Global sportswear giant Nike is facing recessionary problems after a series of strategic missteps. The company’s recent earnings report saw $25 billion of its shares wiped off the market in a single day, underscoring the severity of the situation.
In a LinkedIn post, Massimo Giunco, Nike’s former chief marketing officer for more than 20 years, outlined the challenges the brand is facing. Giunco attributes Nike’s current predicament to 2020, when CEO John Donahue and President of Product, Brand and Customer Heidi O’Neill proposed a radical transformation.
According to Giunco, the cause comes from an over-focus on the direct-to-consumer sales model and a shift in marketing strategies to focus on digital approaches based on customer data.
While these decisions initially showed promise, over time fundamental flaws in Nike’s new operating model were revealed.
The shift to segmenting the category by sport has cost Nike important expertise, leading to a lag in product innovation. Additionally, the emphasis on DTC, especially e-commerce, has strained relationships with wholesale partners and inadvertently ceded market share to competitors.
This shift is evident in the marketplace, as consumers increasingly gravitate toward newer athletic shoe brands like On Running, Hoka, New Balance, and Asics. Just walk into any music festival or casual gym and you’ll see that Nike’s once ubiquitous presence has waned significantly, signaling that its dominance is under threat.
Additionally, Giunco argues that Nike’s brand-building capabilities have been undermined by an overemphasis on digital marketing and sales, leading to an overreliance on promotional strategies and eroding brand equity.
This setback has had serious financial consequences, with Nike’s gross profit margin falling from 46% in 2022 to 43.5% in 2023.
Despite these challenges, Nike still retains key advantages such as strong brand recognition and high profitability. However, Giunco notes that it will take time and investment for the brand to regain its product leadership, market influence and consumer appeal.
