for four years,” said another. “The biggest hit to Nike was definitely the price increases.”

“When I started collecting Jordans they cost £105, ten years later the same model cost £190 – that’s unjustified!”

The statements go on and on. As do those that address the second biggest criticism consumers have of Nike sneakers: quality control.

Anecdotal reports of botched products are not uncommon, with many shoppers frustrated after spending big bucks on new shoes only to receive sneakers covered in glue stains, with mismatched logos, missing patterns, misshapen heels, and more.

Quality control is a hands-on process that involves both manual and automated procedures and is therefore not foolproof.

But the sheer number of error reports suggests that these are not just errors made by a few air forces.

The term “Nike quality control” gets tens of millions of views on TikTok, and—spoiler alert—most of the videos don’t involve people talking about how excited they are about buying their new sneakers.

“Why would I spend £200 on a pair of Nike trainers 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 one member of The Basement.

“The quality has gone downhill. Anyone who has ever worked at a Nike dealer knows the smell of glue from the pallet all too well,” says another.

Return flight via Paris

But it's not all doom and gloom for Nike. This summer, the company had a golden marketing ace up its sleeve – Paris 2024.

The world's biggest brands see the Olympics as an opportunity to showcase themselves to a global audience, and Nike is no exception. Good advertising and brand image can build customer confidence and increase share price – in Paris, this was the key to success.

The sporting goods giant had announced before the games that it would spend more money on them than on any other event before.

“This will be the biggest investment and moment for Nike in years,” Heidi O'Neill, Nike's president of consumer, product and brand, told Reuters in April.

Nike secured official sponsor status for Team USA, meaning the Swoosh would be seen at the top of the podium provided the athletes performed as expected.

And that's exactly what happened. Simone Biles won three gold medals in gymnastics, Noah Lyles won the 100 m and swimmer Katie Ledecky stood on the winner's podium four times.

Longtime Nike endorser LeBron James laced up some extremely eye-catching metallic gold-style sneakers from his own custom LeBron 22 signature line en route to the gold medal.

And it's not just at competitions that the Nike symbol is particularly popular. Each US athlete received a special package with 50 items of clothing, shoes and accessories, including “interview clothing” and “village clothing” to ensure the brand remained visible at every possible moment in Paris.

This was important because Paris 2024 broke audience records around the world. In the UK, BBC Sport's coverage of the Games was streamed 218 million times, more than twice as many as in Tokyo.

Across the pond, NBCUniversal's cross-platform coverage generated record advertising revenue and averaged 30.6 million daily viewers.

What did all this mean for Nike? During the opening week of the Olympic Games, from July 26 to August 1, the company was able to increase visits to its websites, while its direct competitor Adidas saw a decline in visits compared to the previous week.

Importantly, data from Similarweb showed that Nike was able to convert many visits to its website into sales, more often than its competitors.

“(Nike is) still a struggling brand overall,” said Drew Haines, director of merchandising at retailer StockX.

“But the Olympics definitely spark interest in these things. Nike is the one that really wins there.”

Where now?

The marketing boost from the Olympics will not immediately solve all of Nike's perceived and actual problems, but it is clearly a step in the right direction.

But the share price has already begun to slowly recover. Last month it rose by around 14 percent following the latest investment by billionaire US hedge fund manager Bill Ackman.

“Nike has the ability to go beyond the product discussion and build a connection with consumers that is unparalleled,” says Herval.

“It will take a few years. But I firmly believe that the brand can still recover.”

Nike did not respond to a request to contribute to this article.