The ruthless sneaker industry – Nike vs Adidas
Billions of people are wearing their legendary logos every single day, and if you go out now and look around, you will definitely spot them: Nike’s swoosh logo or Adidas’s three black stripes are literally everywhere.
But which is the better brand? Who offers the better products?
Well, the answer might surprise most of you, so if you are curious to know, make sure to read until the end.
Don’t worry if you don’t feel like reading, you can enjoy the video below or watch it on YouTube:
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Arc One – History of Nike and Adidas
Let’s go back in time to more than 50 years ago.
It’s important to know how this interesting feud story got started. We’ll start with Adidas since they’ve been in the ring the longest.
• Adidas was founded in 1949 by Adolf “Adi” Dassler in Herzogenaurach, Germany.
But it can be tracked back to 1924 when Adi and his brother Rudolf Dassler started a shoe company called Gebrüder Dassler Schuhfabrik.
In 1948, the brothers went their separate ways, and Rudolf went on to start another clothing brand called Puma.
As we said, earlier, it’s a ruthless industry.
In 1954, the German football team won the FIFA World Cup while wearing Adidas shoes with screw-in studs. This is when Adidas started gaining prominence.
The famous three-stripe mark came from the brand’s purchase of the Finnish sportswear company Karhu in 1952. It quickly became a symbol for Adidas as a whole.
The three lines have been used in different ways, like the “trefoil” logo (which came out in 1971) and the “Performance” logo, which came out in 1997 and is still used today.
Adidas kept growing and adding new products to its line, like clothes and other sports gear.
Over the next few decades, Adidas supported a lot of athletes and teams, which helped it become the biggest sportswear company in the world.
The release of the famous “Stan Smith” tennis shoes in 1965, the “Adidas Superstar” basketball shoes in 1969, and the purchase of Reebok in 2005 are all important moments in the history of Adidas.
Collaborations with well-known designers, like Yohji Yamamoto’s Y-3 line and Kanye West’s Yeezy, have helped Adidas stay popular and relevant in the fashion and streetwear scenes.
• Nike, on the other hand, was founded in 1964 by Bill Bowerman and Phil Knight as Blue Ribbon Sports (BRS) in Oregon, USA.
At first, BRS was a US wholesaler of Onitsuka Tiger shoes (now ASICS).
In 1971, the company changed its name to Nike, after the Greek goddess of victory, and introduced its famous “swoosh” logo. Fun fact, it was created by a college student for $35.
Crazy, right? Taking inflation into account, that’s about $250 in today’s money.
In 1972, the “Nike Cortez” running shoe made its appearance at the Munich Olympics. This was Nike’s first big breakthrough.
In the 1970s and 1980s, the company kept growing thanks to new products like “Nike Air” cushioning technology (1979) and smart marketing efforts with famous athletes like Michael Jordan.
During the 1980s and 1990s, Nike added clothes and accessories to its line and moved into new sports, such as soccer and golf.
With the help of high-profile endorsements and collaborations, like the “Air Jordan” line and relationships with Tiger Woods and LeBron James, Nike has become one of the world’s leaders in sportswear.
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Arc two – Business Models and Profitability
Now, let’s get back to the present and look at things from a more technical point of view.
The way Nike and Adidas do business is similar.
But there are differences in how they name, distribute, and reach their target markets.
Let’s start this time with Nike, because, as you will see later, they are the current leader in the market right now.
Their business model rests on four important pillars:
- Focus on Innovation
Nike invests heavily in research and development (R&D) to create innovative products using cutting-edge technology.
The company’s goal is to enhance athletic performance and provide a competitive edge to its customers.
- Marketing and Branding
Nike relies on powerful storytelling and endorsements from elite athletes to create an aspirational value for its products.
The company is known for its emotional advertisements and campaigns that highlight the perseverance and dedication of athletes.
And their notorious ”Just Do It!” slogan is living proof of the success of their marketing.
Some people even got the slogan tattooed on their bodies because, well, it’s simply a good motivational reminder to get it done.
