Friday, December 12, 2003

Basketball sneakers and convergence In the market sub-segment of basketball shoes, Nike is the champion, with a market share of over 60%. That's not a small category. It represents $500 million a year. But rivals Adidas and Reebok see an opportunity to make inroads into Nike's dominance. Nike's problem is, in part, the lack of the right superstar endorser, according to a Wall Street Journal article, "A New Game for Reebok and Adidas," 12/5/2003). Michael Jordan built the Nike brand and created a whole new way of marketing high-cost sneakers. But Jordan retired (again) last year, and Nike's looks a little vulnerable for the first time in years. Adidas (with 20% market share) and Reebok (15%) are taking their marketing campaigns out of Nike's playbook. All three companies have signed basketball superstars to multi-million dollar contracts, and have launched extensive campaigns to promote branded sneakers, Reebok has Allen Iverson, Adidas has Tracy McGrady, and Nike now has 18-year old LeBron James, just to mention the biggest names. These athletes appear in barrage of ads all touting the street credibility of the endorsers. The cost of the endorsements and the TV ads together make for a giant investment by all three companies. According to the WSJ article, sports-marketing consultant "figures Nike will have to sell an extra 4 million pairs of shoes just to cover James's seven year, $90 million contract. Throw in the marketing budget and it's closer to 80 million pairs." The other companies face similar problems. This tight oligopoly is certainly a competitive one, but it's one dominated by only three companies, and those three are converging, as the #2 and #3 companies try to beat the leader by imitating it as much as possible. Their products have been pretty much interchangeable for years; their marketing is now converging too. 7:34:47 PM

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