Nike Bear's Rebuttal
by Yi-Hsin Chang ([email protected])

Unfortunately, in life, we can't always have fairy tale endings. Unlike Ebenezer Scrooge in A Christmas Carol, Dale in our Nike Carol has not seen the light, has not sought redemption, and thus risks the same chained fate as Jacob Marley -- chained to a company that frankly has lost its edge.

As part of my research on Nike, I stopped by NikeTown on North Michigan Avenue when I was in Chicago over Labor Day weekend. Consistent with its "empowering" new "I can" slogan, the store's videos and T-shirts stressed messages such as "Courage, Commitment, Challenge" and "I want to be a player." Never mind being a winner. I remember an awesome Nike T-shirt in 1996 that said on the front, "Losing teaches you one thing" and on the back, "it sucks." That's the winning, kicking-ass-and-taking-names attitude that won Nike millions of loyal consumers worldwide. But somewhere along the way, Nike forgot its core values, and that's why it's looking less like a winner every day.

Dale is right to some extent that this company is about sports. Serious athletes will continue to buy Nike equipment -- or adidas or New Balance, depending on their personal preference. But the bulk of consumers that fueled Nike's growth in the last two decades were not athletes. They were ordinary Americans who sported Nikes, not on a track or field, but on the streets and sidewalks, as casualwear. If Nike shoe owners were actively involved in sports, this wouldn't be the most obese country in the world.

The truth is, Nike is all about fashion, all about image, as Andre Agassi pointed out. Nikes didn't make Michael Jordan; Michael Jordan made Air Jordans. If Nike weren't about fashion, why would the company come out with a new line of shoes every season as Ralph Lauren and Donna Karen do -- shoes in jazzy new colors but without any noticeable improvements in design and "technology"? Speaking of technology, several independent tests comparing Nikes with its competitors and even cheap no-name brands have shown that a Nike shoe is not significantly better. Phil Knight's brilliance was his marketing savvy, not a unique shoe design.

Another critical error was Nike's capitulation to politically correct fanatics who criticized the company's "unfair" employment practices in developing countries such as Indonesia and Vietnam. Instead of explaining the nuts and bolts of free markets, that what would be considered a low wage in the U.S. is in fact generous in emerging markets, that a coveted job at a Nike factory can vastly improve children's lives in these countries, Nike simply gave up and threw in the towel. Sadly, the FAQs, or Frequently Asked Questions, on Nike's website are almost completely devoted to answering political questions, not questions about its shoes or key endorsers such as Tiger Woods and Pete Sampras.

Nike isn't about to go bust, but this isn't the Nike we all knew and loved. Teens and young adults have cast their votes by switching to brown shoes. No matter how you crunch the financials, the numbers are getting smaller, and the stock's valuation is as overpriced as its out-of-fashion shoes that are stuck on the shelves at Foot Locker and Champs.

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