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Nike Shares Fall; Backlash Over Colin Kaepernick Ad Deal Flares Up



Is there business logic for Nike embracing Colin Kaepernick? I think there is, for the NFL and athletic shoe business are very different.

In the conservative blogosphere, on Fox News, and among my friends, the name of Nike has been forever damaged by the brand’s embrace of Colin Kaepernick, who sparked the widespread disrespect for our flag by NFL players kneeling during the National Anthem.  Pictures and videos of Nike gear burning already are proliferating among the outraged:

Given the damage that the NFL has suffered from failing to confront players over their disrespect, many are wondering how on Earth Nike could be so stupid.

But I suspect that this was a calculated decision, not an impulse based on the ideology of the CEO.  Successful companies the size of Nike (2017 sales of $34 billion, 74,400 employees) closely analyze serious decisions such as selecting Kaepernick for a very visible endorsement.  Focus groups, survey research, and a close analysis of which demographic slices buy which products, with what profit margins, almost certainly preceded the decision.

I strongly suspect that Nike’s most lucrative target market is young males, particularly urban youth.  Among many young people, athletic shoes have become a way to signal one’s identity and affiliations, and having the “right” shoe can be worth hundreds of dollars more than an alternative shoe that does the functional job just as well.  A good comparison can be made to wristwatches, which at least before the rise of cell phones were an opportunity to signal one’s level of affluence and taste.  An accurate wristwatch can be had for a few dollars, but people are willing to spend thousands of dollars on something from Switzerland with a famous brand name and maybe some precious metals and stones.

Nike has recently been losing ground to Adidas.  The endorsement power of Michael Jordan for the Air Jordan line of shoes had been hugely profitable, but that power is fading:

Charles Robinson, NFL reporter for Yahoo News, tweeted out that Nike faced competition for Kaepernick’s continuing endorsement:

My guess is that Nike was worried that a rival like Adidas would jump on Kaepernick as a weapon to use against Nike, painting it as a has-been company stuck in the era of Michael Jordan’s NBA career.  Its niche among young African-American style-setters might be the most profitable element in the entire company, and Nike feared its loss.

Now, it’s quite possible that Nike miscalculated, and that boycotts and burnings by the sort of people like me who don’t spend a lot of money on the latest athletic shoe or wear will cost it more than it would have lost by letting Kaepernick power a rival’s gear with his endorsement.  But for good reason, Nike doesn’t care what I think about its image, because I think it is stupid to pay a lot of money for a brand image or an endorsement by an athlete.  I am not Nike’s kind of customer.

In pre-opening trading, Nike’s stock price is down 2:31% at 8:19 EDT. (American Thinker)



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