Nike: What Does AI Think?

I asked ChatGPT to conduct a critical appraisal of Nike's performance. Will writers in the future be judged not for their writing but for their ability to create great prompts? Answer below.

Oct 04, 2024

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Nike’s recent post-Covid struggles have been well-documented so, rather than re-hashing much of that, I conducted an experiment using my instance of ChatGPT 4o which is internet enabled via a Google Chrome extension.

That last part is important, not just because it hugely improves the response, but by listing its sources (see below) perhaps the very nature of SEO is changing, where the most critical thing will be to show up in ChatGPT source references?

That’s perhaps a topic for another discussion and for far more learned Generative AI experts than I, so for now, what did ChatGPT have to say? Read on to find out.

My prompt read as follows:

“You will write a 600 word appraisal of the reasons behind the decline of sales at Nike. This should include an analysis of Nike product innovation over recent years, changing consumer preferences and also an analysis of their competitors such as Adidas, On and Hoka. You will also look at its stores and direct to consumer businesses and suggest reasons why these are underperforming”.

This is what it had to say:

“Nike, long regarded as an iconic leader in the sportswear industry, has recently experienced a significant decline in sales. This decline can be attributed to various factors including a slowdown in product innovation, evolving consumer preferences, and growing competition from emerging brands such as On and Hoka. Additionally, Nike’s direct-to-consumer (DTC) pivot has not panned out as expected, further contributing to its struggles.

Stagnation in Product Innovation

One of the key reasons behind Nike's declining sales is the perceived stagnation in product innovation. Historically, Nike has been synonymous with groundbreaking products, from its Air Max technology to Flyknit. However, in recent years, critics have pointed out that the brand has struggled to introduce novel products that excite consumers the way its predecessors did [1]. With increased competition and a rapidly evolving market, the company’s focus on updating existing lines like Air Jordans and Air Force 1s has been seen as insufficient to sustain consumer interest. Instead of leading the innovation frontier, Nike has faced increasing pressure from more agile competitors that are offering unique and differentiated products.

Shifting Consumer Preferences

Consumer preferences have also shifted significantly, and Nike has struggled to adapt quickly enough. There is a growing trend towards health, wellness, and sustainability in the sportswear market. Many consumers are now looking for brands that not only offer performance but also align with their values, such as environmental consciousness and transparency in supply chains. While Nike has made efforts in sustainability through initiatives like “Move to Zero,” it still faces criticism for not being as proactive as some smaller, up-and-coming brands [1].

In addition, the rise of athleisure has changed the dynamics of the sportswear industry. Brands like On and Hoka, which specialize in high-performance yet stylish athletic shoes, have gained popularity by catering to this shift. They have captured market share through their minimalist design and performance-oriented footwear, appealing to consumers who value both fashion and functionality [2].

Competition from Emerging Brands

Nike’s dominant market position has also been threatened by growing competition. Smaller brands like On and Hoka have steadily increased their market share at the expense of both Nike and its long-time rival Adidas. On, known for its sleek design and lightweight running shoes, and Hoka, celebrated for its cushioned running shoes, have developed a loyal customer base, particularly among runners and fitness enthusiasts [2].

On and Hoka's success lies in their targeted approach. While Nike has attempted to cater to a broader audience, these brands have carved out niches in the performance sector. Their focused innovation, particularly in specialized running shoes, has resonated with consumers who prioritize quality, comfort, and performance.

The Struggles of Nike’s Direct-to-Consumer (DTC) Pivot

Nike’s decision to prioritize its DTC model, largely through its digital channels and own stores, was meant to reduce reliance on traditional retail partners. While this strategy aimed to drive growth and enhance profit margins, the execution has not gone as smoothly as anticipated. Many consumers still prefer in-store experiences for trying on shoes and apparel, making a complete shift to digital less effective. Additionally, as other competitors have also ramped up their own DTC strategies, Nike’s digital pivot has not provided the competitive advantage it sought [5].

Moreover, the DTC approach has alienated some of Nike’s long-time retail partners, causing a disruption in sales channels. By scaling back its presence in third-party stores, Nike limited its accessibility to customers who still prefer shopping through those outlets. In the meantime, competitors that maintained strong retailer relationships have gained traction.

Retail Store Declines and Cost-Cutting Measures

Nike has also been dealing with underperformance in its physical stores. Despite efforts to integrate technology into the retail experience, including digital touchpoints and customized services, foot traffic has remained underwhelming. Nike’s stores have failed to attract the numbers they need to counterbalance the shift towards e-commerce, particularly in post-pandemic retail environments where foot traffic has not fully recovered [4].

This decline in retail store performance, combined with overall lower revenue, has forced Nike to cut costs. The company has announced plans to reduce expenses by up to $2 billion over the next three years, targeting operational efficiency, supply chain management, and marketing. However, while these cost-cutting measures are intended to fuel future growth, they also suggest that Nike is still struggling to stabilize its business amid current challenges [5].

Conclusion

In summary, Nike’s recent sales decline can be attributed to a combination of internal and external factors. A perceived lack of product innovation, changing consumer preferences, intensified competition from smaller, more agile brands like On and Hoka, and an ineffective DTC strategy have all played a role in the company’s struggles. While Nike remains a dominant force in the global sportswear market, it must address these challenges through reinvigorated innovation, better alignment with evolving consumer demands, and more strategic execution of its direct-to-consumer model to regain its stride”.

And in answer to my question posed at the very beginning of this piece? What, of course, I’ve learnt, is that whilst ChatGPT does an amazing job of curating, condensing and presenting masses of information, it is doing just that.

In my (albeit embryonic) view, there is nothing new or uniquely created in any of the above, that remains the preserve of the original writers and content creators. And long may that remain the case.

Andrew's Retail Reflections

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