How Nike’s Smartest Move Became Its Biggest Mistake

Añadido: 2026-05-05

[00:00:00]You know, there was a time when Nike did not need to convince anyone to buy their shoes. You walked into any sports store anywhere in the world and the first thing that you would see probably would be a Nike. Nike was not just the biggest sportswear brand, it was almost like the default sportswear brand. But something has gone very, very wrong. Since its peak in 2021, Nike's market valuation has gone down from around 280 billion US dollars to now just around 60 billion dollars. And you know, while Nike has been falling, the brands that were once considered too small to even be cared about have now started rising. Hoka, a brand that most of us had not even heard about until 5 years ago, has now grown into a 10 billion dollar business. On running, which started as a small Swiss company, is now one of the hottest names in the running world. And even Adidas, which was going through its own crisis just about 2 years ago, has turned itself around and is growing once again.

[00:00:51]So, the question is, what exactly happened to Nike? How did a company with a 280 billion dollar valuation, 50 billion dollars in annual revenue, the biggest athletes on the planet, and around six decades of brand power end up in this position? That is what I will decode in today's video. I'll talk about three things. One, what did Nike exactly do to turn such a powerful business into almost a disaster? Second, why did Nike's strategy backfire on them? And third, how did smaller brands like Hoka and On Running capture the market share that Nike lost? I would love for you to watch this video till the very end because this story is a very big lesson for every person and every brand that thinks that simply running ads or removing intermediaries in a business is a shortcut to profitability. My name is Anurag Bansal and let's decode.

[00:01:42]Let's first quickly understand the rise of Nike. See, Nike started in 1964 when a runner called Phil Knight and his coach started selling Japanese running shoes from their car. By around 2010, Nike had become so big that it was generating around 20 billion dollars in annual revenue and they had some of the topmost athletes in the world under their sponsorship. But what made Nike truly special is not the money that they made, it was the kind of brand value that they had. See, if you think about it, Nike was never really a shoe company. It was basically a storytelling company that just happened to sell shoes. Every ad they made, every campaign they ran, every athlete they signed, it was all designed just to do one and only one thing, make you feel motivated. That's also, by the way, where their just do it slogan comes from. Now, on top of this brand power, Nike also had something else and this is where it becomes important. See, they had huge distribution. Nike shoes were available in almost every sports retailer and every neighborhood shoe store in the entire world. So, basically, Nike had this deadly three-part combination. First, a great brand story that attracted people.

[00:02:43]Second, great products that made the best people want their shoes. And third, a massive distribution which made sure that the people who wanted the product could buy it easily. That is the combination that made Nike untouchable and legendary for so many decades. But then, something happened, something that changed everything. See, in the early 2010s, Nike looked at its business and they asked a question, "Why are we sharing our profits with others?" See, a decent part of the way Nike's business worked was this. Nike would design and manufacture a shoe, they would then sell that shoe to a distributor, the distributor would then sell it to a retailer or a sports store, and the retailer would finally sell it to consumers like you and me. Now, at every step in this chain, everyone adds their own margins. So, if Nike, for example, makes a shoe for $100, by the time it passes through a distributor, a retailer, and finally reaches the consumer, the shoe is being sold for maybe $200. But Nike's cut out of that $200 is only maybe around, let's say, $120. The remaining $80 goes to the people in the middle. So, Nike looked at those $80 and they thought, "What if we sold the shoes directly to consumers ourselves? We could sell it for maybe $170 instead of $200, which is cheaper for the consumer and we could still make more money than we were making before."

[00:03:55]Now, that sounds like a great deal, right? That's what Nike also thought.

[00:03:58]So, in 2017, they made a massive, massive bet. They launched something called consumer direct offense strategy.

[00:04:04]Now, under this strategy, Nike started cutting most of their wholesale partners and they reduced their supplies to the rest of them. And to make this work, they also built an entire digital ecosystem. They made Nike Training Club for gym enthusiasts, Nike Run Club for runners, a sneakers app for sneakerheads, and the main Nike app for shopping. They also opened their flagship stores, built QR code scanning, personalized recommendations, and all of that stuff. Basically, the whole idea was to create a closed loop where the customer enters the Nike ecosystem but never leaves. Now, initially, it worked.

[00:04:35]Nike's D2C sales went from 16% of total revenue in 2011 to about 35% in 2020.

[00:04:41]During COVID, when everyone was stuck at home and shopping online, Nike's digital sales went absolutely crazy. In 2022, just their D2C channel alone generated 18.7 billion US dollars. To put that into perspective for you, Adidas's entire revenue that year was 24 billion dollars. Now, think about it. If you were sitting inside Nike's office at that time and you were looking at numbers on your Excel sheet, you would have felt like a genius. Sales were up, margins were up, app downloads were growing, and everything on the Excel sheet dashboard looked absolutely perfect and fantastic. But here is the thing about dashboards, they can only show you what is measurable. They can show you things like clicks, conversions, app downloads, revenue per user, and all of that stuff. But what they do not show you is what is happening outside your ecosystem. They don't really tell you if your brand is slowly becoming less visible, less present, and less default in people's lives. And that is exactly what was happening with Nike as well. See, when COVID ended and people stepped outside once again, they also started visiting offline stores. And that is exactly when Nike's strategy started falling apart.

[00:05:44]Three things went wrong. The first problem was the empty shelf. See, when Nike pulled its shoes out of wholesale stores, these stores still had shelf space to fill. Consumers were still walking in every day looking for running shoes. So, the stores started keeping other brands instead of Nike. Brands like Hoka, On Running, and New Balance saw this opportunity and they took very good advantage of it. And by the way, these retailers did not just casually put a few new shoes on their shelf and wait, they also signed contracts, they made inventory commitments, they set sales targets, and all of that stuff.

