NIKE (NYSE:NKE) is a seller of athletic footwear and athletic apparel worldwide. The company sells its products to retail accounts, through NIKE-owned retail stores and Internet sales, and through a mix of independent distributors and licensees, in approximately 190 countries around the world.
The Oregon-based company is a global brand and the No. 1 sports brand in the world. Nike is a very competitive organization and boasts of a very good leadership. It sponsors the top athletes and gains valuable coverage through the media. For the last 20 years there has been an increase in demand for products in the sports clothing market which suggests that Nike will have a profitable investment if it continues business in the same industry. People are spending more on such products.
The company gets stiff competition from UnderArmour (UA). Both the companies are vying to capture the women’s wear segment. UA is about to spend $250 million to make a position among the women buyers. Management at Under Armour has embarked upon a robust advertising campaign geared toward female athletes, which includes the use of television ads and various social media platforms. The "What's Beautiful" campaign has been backed by individual Under Armour stores that have been redesigned specifically with women in mind.
Another competitor is Lululemon Athletica (LULU). It is a leader in athletic apparel for women. This company remains a significant obstacle for Nike to make its mark among the female consumers. Lululemon has had great success branding its products toward lifestyle activities such as yoga and running. In 2012, the female business generated approximately $400 million in revenue, which is less than half the revenue of its male business. To rectify this, the company has embarked upon a robust advertising campaign geared toward female athletes.
Nike is currently performing well when compared to its peers. Nike's rich history with regard to footwear and its constantly innovative approach, particularly with regard to running/training and basketball shoes, has firmly cemented the company as the world's best sneaker brand in the minds of consumers. It may be quite impossible for Under Armour to overtake Nike in total footwear sales.
The acquisition of the brand Converse has proved to be beneficial. The addition is raking in annual revenue that is four times the purchase price. Nike has been expanding its training, running, and — by way of its Converse brand — casual lines. It is a highly profitable segment as it doesn't require expensive research and development, or R&D, investment. Revenue from this brand is expected to be at $3 billion by the end of 2017. New market conversions will expand the brand’s image.
Nike India: Options of Setting Up Concept-Based Stores
Nike India is exploring options of setting up concept-based stores in the country as part of garnering more share in domestic sportswear industry valued at Rs 3,500 crore, a top company official. The company, which has about 3,000 touchpoints across the country, inaugurated the first concept-based store, Nike House of Cricket, also the third in the country. Elaborating on the concept stores, Nike India Marketing Director Avinash Pant said whether it comes from footwear or apparel, the House of Cricket and Football concept in Mumbai and New Delhi has garnered "good response,"
The next five-year plan can involve a shift in Nike's focus from traditional division in categories like footwear, equipment, etc., to individual sports, and selling of other assortments like sunglasses, hats and other accessories.
On the other hand, Nike's strong financial performance will help it to cash in on new innovation with its robust R&D. Apart from the main focus on athletic apparel and footwear, Nike can make further development in casual wear items. Further, Nike can inbuild RFID technology into its supply chain system which will help it in operating more efficiently in the market and also gain six sigma quality standards. There is also an opportunity to tap other market segments like Asian countries where disposable income of people is increasing and they are becoming more brand conscious.
Nike has a $36 billion goal to hit by 2017. It will be a mixture of Nike brand growth, women's apparel, and a nice boost from iconic shoe brand Converse that will lead the charge of what amounts to more than 40% sales growth between fiscal 2013 (recently completed) and 2017.
Nike has a high perceived value and is a hit among consumers who are brand conscious and are willing to pay a high price for high quality. It has a good brand reputation and is distinctively marked by its slogan Just Do It. Nike is continuously improving its products and so it can rightly be said that innovation plays a key factor in its growth opportunities. Strong research and development, complementing innovation, expansion into trendy/fashion industry where not just athletes are targeted, but the general population where new competition can be met from alternative clothing lines, are some of the measures taken by Nike to sustain its growth.
One of the best things to see from a large company is its ability to return value to shareholders. Nike knows the opportunities that lie ahead with its Converse segment and has already started working to capitalize on them.