Byline: Rosemary Feitelberg / With contributions from Katherine Bowers, Los Angeles

NEW YORK — Nike is trying to rev up its $9 billion business with a dose of the irreverence that made the brand a powerhouse in the mid-Nineties.
It’s hoping to get there with some new key hires, a more diversified marketing strategy, a new women’s division and the launch of the Shox label.
Last week, the company tapped Mindy Grossman to head up its $2.7 global apparel business and Robin Lanahan to serve as director of marketing. Two months ago, Nike founder and chairman, Phil Knight, gave the nod on a beefed up marketing budget to 19-year Nike veteran Claire Hamill, to oversee its new women’s division.
Now the company is trying to dress up its women’s apparel with more stylish and colorful items. The brand’s first yoga collection ships to stores in December, and activewear with sewn-in compartments for Nike personal electronics, such as an MP3 player, will be in stores for holiday selling.
In an effort to widen its customer base, Nike is reaching out to a greater variety of people, especially teenagers and nonathletic types. The company’s annual report adheres to that. A marked departure from other annual reports, the new one has a cover shot of Guillermo Copado Leos, a tough-looking 16-year-old boy. Mixed in with the report’s financials, are snippets about Leos and three other young “everyday” athletes, peppered with personal information, photos and their insight about the brand.
Take Candice Bauchman, a triple jumper, who describes her daily routine and hankering for Destiny’s Child in a Q&A with cartoonish graphics. The report also has a full-page shot of Ken Oshato, a surfer, wearing headphones in a music store.
Margaret Mager, a footwear and apparel analyst at Goldman Sachs, liked the pitch.
“That’s their core customer — that’s what they should be doing,” she said.
In his letter to shareholders, Knight trumpeted, “The consumer rules the roost. They make the important decision. I answer to them, as we all do. The opinion of Wall Street analysts and media pundits are really derivatives of our relationship with our consumers.”
Young consumers — especially female ones — seem to be responding, with the brand earning higher approval ratings from style setters, according to Jane Rinzler Buckingham, president of Youth Intelligence.
“It feels like Nike is getting the right buzz in the right way versus their saying, ‘We’re big. We’re Nike. Buy our shoes.’ It’s starting from the street up rather than the top down,” she said. “It’s almost as though the consumer had to punish them for being so big and omnipresent, and now they’re ready to re-embrace them.”
Nike is trying out some new meet-and-greet opportunities. Two weeks ago, the company hosted a crowd of 2,000 at the opening night party for “Hip Hop Nation,” an exhibition running at the Brooklyn Museum of Art through the end of the year. The Cold Crush Brothers and LL Cool J performed at the party.
In August, Nike staged a “Ruff, Rugged & Raw” fashion show on an outdoor basketball court in lower Manhattan. Instead of Nike’s standard routine of having models jog down makeshift runways, this summer’s event featured a deejay spinning hip-hop and house music as break-dancing models performed.
This summer, to appeal to more electronic-minded consumers, Nike “street teams” covered Manhattan passing out CDs “burned” with cartoons and techno music promoting its new Air Presto sneakers, said Kevin Umeh, chief executive officer of Element, a youth-oriented market research and consulting firm. Umeh said Nike’s popularity with women between the ages of 13 and 30 has increased in recent months.
“They relied on the big blitz for a long time. But to capture the youth market and to be relevant to them, you have to take it down a notch, focus on their community and in their language,” he said. “They’re trying to build credibility for the brand at the grassroots level. That can be reinforcement for mass advertising. It’s hard to build credibility for a brand through mass advertising.”
Nike is hiring a city marketing manager, a new post based in Manhattan. Handling local marketing including grassroots efforts will be a key responsibility. Getting a grip on the New York-market, which generates the highest amount of activewear sales in the U.S., is a priority, according to Hamill. New York is one of a handful of cities that Nike is focusing on to try to build sales, she said.
For the fiscal year ended May 31, Nike’s U.S. apparel sales slipped to $1.15 billion from $1.4 billion. But Mager of Goldman Sachs said Nike’s apparel business seems to have “bottomed” out, with orders up modestly for the second consecutive season.
Nike’s women’s worldwide division generates about $1.4 billion in revenues globally, and accounts for 20 percent of Nike’s U.S. business. Bolstering retail space, offering more wearable technology, shipping new merchandise every 10 months, coordinating apparel with footwear and equipment, and “significantly” increasing advertising and point-of-sale material are part of the new plan, Hamill said.
Following last month’s annual meeting in Portland, Ore., Hamill said, “We’re paying much more attention to trends and color direction. We’re also working with our accounts to increase the amount of floor space given to women’s products.”
Hamill said that the company will be boosting the number of women’s concept stores from 67 to 200 by the end of 2001. Freestanding stores for women are also being considered.
During a phone interview Monday, Hamill said Nike plans to increase women’s products from one floor to two floors in select NikeTown stores, and to establish women’s floors in those that don’t have them. Nordstrom, Galyan’s Trading Co., The Sports Authority, CitySport and The Finish Line earned high marks from Hamill.
“We’ve definitely got some leading retailers stepping up. People are looking to do more,” she said. “They want it to be their industry and not have the fashion industry defining it.”
But John Shanley, senior vice president of First Security Van Kasper, said Nike “doesn’t have a lot of friends in the retail community,” due to its limits on production runs, exclusivity deals and practice of pulling product out of the market to drive up retail price points. Given that, last week he lowered the company’s rating to “buy” from “strong buy.”
“From a shareholders point of view, they’re doing what they should be doing. But retailers said there’s a lack of willingness to think outside the box. Nike is what it is and if you don’t like it, tough,” Shanley said. “We’re starting to see a level of arrogance from Nike that we haven’t seen since fiscal ’97. I’m not anti-Nike. They have a great line and unbelievable talent, but they have a way of getting under the skin of their retail partners.”
On the upswing, the athletic industry’s footwear sales are expected to increase by 4 or 5 percent this year and by 6 to 7 percent next year, which will mark the first back-to-back years of growth since 1991 and 1992, Shanley said.
Nike is also trying to give footwear a fashionable twist. With a suggested retail of $150, Nike Shox will be offered in select stores in November. Designed to put springs on the wearer’s feet, Shox have four foam columns sandwiched between two plates between the rear soles and midsoles. The columns look like spark plugs and are made of the same polyurethane foam that’s used in jounce bumpers for Formula One race cars.
Ovidian, reversible athletic footwear for children, and Presto, brightly colored, stretch sneakers, are other examples of Nike’s more fashion-oriented styles. Both shoes will have small introductions over the next couple of months, with additional products slated for fall 2001, according to Mark Parker, vice president of global footwear.
For back-to-school, several athletic specialty stores said shoppers purchased two or three pairs of athletic footwear like Prestos, which are offered in 18 colors, Shanley said. Instead of buying apparel at Abercrombie & Fitch, American Eagle and Gap like they did last fall, teenagers turned to fashionable footwear to avoid “redundancy,” Shanley said.
“This year footwear is a major fashion statement. That should last for another six months or so, but it will probably change,” he added. “The Gaps aren’t about to let this roll over them, they’ll remerchandise and come back with strong strategies. The footwear guys should try to take advantage of it while they can.”