Home Adidas sales Nike’s luxury lessons, luxury lessons

Nike’s luxury lessons, luxury lessons



Key points to remember:

  • Luxury brands have come to understand that precariousness is not a fad and that the sporting goods giants are impressive in terms of sustainability efforts and considering the communities to which they sell.

  • Nike, adidas and Puma can benefit greatly from selling more directly to consumers like luxury brands do, but they also have the advantage of structurally higher online penetration than luxury brands.

  • If managed well, the relationship between the sporting goods space and the luxury sector is a win-win.

Looking back, when Kering – the owners of Gucci and many other big luxury brands – took a stake in Puma in 2007, they were almost prescient and certainly a bit early. Investors always ask me if the shift to casual clothing is going to last or if it is a fad. A fashion does not last for decades. It’s just a generational change and one that has been temporarily supported by many of us working on Zoom, Teams, etc. Nike has a saying that they sell to athletes and that “if you have a body, you are an athlete”. Athletic shoes will likely account for almost half of the total footwear sold globally by 2025. Let it sink in. And consider that all those “athletes” you saw running on treadmills in brown shoes decades ago are definitely a thing of the past.

Sports brands have likely benefited from the COVID-19 crisis once again as consumers strive for healthier lives and after the excitement around EURO 2021 and the Olympics – both this summer in Tokyo and early 2022 in China – there are many occasions to celebrate the sport. The sector enjoys a very positive perception and beyond the projection of healthy habits and performance, it is also making itself known to be a very responsible and trustworthy sector on two fronts.

First, adidas and others are at the forefront of sustainability efforts in the consumer space – efforts where many luxury brands seem to be a bit behind – in terms of concerns the replacement of raw materials, circularity, recyclability. adidas, for example, pledges that 90% of products will be sustainable by 2025. This is a big improvement over the early 90s when Nike made headlines for the wrong reasons. , accused of underpaying workers and making them work in bad conditions. clandestine workshops.

Second – and most obviously in the United States – sports brands have been active in social debates, with Nike backing Colin Kaepernick in the NFL and being vocal on racism issues in America with a “For once don’t do it”Campaign that was so powerful that their main competitor adidas retweeted it. Societal or political positions can annoy a fraction of consumers but if they trigger more loyalty with others and attract newcomers, then there is no harm at all, on the contrary. If asked why they buy Nike, I imagine most American consumers would naturally say it’s because their products are awesome. I think the reality is deeper and that consumers connect to the brand on shared values.

The best of both worlds: retail and online

Nike generates more than 35% of online sales through its own websites, partners and, most importantly, Nike Apps which now have a community of over 300 million members. Very quickly, online sales should represent more than half of Nike’s turnover. While the competition has less exposure online, they will all end up selling a lot more there as well. This is an advantage over luxury for which many consumers are still first-time buyers and the contribution of online is somewhat capped. Online means better data, lower costs and the ability to produce at the right size.

One area where sporting goods come closer to the luxury business model is selling more directly to consumers. Here again, Nike is ahead of the pack with “DTC” representing 40% of online and offline sales and visibility ultimately allowing activity to rise to 60%. Penetration of DTC, like greater online penetration, means higher sales (retail rather than wholesale) and higher margins.

Why Sporting Goods and Luxury Can Be a Win-Win

Charismatic Moncler CEO Remo Ruffini recently defined what he calls “new luxury,” a subtle mix between Nike and Chanel, and the group isn’t doing too badly with the Moncler and Stone Island brand, recently acquired. A mixture of pragmatism, online, retail, innovation seems to have borne fruit. The luxury approach to retail and customer base can inspire sporting goods brands. The sporting goods approach to youth, energy, innovation, a cool attitude and values ​​that resonate with a more demanding rising generation can inspire luxury. And if you thought luxury / sport collaborations were coming to an end, again, it’s a win-win.

Erwan Rambourg is a leading analyst covering the luxury goods and sporting goods sectors. After eight years as Marketing Manager in the luxury industry, notably for LVMH and Richemont, he is now Managing Director and Global Head of Consumer & Retail equity research. He is also the author of Future Luxe: What’s Ahead for the Business of Luxury (2020) and The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun (2014).