Profile
By Sara Germano
Nike Inc. this week begins selling a pricey sneaker with
self-tying laces, a high-stakes test of the company's technology
investments and efforts to sell more products directly to
consumers.
Since its founding, Nike has predominantly been a wholesaler.
But as shopping shifts online, Nike is moving to lessen its
reliance on retailers. It wants to double its direct sales to
consumers to $16 billion by 2020, particularly as rivals Adidas AG
and Under Armour Inc. have become more competitive in recent
years.
That is where the self-lacing $720 HyperAdapt sneakers play a
role. The company is offering the shoes exclusively on its
relaunched Nike+ app and at a new retail store in New York City,
beginning on Thursday. The idea is to hook consumers into buying
via its app or visiting Nike stores for limited-edition sneaker
releases, which to date has been a near-weekly phenomenon at Foot
Locker and other retailers.
The move could put the squeeze on an already consolidating
sporting goods retail industry, analysts say. Nike currently is the
single-largest vendor to big chains like Dick's Sporting Goods
Inc., Foot Locker Inc. and Finish Line Inc., accounting for 20%,
72%, and 73% of merchandise purchased, respectively, according to
regulatory filings.
"They have to be worried about it," said John Kernan, senior
retail analyst for brokerage Cowen & Co. He pointed to recent
efforts by Dick's to create some of its own products and provide
more shelf space to Under Armour and Adidas. Dick's didn't respond
to a request for comment.
Kasper Rorsted, the new chief executive of Adidas, said of the
self-lacing shoes, "I don't know if that's a save-the-world
product," but sales through mobile devices and apps will continue
to grow within the industry.
Asked for his perspective on the HyperAdapt launch, Foot Locker
CEO Dick Johnson said on a November earnings call that Nike has
"very limited peers in the marketplace" and has the bandwidth to
launch some of its product via its own retail channels.
The HyperAdapt release comes after a decade of changes within
Nike to expand into technology and consumer services.
"There was a moment of realization, when Nike people looked
around and saw everyone running around with an iPod, that was when
we knocked on the door of Apple," said Roberto Tagliabue, who was a
director of digital innovation at Nike from 2005 through 2009.
He oversaw the launch of the first Nike+ product, a sensor
placed in running shoes that synced with early iPods. The idea was
to keep customers communicating with Nike long after they left the
store.
Beth Sasseen, a recruiter who worked at Nike from 2007 to 2009,
said her focus was on finding tech-savvy talent who could help
develop more personalized products and software to better engage
with consumers. Nike "was trying to be ahead of the game," she
said.
Nike's push into tech wasn't without its setbacks. The original
Nike+ sensor evolved into a series of wristbands, including the
FuelBand, first launched in 2012. But it was discontinued in 2014
when the company decided to scrap hardware development altogether
and focus on software and apps.
Meanwhile, Under Armour purchased a suite of fitness-tracking
apps between 2013 and 2015 to create a network of more than 190
million users to market more shirts and shoes. Another fitness app,
Strava, is popular among Nike employees, who have recorded
thousands of runs around their Beaverton, Ore.,campus, according to
interviews with staffers and data from Strava's website.
Nike began upgrading training apps of its own, including Nike+
Run Club and Nike+ Training Club, which include coaching tips from
star athletes like Serena Williams and Ashton Eaton. The company
returned to the gadget market this fall with a swoosh-branded
version of the Apple Watch.
Mr. Tagliabue, who has since started his own Silicon Valley
design firm, said Nike operates differently than other tech firms.
"They cannot bring to market products that are not perfect" and
risk damaging the brand, he said. "At Nike, sometimes you can get
frustrated because things go slow."
Nike's digital sport team has spent roughly $100 million on
software products, including the new Nike + app, over the past four
years, according to a person familiar with the matter. The
department has also been hit by turnover, with some members
departing for Under Armour, Alphabet Inc.'s Google and others, the
person said.
Nike said it doesn't disclose spending figures. The company
announced in February it was naming Adam Sussman as chief digital
officer, shortly before the HyperAdapt shoes and new apps were
unveiled. Development on self-lacing technology began over a decade
ago, and today's HyperAdapts are intended to be the first version
of what Nike calls "adaptive performance" products.
So far, some Nike aficionados are excited about the futuristic
shoes, if not the price. Hunter Harpin of North Adams, Mass., said
he buys a pair of custom Nikes every year but the HyperAdapts just
aren't worth the extra cost.
"It takes me two seconds to tie my own shoes," he said, "so I
think I'd have a $200 limit on self-lacing sneakers."
Write to Sara Germano at sara.germano@wsj.com
(END) Dow Jones Newswires
December 02, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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