Hi! Welcome to Tsinghua Fimorning. Today is March 4th, 2019. We will talk about how Duke star player Zion Willamson’s injury affects Nike’s stock price.
On Feb 20th, when one of US college basketball’s fiercest rivalries, the one between Duke University and University of North Carolina (UNC), just began 33 seconds, star player from Duke, Zion Willamson, sprained his left knee in a bizarre way. He got his shoe, Nike PG 2.5, split up and “exploded”. According to USA Today, on Feb 21st, Nike’s stock price was down for more than 1%. Nike is a company with $130 Billion market cap, which means that’s more than 1 billion dollars’ loss.
Nike, Duke’s shoe partner, called the explosion an “isolated incident”. “We are obviously concerned and want to wish Zion a speedy recovery,” a Nike statement said. “The quality and performance of our products are of utmost importance. While this is an isolated occurrence, we are working to identify the issue.”
Why Nike suffers such backlash?
I. Unreliable Product Quality
The mishap is "a major brand failure" for multiple reasons, according to brand expert Mario Natarelli, managing partner at the MBLM agency in New York. The incident was a “very visible shoe structure failure for a company committed to performance and technology of its products.” The incident isn't Nike's first with its basketball products. Multiple players including LeBron James had their jerseys rip after Nike took over as the official NBA uniform supplier in 2017.
Since Nike always builds its reputation around creating premier shoes and clothes for athletes, this case definitely had negative impact on the brand. Even if athletes were offered specifically designed and manufactured products, they couldn’t avoid equipment damage in a game. Consumers could rarely trust Nike products to provide them with safe and comfortable experience when sporting and exercising.
II. A Slim Chance to Sign Zion
The brand value of a superstar is undeniable, and Zion is the most highly-anticipated basketball prospect in recent memory. Once he is picked as a high-ranked rookie in the NBA draft this summer, many believe his sneaker endorsement deal will be one of the largest one in history. Brands will look at a player’s influence, skills and geography. However, most importantly, brands will consider the intangibles like personal values. Statistics including 6-feet and 7-inch height, and astounding 285-pound weight, more than 2 million Instagram followers have proved something for his possibility either on court or in market. What Zion may bring to a brand is unknown yet, while Nike could have lost Zion’s trust as no professional player will risk his career to sign a large contract, even though Nike’s bid may not be the most attractive one.
Nevertheless, some analysts still held optimistic views, believing that Nike is a massive brand and has tremendous power. “Zion’s injury is embarrassing for Nike, but will have no material impact on the business,” said Matt Powell, analyst at NPD Group. “If they’re smart, they’ll reach out to Zion and have him wear their shoes again.”
Nike's Ad on its Official Website
In response to market trend, Nike has reduced its dependence on high-top basketball sneakers for growth in recent years. It has instead focused on lightweight running and wear-to-work shoes. Nike’s basketball sneaker sales fell last year as consumers move away from performance sneakers to more casual and comfortable shoes. "Basketball shoes are not in fashion,” Powell said. “Athleisure footwear is in style.”
Thank you for listening to Tsinghua Fimorning. Hope you have a nice day!