How Nike Lost Its Way

Nike, headquartered in Beaverton, Oregon, is currently facing significant challenges despite its historical dominance in the athletic shoe market. The company, which operates from a sprawling 400-acre campus, is experiencing a decline in market share due to bungled product launches and a failure to innovate. While 67% of Nike's revenue comes from shoes, it's crucial to understand that Nike does not own or operate any shoe factories. Instead, its business model is more abstract, focusing on design, development, worldwide marketing, and selling of athletic footwear, apparel, and accessories. Phil Knight, the company's founder, defines Nike's business as inspiring and innovating for athletes, emphasizing its role as a "taste maker" rather than a shoe maker. Shoes, beyond their utilitarian purpose, are powerful tools for self-expression and perception. Research from the University of Kansas indicates that footwear alone can reveal a person's age, gender, income, personality traits, and even political leanings. Consumers recognize this and make shoe choices to cultivate an image or tell a personal story. Nike's historical success was built on its ability to be a master storyteller through its products. The company's rise is intrinsically linked to figures like Steve Prefontaine, a legendary distance runner from Oregon. Before Nike became a global giant, it was a disruptor, with founder Phil Knight importing Japanese running shoes. Prefontaine, who ran for the University of Oregon under coach Bill Bowerman (also a Nike shoe designer), embodied the brand's early spirit. He was not only a talented athlete but also a charismatic, working-class kid who resonated with the American public. His "GO Pre" t-shirts were immensely popular, and he became a national star while wearing Nike. Prefontaine actively promoted Nike shoes at events, demonstrating them to high school and college programs, and sending them to friends and rivals globally. Nike, mirroring Prefontaine's brash spirit, also pushed boundaries with its shoe designs. The Nike Cortez introduced midsole cushioning, followed by the lightweight and grippy Waffle Trainer. Although Prefontaine tragically died before wearing his signature shoe, the Pre Montreals, his spirit fueled a movement. Title IX and televised track events spurred a running boom in the 1970s, with millions of new runners seeking to emulate Prefontaine by wearing Nike. This revolution transformed the American shoe landscape, making trainers acceptable for everyday wear. By 1979, athletic shoes accounted for one in four pairs sold, and by 1980, Nike held 50% of all running shoe sales in the US. The success with Prefontaine established a growth model for Nike: identify a trend, find an athlete who embodies it, and then leverage that connection to create demand. However, fashion is fickle. In the 1980s, urban culture shifted, and basketball shoes replaced jogging shoes as the "cool" footwear. This caught Nike off guard, leading to its first losses in 1984. To regain its footing, Nike turned its attention to a promising young basketball player: Michael Jordan. Signing Michael Jordan was a bold move. Jordan was not the first draft pick, and his position was not yet synonymous with basketball dominance. Nike, lacking a strong presence in basketball shoes compared to competitors like Converse and Adidas, needed a daring strategy. They combined bold design with an innovative marketing campaign. NBA rules at the time required basketball shoes to be 51% white. Nike deliberately created a flashy, colorful shoe for Jordan, knowing it would incur a fine but generate immense visibility. In 1984, rookie Michael Jordan wore these rule-breaking shoes, and Nike paid the $5,000 fine. This move was a stroke of genius. The message was clear: this was not just a new favorite player's shoe, but a radical, counter-culture product banned from the very game it was designed for. The Jordan 1 sold out immediately, generating $126 million in its first year. Nike replicated this playbook across various sports: Tiger Woods in golf in the 90s, Serena Williams in tennis, and Ronaldo in soccer in the 2000s. By backing "mold breakers" and embodying an "up-and-comer" attitude, Nike became the world's biggest sportswear company. Its slogan, "Just Do It," resonated with customers. However, a fundamental problem emerged: maintaining a "scrappy underdog" identity after becoming an industry leader. This struggle is evident in Nike's recent performance. For example, the 2026 Winter Olympics will see Team USA in Nike's All Conditions Gear (ACG) sublabel, a brand that lacks widespread recognition despite its historical significance. This highlights Nike's fumbles over the past two decades. The running shoe market has evolved, with trail running shoes, a rugged off-road option, experiencing a significant surge in popularity. While they constitute a smaller fraction of total running shoe sales (12% in 2022), their projected annual compound growth surpasses conventional running shoes. Trail runners, like trainers and basketball shoes before them, have transitioned into casual fashion. Brands like Hoka, known for maximally cushioned trail shoes, and Solomon, with its rugged mountain running shoes, have gained traction among consumers, including Gen Z in urban environments. This broader trend, known as "Gorpcore," has led to outdoor brands and their Gore-Tex offerings influencing urban fashion. What's particularly glaring is that Nike, which launched its first trail shoe in 1984 and ACG in 1988, helped establish this trend but failed to capitalize on it. Nike was a visionary in trail shoe technology, blending hiking boot treads with running shoe uppers and infusing the outdoor space with its signature brashness and color. However, in the 2000s, the ACG branch was neglected. This lack of follow-through and vision became a recurring theme. In 2000, Nike held a dominant 42% of the athletic shoe market, outpacing its next three largest competitors combined. By 2022, even with the Jordan brand, its market share was 36%. While still strong, this figure doesn't account for momentum. Brands like Hoka, New Balance, Saucony, Puma, ASICS, Brooks, and On are aggressively innovating in specific niches, particularly in the specialty running market, effectively out-innovating Nike. In specialty running shops, where educated staff cater to runners, Brooks and Hoka account for almost half of sales, while Nike, which has de-emphasized in-store sales and running across the board, holds less than 5%. Nike has been surpassed in key categories. In "speed," once dominated by its Vaporfly line, Adidas has caught up, and Puma has surpassed it in lab performance. In "comfort and cushioning," concepts Nike pioneered, it has been overtaken by Hoka's maximal support and Brooks' corrective shoes, which are popular not only with runners but also for professions requiring long hours on one's feet. Even in bold design, Nike has been outshone by On Running, a Swiss brand known for its eye-catching and comfortable "cloud tech." On's origin story, with its founder Oliver Bernard creating a new shoe to address Achilles pain after Nike rejected his idea, mirrors Nike's early disruptive spirit. Nike's decline in running can be attributed to a decade spent "putting out fires." In 2004, the company brought in an external CEO, William Perez, whose focus on present sales rather than future innovation set Nike back. Although succeeded by Nike lifer Mark Parker, the company faced scandals, including Tiger Woods' marital issues (2009) and Lance Armstrong's doping (2013), which forced it into PR defense mode. Even within its innovation efforts, such as distance running, scandals erupted. Alberto Salazar, a central figure in Nike's distance running project, faced doping allegations, a ban, and abuse accusations from athletes between 2015 and 2019. Simultaneously, Nike was hit with a sexual discrimination lawsuit alleging a "boys club" culture. These scandals ultimately led to Parker stepping down. With a tarnished reputation, Nike looked backward, bringing in John Donahoe as CEO with a mandate to build its digital footprint. Donahoe "played the hits," focusing on direct-to-consumer sales during the pandemic and leveraging the popular Michael Jordan documentary to push Jordan and Air Force lines. While sales temporarily boomed, innovation flatlined, and relationships with wholesalers soured. Nike ceded shelf space just as in-person shopping rebounded. The company experienced its worst day in 2024 with a 20% stock drop and reported its worst fall revenue in 2025 with an 11.5% year-over-year decline. Nike had lost its plot, relying on past successes rather than innovating for the future, and losing consumer trust. However, with Donahoe's departure and Elliot Hill, a long-time Nike employee, now at the helm, there's cautious optimism. Hill is pushing for a return to wholesale partnerships and has been actively mending relationships with major sports figures and brands. The relaunch of ACG has also provided a boost. Time will tell if these efforts can rebuild consumer trust and if Nike can rediscover its competitive fight.