- Direct-to-Consumer (DTC) Sales
Nike is increasingly focusing on its DTC channels, such as its website, mobile apps, and owned retail stores, to provide a personalized and immersive customer experience.
The company is also striving to reduce its dependence on third-party retailers with this move, which allows them to generate more profits.
- Manufacturing and Sourcing
Nike does not own its manufacturing facilities; instead, it outsources production to independent contractors, predominantly in Asia.
This allows the company to reduce overhead costs and maintain flexibility in production.
For Adidas, the strategy is pretty similar, but there are some differences in the vision.
Their business model generally revolves around the following:
- Diversified Product Portfolio
Adidas offers a broader product range than Nike, encompassing performance sportswear, lifestyle products, and streetwear.
The company operates under two major divisions: Adidas (performance) and Originals (lifestyle and fashion-focused).
- Collaborations and Partnerships
Adidas places a strong emphasis on collaborations with designers, musicians, and celebrities, resulting in unique and fashionable product lines.
Old School, but efficient.
- Distribution Channels
Adidas follows a multi-channel distribution strategy, selling products through owned retail stores, e-commerce platforms, and third-party retailers.
The company maintains a more significant presence in third-party retail channels than Nike, which some would argue cuts a lot from their profit margins.
- Manufacturing and Sourcing
Similar to Nike, Adidas also outsources its manufacturing to independent suppliers. Primarily in Asia in order to reduce overhead costs and maintain production flexibility.
Now, let’s explore some general differences, to pinpoint exactly where their common ground in doing business diverges.
This will be very important later on when we look at the finance stuff.
• First, Brand Focus
Nike primarily targets performance-oriented customers. While Adidas caters to a more diverse customer base, including performance, lifestyle, and fashion-focused consumers.
Marketing and Collaborations
Nike places more emphasis on athlete endorsements and emotional storytelling. Adidas focuses on collaborations with designers, musicians, and celebrities to create fashionable and unique product lines
• Distribution Channels
Nike is putting more effort into expanding its DTC sales channels, while Adidas maintains a more significant presence in third-party retail channels.
• Product Portfolio
Adidas has a more diversified product portfolio, with a strong focus on lifestyle and fashion products, in addition to performance sportswear.
• Geographic Market Presence
Historically, Nike has had a stronger presence in the United States, while Adidas has enjoyed greater popularity in Europe.
This is partially due to their origins – Nike is an American brand and Adidas is a German brand.
• Subsidiaries and Acquisitions
Nike and Adidas have made different acquisitions to expand their brand portfolios.
Nike owns brands like Converse and Hurley and formerly owned Cole Haan and Umbro. Adidas, on the other hand, has acquired Reebok and Runtastic and previously owned TaylorMade, which was sold in 2017.
With all of the above considered, you would expect Adidas and Nike to enjoy the same prosperity when it comes to finances.
Dead wrong. Let’s take a look at some graphs and tables to get an idea of how far they are from each other.
This is Nike’s income statement for 2022:
And this is Adidas’s:
Ouch, this first round goes to Nike for sure.
We’ll provide the explanation soon, just bear with us for a bit.
This is Nike’s stock performance in the past year:
And this is Adidas’s:
Another round goes to Nike, and finally, this is how the graphs look when you put them side by side:
So, clearly, Nike was a better investment than Adidas over the past year by a mile, and the income statements reflect that.
In fact, for the past decade, Nike has been the smartest kid in the class and the top performer by far.
So, why is Nike more profitable and, as a result, a better investment than Adidas?
A disclaimer first: In itself, the sportswear market is not a high-growth sector. It’s pretty saturated.
In fact, the industry could hit $365 billion by 2027, with a “compound annual growth rate (CAGR)” of only 3.70 percent.
That’s worse than what’s expected for the S&P 500, so investing in this area may not be the best choice.
But we digress. From a business point of view, here’s why Nike is the winner.
This is a picture of both Adidas and Nike’s sales, so it’s clear that Nike has been making more money than Adidas for the past 10 years or so.
And the gap seems to continue to increase.
