Scoring Points in a League of Its Own – Nike – Brief Article

Terry Lefton

Nike uses its size to outmuscle the competition and gain market share.

Nike’s licensing efforts started purely as a way to get the Swoosh TV exposure through its appearance on pro sports uniforms. Now, with so many licensing brands folding up like cheap tents, the most remarkable thing about Nike is that it may end up being the biggest license apparel company–simply because everyone of any size will have fallen by the wayside. Nike’s size and legendary marketing muscle (its ad budget is bigger than all of its licensing competitors’ total revenue, except for VF Corp.) always alarmed licensing companies who maintained that their economic model was different from a shoe company that merely depended on licensing as an advertising vehicle.

“They are in the exposure business. I’m selling licensed apparel,” said Tom Shine, founder/co-chairman of Logo Athletic.

A year ago, Nike decided that even if it couldn’t make money in licensing immediately, it could do a better job of leveraging its athletes and teams, which include some of the most powerful marks in sports: the Dallas Cowboys and Los Angeles Lakers, and college squads like Duke, Kentucky and North Carolina. “We looked at the assets we had and decided we could do a lot better job if we focused solely on licensing,” said Mark Hampton, president of Nike Team Sports, a wholly-owned subsidiary composed of what were the Sports Specialties and Organized Team Sports units.

A year in, NTS gets better than passing grades. “Coming from where they did, they are swimming upstream a little, but I think they are figuring it out,” said Ian Gomar, vp-marketing at Champs. “Very few people realize how complex a business licensing has become because of the regionalization and chase aspects of the business. But they are committed and they’ve already come a long way.”

Nike’s historical strength in product innovation finally showed up in its licensed togs. Using its prominent National Football League sidelines slot expertly this past season, NTS’ retro varsity jacket sold out; the “ligature” cap was another huge seller. Consumers buy licensed sports apparel primarily on the basis of team first, and so Nike’s efforts are a test of whether one of the world’s strongest brands and some better fabrications makes a difference to consumers and the trade. “We’ve got a strong brand to position with the consumer and retailers, better fabrications and we’re big enough to be able to hang around until prices do stabilize, which I think you’ll start to see this fall,” said Hampton.

Leveraging its size, NTS will continue its share game. For now, top Nike execs don’t expect profitability from NTS as much as a better return on the huge investments they’ve made in getting the swoosh on field. At retail, NTS will continue to avoid the mass merch “marts” in favor of upstairs distribution. Of course, the biggest problem with sports specialty stores is that they have either disappeared, like Just For Feet, or drastically cut back their licensed assortment, like Foot Locker and JC Penney. The development of a sub-brand, SPL 28, has allowed Nike to take fan wear to mid-tier stores like Sears and Kohl’s. “For the industry it was a horrendous year, but for our first year we’re OK. I think the industry has seen the bottom and is coming back up,” said Hampton. “Our product assortment is good and we’ll continue to gain share as the market consolidates. I can look at a big customer in the eye and tell them we’ll be around next year. If you look at the financial condition of most of the competition rig ht now, I’m not sure how many of them can say that.”

Nike’s boldest play yet–a proposed venture with the NFL for a total exclusive with no rights fees, nor guarantees–may be the deal that asks for too much too soon. The NFL has apparently nixed the idea and is talking to rival players.

What’s the big idea? Going beyond on-field exposure and taking advantage of the carnage in the market to become one of the biggest companies left in licensed athletic apparel.

What’s ahead? A new MLB license (off-field), increased fixturing and POS. Expansion into kids’ offering and possible segmentation against female consumers.

COPYRIGHT 2000 BPI Communications, Inc.

COPYRIGHT 2000 Gale Group

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