News & Analysis

Just Do It: Kaepernick Secures Nike’s Financial Future

merlin_143309763_7da918ed-2d47-451b-ab54-85d84d751849-superJumbo.jpgA billboard on top of the Union Square Nike store features the former 49er’s quarterback Colin Kaepernick. Photo: Eric Risberg/Associated Press

After Nike Inc. announced on September 3rd that Colin Kaepernick is the face of the “Just Do It” 30th anniversary marketing campaign, many customers set their sneakers aflame in protest of the company’s decision and proudly posted videos of the destruction on social media with “#boycottnike.” Many question Nike’s decision to partner with a controversial activist in Kaepernick, but frankly, this business decision is exactly what Nike needs.

The global shoe and athletic wear market is shifting. Adidas in particular is rapidly gaining market share through their recognizable three stripe logo and partnerships with headliner athletes and celebrities, such as Lionel Messi, James Harden, and Kanye West. In Q3 of 2017, Adidas posted a 31 percent increase in North America revenues, while Nike and Under Armour slid 3 and 5 percent, respectively. This trend has continued into 2018 as Adidas posted a 23 percent increase Q1 compared to Nike’s flat revenues.

Nike has gained a reputation for not caring about social issues, especially with their abominable working conditions and dreadful pay for factory workers in developing countries.

Launched in 2008 in response to a PR crisis, the Girl Effect campaign seeks to inspire the world’s most influential leaders to incorporate girls’ needs into the global development agenda and end female poverty. Despite Nike leaving their stamp all over the global anti-poverty movement, they have neglected their own workers. Nike has 75 factories under contract in Vietnam with roughly 80 percent of the workers being women and girls with some as young as 16 years old, per the minimum working age under Nike’s Code of Conduct. In a 2016 article for Slate, 8 years after the new campaign was launched, Maria Hengeveld interviewed 18 women working at 5 different Nike factories outside of Ho Chi Minh City, Vietnam. All 18 “reported pay so low they could not even meet the basic needs of their families, let alone save money or contribute to their communities.” The women also reported that they are constantly harassed and abused in their workplaces and strongly discouraged from speaking their opinions.

Critics of the recent Kaepernick marketing campaign cite these issues as evidence that Nike is insincere towards social issues and is one of the “systems of oppression” that Kaepernick kneeled against. Those that have voiced out against Nike have generally been older conservatives. For Nike, this demographic is practically meaningless. In recent years, Nike has made a conscious effort to attract a younger, more diverse customer base through endorsements and targeted advertisements, such as their “more than an athlete” and “equality” campaigns. These marketing campaigns have diversified their consumer base and attracted young people of color, especially, to purchase their products. The Kaepernick marketing campaign angers an ever-shrinking portion of the U.S. market that Nike cares little about.

In the current hyper-political culture, the videos of burning sneakers on Instagram and an early morning tweet from President Trump can be significant, if not constructive, brand attention. People are obsessed with outrage these days, and so Nike simply decided to feed consumers exactly what they want. The notion that Nike didn’t expect the outrage on social media or that their stock may drop a few points is small-minded indeed.

From a financial perspective, Nike has already benefited from their new marketing campaign. Online sales are up 31 percent compared to 17 percent for the same period last year. Nike lost $4.16 billion in market capitalization on the day that it announced the marketing partnership but has since seen the stock price return to previous levels; analysts at Wedbush Securities, optimistic about Nike’s future outlook, have raised their target price from $85 to $90. The marketing campaign has showered Nike free publicity and air time; Apex Marketing Group estimates that the first day’s attention alone was worth $163 million.

Regardless of one’s personal opinion on Colin Kaepernick, history has already determined that he will be remembered as an activist who attempted to stand up, or kneel down, for race inequality. Nike took a calculated risk that, for now, appears to be paying off.

Categories: News & Analysis

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