The primary cause of the divergence between Nike and Adidas stems from consumers’ differing perceptions of their quality.
Both brands are appreciated for their product quality, but they are not regarded equally.
Two things have given Nike an edge in the market:
First, Nike stands out because of its ability to come up with new ideas and form great partnerships.
Nike has also teamed up with high-fashion names like Louis Vuitton, in addition to the well-known Michael Jordan collaboration.
Adidas has also worked with high-fashion names like Gucci, but there hasn’t been as much excitement about that. People often think that Adidas is always lagging behind and trying to copy Nike’s creative methods.
Adidas’s partnership with Kanye West ended recently, which hurts its present and future sales.
So, the gap with Nike keeps getting bigger. Many people really liked the Yeezys.
The second important thing is that the Nike brand is easy to recognize.
It is known as one of the most important logos in history, and the word “quality” is often used to describe it.
Even though Adidas has a well-known design, it doesn’t have as much power as the Nike Swoosh. Nike’s already dominant brand has been strengthened by its many global advertising efforts.
Forbes agrees with this idea by putting Nike at number 13 on its list of the most valuable brands in the world, while Adidas is at number 51.
So, there’s no question about it: Nike wins most of the time, no matter how you look at it.
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Arc three – Struggles and Overcoming Challenges
But behind every huge success story are battles, controversies, and scandals that are often forgotten.
As two of the biggest sportswear companies in the world, Nike and Adidas both have their share.
Here are some of the most important ones, starting with Nike
• Sweatshop labor
People say that Nike takes advantage of workers in developing countries by paying them low wages and giving them bad places to work.
Since the 1990s, the company has been accused many times of using slave labor.
Nike changed how it treats its workers because of public pressure. Since then, the company has put in place a number of policies and programs to address these issues.
• Child labor
In the late 1990s, Nike was also criticized when it was found that some of its soccer balls were made in countries like Pakistan by children.
The company worked with UNICEF and local non-government organizations (NGOs) to improve working conditions and get rid of child labor in its supply chain.
? The Colin Kaepernick ad campaign
In 2018, Colin Kaepernick, a former NFL player, started kneeling during the national anthem to protest racial injustice. He was featured in an ad campaign by Nike.
Some people praised Nike for backing Kaepernick’s activism, while others boycotted the brand because they didn’t agree with how he protested.
Now for Adidas… Well, the stories are not that different:
• Exploitative labor practices
Like Nike, Adidas has also been accused of hiring people from sweatshops to work in its plants.
In 2011, the BBC made a documentary about how Adidas goods are made in Indonesian factories with bad working conditions and low wages.
As a result, Adidas has taken steps to make working conditions better and make its supply chain more open.
• The 2014 World Cup
During the 2014 FIFA World Cup in Brazil, Adidas was criticized for the way it treated workers who made goods for the event.
A study found that workers had to work long hours for little pay and in really bad conditions.
Adidas said it would better supervision and working conditions, but unfortunately, changes like that usually come after the damage is done.
• Environmental concerns
Adidas has also been criticized for how it affects the earth, especially because so many of its products and packaging are made of plastic.
Adidas has started a number of sustainability programs, like using recycled plastic in its products and making a promise to reduce its total environmental footprint, to reduce the damage it does to the environment.
And, by the way, Nike had the same trouble for a while.
Both businesses have tried to deal with these scandals and controversies by putting in place new policies, forming partnerships with outside groups, and making their supply chains more open.
But as global companies, they continue to be watched and must work hard to keep doing things in a decent and sustainable way.
The bigger you are, the harder people will hit you, which is good because we need models of how to run a business in an honest way.
Most of these problems still exist in a lot of businesses all over the world.
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Arc four – Key Lessons Learned
So, all in all, what can we learn from these two companies?
All this information means nothing if it does not teach us some valuable lessons.
So here they are, in no particular order:
• Embrace your passion
Phil Knight’s love of running led him to make better shoes for sports, which was the start of Nike.
Adi Dassler was dedicated to making sports shoes that helped athletes do better because he was a good maker.
