How Nike Has Mastered “the Fundamentals”
by Jack Redford
Nike and its infamous swoosh are legendary in the athletic apparel space. Premier athletes, movie stars, and fashion icons have all sported the brand and helped bolster it to a global powerhouse. Many don’t know, however, that a large amount of credit goes to its incredible management of supply and demand. With its finger on the market’s pulse, Nike can read customers’ demand and roll out just enough products — just in time.
Decades of success have given Nike the luxury of having arguably the highest demand of any sportswear brand. One of their favorite tactics is the “limited release” business model; going so far as to re-release old shoes in limited quantities, like dropping an old Air Jordan colorway from 1995, confident it will fly off the shelves. Never fully satisfying their customers’ needs keeps them eager to get in on the action early.
After weeks, or sometimes months of anticipation building to feverish levels, “drop day” is seen as a holiday for some buyers. Dedicated “sneaker heads” will camp outside of stores or stay glued to computer screens, hoping to score a pair of their own. Realizing the power of “scarcity”, buyers see the value of their new investment skyrocket in the resale market — sometimes increasing tenfold upon sell out. This process can sometimes take months or years to get to the point where Nike sees it as the right time to release another stock. Once they see the potential cash cow grazing pasture, they strike. Re-releasing another wave of the same shoe sends buyers into a frenzy, many times attracting new customers smarting from missing the last release. It then becomes a matter of rinse and repeat.
For many, this resale market is a source of income with resellers buying in bulk. It’s a similar concept as trading stocks. Nike has created a market for consumers to buy and sell assets. This gives consumers a great opportunity to make money on their investment, but it also helps grow the demand for the product. When a shoe’s resale value goes through the roof, all it is doing is ensuring that it will sell out just as quickly next release. Missing out on the resale markup is a small price to pay for all of the free promotion and hype Nike gets in return.
Websites like StockX, GOAT, and Grailed that focus primarily on the sneaker resale market have given people an independent marketplace to conduct business. The stock market theme has been fully embraced by StockX. Their website, littered with green and red arrows, informs users which sneakers are trending in either direction. With “The Stock Market for Things” emboldened across the top of the page, users get that same thrill as day traders hunting for their next venture.
What Nike has realized is the power of withholding stock from the marketplace just to the point of creating buyer frenzy. This product transcendence is a result of a mastery of a fairly simple supply and demand concept. Sometimes, it truly is all about the fundamentals.