[00:06:14]And all of this was tied to these new brands itself. But there is another layer to this as well. See, when a retailer gives shelf space to a brand, they are not just displaying their products, they are also planning stock, order cycles, and they are building that brand into their everyday operations.

[00:06:28]So, once Nike stepped back and brands like Hoka and On came in, this stopped being just a branding opportunity, it also became an operational opportunity.

[00:06:36]Because the moment a retailer starts building inventory around you, you become much, much harder to replace. And that is exactly why inventory matters.

[00:06:43]Once a business starts scaling, poor inventory management can start breaking your growth from the inside. And that is where a tool like Odoo can actually help. Odoo is an all-in-one business management software that helps businesses streamline and simplify their day-to-day operations through a suite of 45 plus applications. If inventory is a headache in your business, Odoo's inventory app is very, very useful. It helps you organize your entire storage setup, warehouse management, and product routing so that items automatically go to the right locations through smart rules. It also gives you an intuitive dashboard to manage your orders and supply chain. You can also handle things like receiving, sorting, and transfers very easily while also tracking stock levels in real time so that you're not suddenly dealing with shortages or excess inventory. With accurate material forecasting and automatic replenishment, you can also manage raw material supply much more smoothly. And with the integrated barcode scanner, you can speed up day-to-day operations, you can reduce manual errors, you can make quality check smoother, and you can register stock into the system much more easily as well. Odoo's inventory also makes it really easy to trace any product from purchase to sale, monitor expiration dates, and optimize processes through methods like FIFO and LIFO. And the best part is that Odoo offers you your first application completely free for life for unlimited users. So, if inventory feels like a headache in your business, I would really recommend checking Odoo out. The link is in the description. Now, coming back to Nike, this is exactly why it became such a big problem. Because once the new brands got built into the retailer system, winning that shelf space back was never, ever going to be easy for them. So, if you think about it, within a very few years, the shelf space that once belonged to Nike now had new occupants and those occupants were performing well and they had no reason to leave. Now, think about this from the retailer's perspective.

[00:08:29]Nike ditched them voluntarily, then the new brands came up, cooperated, and helped them make money. So, even if Nike now comes back and says, "We want our shelf space back," why would the retailer ever care about it? The retailer's shelves are full with new brands and those new brands are even selling well. The second problem was far more damaging and it came from inside the company. See, while Nike was busy building apps and dashboards based on his new strategy, the focus on making great shoes went significantly down.

[00:08:55]I'll tell you how. So, in 2020, Nike hired a new CEO called John Donahoe.

[00:08:59]Now, he was a tech guy, not really a shoe guy. Before Nike, he was the CEO of companies like eBay and Bain. Now, the thing is, under him, Nike stopped organizing their internal employees under departments like running, football, basketball, etc. Instead of that, they actually restructured everyone into generic groups like men's, women's, and kids. So, basically, Nike then started behaving like any other fashion brand in the world and the innovation that made Nike Nike started to slow down. And to make things worse here, while Nike was optimizing for dashboards and conversion rates, Hoka and On Running were actually focusing on building newer and better products. And they showed up in their results as well.

[00:09:36]Hoka, for example, went from sales of 154 million dollars in 2018 to 1.8 billion dollars in 2024. And they grew by filling that exact gap which Nike left behind. So, that was the second problem. The third problem was actually China and what's funny is that this one was not even Nike's fault entirely. See, the thing is, Nike used to completely dominate in China earlier. To give you numbers, China contributed nearly 20% of Nike's total revenue at Nike's peak in around 2021. But since then, it has been an absolute free fall. Why? Mainly because young Chinese consumers started preferring domestic brands. There is actually a movement in China called Guochao, which is basically a wave of nationalistic pride, where homegrown brands are now seen as culturally cooler than Western imports. I've actually made a very interesting video on this in the past, so if you're interested do check it out. I'll leave a link in the description. But anyway, this movement was so large that in 2022, the Chinese sportswear brand Anta actually overtook Nike to become the number one sportswear brand in China by revenue. So basically, after all of these three problems, by September 2024, the situation for Nike had become so bad that John had to step down as CEO. Nike then brought back a man called Elliott Hill as the new CEO.

[00:10:49]Now the thing is, Hill is the exact opposite of John. He joined Nike as an intern in 1988, and he spent 32 years at the company before he took retirement.

[00:10:58]So he knows the product, the athletes, the retailers, and the culture that once had made Nike the great brand that it was. So his plan is to now get Nike back to sports, build wholesale relationships, and start innovating once again. But the honest truth is that the damage done to Nike is very, very deep.

[00:11:15]The shelf space is gone, the competitors are stronger than they have ever been, and Nike is no longer the biggest brand in a massive market like China. If you think about it, Nike was one of the most legendary brands in the world, but they got so obsessed with what their dashboards were telling them that they stopped doing the things that made those dashboards look good in the first place.

[00:11:33]They traded long-term brand strength for short-term margin efficiency, and by the time the numbers showed the reality, the damage was already very much done. And honestly, that is a mistake that most other businesses also end up making.

[00:11:45]They run behind performance ads and short-term victories, while completely forgetting about the fundamentals of what makes their brand great in the first place. That's all from my side today. If you enjoyed this case study, please do consider subscribing to my channel, because it keeps me motivated to make more such videos for you. I'll see you in the next one. Take care.

[00:12:03]Bye-bye.