Entrepreneurs-to-be should find and follow their interests, using them as a source of motivation to get through problems and setbacks.
If you don’t do what you love, it’s all for nothing.
• Prioritize innovation
With technologies like “Air” cushioning from Nike and “Boost” foam from Adidas, both companies have made revolutionary improvements that have changed the sports footwear industry.
Every ambitious business owner should foster a mindset of innovation by encouraging workers to think outside the box and question the status quo.
The best promotion is to stand out.
• Harness the power of branding
Both Nike’s “swoosh” and Adidas’ “three stripes” have become universally recognized symbols that encapsulate their respective brand identities.
Always strive to work towards creating a distinct brand identity that connects with their target market and sets them apart from competitors.
This involves crafting a captivating brand narrative and investing in unforgettable marketing initiatives.
• Cultivate adaptability and resilience
Nike and Adidas have shown that they can change and adapt to new market conditions, customer tastes, and threats from the outside.
No matter how much experience an entrepreneur has, they should stay flexible and be ready to change their strategies when they need to. They should learn from setbacks and take advantage of new chances.
If you don’t change, adapt, and get past problems, you will fall behind your competitors.
• Leverage strategic partnerships and collaborations
Nike’s partnerships with top players like Michael Jordan and LeBron James and Adidas’s work with famous people like Kanye West and Pharrell Williams have created a lot of buzz and made their brands more popular.
Every business should look for relationships that can boost its brand and open up new growth opportunities.
Nike and Adidas have shown that they can change and adapt to new market conditions, customer tastes, and threats from the outside.
No matter how much experience an entrepreneur has, they should stay flexible and be ready to change their strategies when they need to. They should learn from setbacks and take advantage of new chances.
If you don’t change, adapt, and get past problems, you will fall behind your competitors.
• Commit to social and environmental responsibility
The “Move to Zero” campaign by Nike and the promise by Adidas to use recycled plastic materials show how they are trying to help the earth.
Sustainability and doing the right thing should be at the forefront of a business’s processes, as this can lead to long-term success and improve how eco-conscious customers see the brand.
• Foster employee empowerment
Employees can be more motivated, creative, and engaged if they feel like they have some freedom and are encouraged to try new things and make choices.
Entrepreneurs should invest in their employees’ growth and build an environment that helps them grow both personally and professionally.
• Balance global expansion and localization
Nike and Adidas have been successful in international markets because they make their goods and marketing strategies fit the tastes of each country.
As your business grows, you should always try to find a mix between global strategies and localized tactics to make sure your products and services are still useful and appealing in different markets.
• Maintain a customer-centric approach
Nike and Adidas have been able to make products that their target audience likes because they always put customer wants and feedback at the center of their decision-making.
Always keep the lines of conversation open with your customers, and use what you learn to help with product development and marketing.
• Foster a culture of continuous learning
Phil Knight and Adi Dassler both displayed a commitment to ongoing improvement in their products and processes, adopting a growth mindset.
Entrepreneurs should promote a culture of perpetual learning and refinement, staying informed about industry trends and embracing novel technologies and concepts to maintain a competitive advantage.
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Arc five – Conclusion and Investment Potential
So, after all that, who takes home the prize in the end?
In short, and from every point of view, the answer is Nike.
Both Nike and Adidas are market winners, but customers tend to think more highly of Nike.
Financially, the two companies are very different. Nike makes a lot more money, has better and more stable profit margins, and has a lot less debt.
As we take all this in consideration, the answer to the common question “Which brand is better?” is that Nike is better by a wide margin.
Compared to its competitors, Nike’s market share is just huge.
The gap has been getting bigger over the past ten years, and it doesn’t look like it will close soon, especially since Adidas lost the Yeezy line, which could be worth hundreds of millions of dollars.
Adidas is facing a number of problems right now, while Nike keeps getting better and better.
But Adidas’s story also has important lessons, and that’s what this article is all about in the end.
We hope you enjoyed reading this article as we enjoyed making it. Now you know how both these market leaders managed to get there are STAY there.
Now, we’re curios to know: What brand is your favourite, Nike or Adidas?
