People Are Angry That They CAN Buy Air Jordans

http://www.sneakersofficial.com/

Today, Nike is one of the largest, most well known footwear brands in the garment industry, with estimated total revenue clocking in at around $30.6 billion USD. Up until 2013, a general consumer might never have heard of their subsidiary line ‘Jordan Brand’, a brand that until that point had rarely been widely available for purchase thanks to the high demand for the product, the Air Jordan sneaker line, and their limited production numbers. But over the last 3 years many shifts have occurred throughout the sneaker industry: Sketchers has become the 2nd most successful sneaker brand in the world, Nike’s competitor Adidas has increased their sales exponentially with the release of a number of hit shoes, the production of high performance sneakers is struggling to keep up with the demand for a number of products, and Air Jordans are sitting on shelves for days, even weeks after their release. But why is this? And who does it affect?

Well to discuss the role Nike’s stakeholders have in this unusual change, we can begin with the Jordan Brand itself. In early 2015, Nike CEO Mark Parker announced that Jordan Brand was attempting to grow its business from $2.6B in 2015 to $4.5B by 2020, hence the company would be required to sell more shoes (or raise the prices). The company has since enacted both of these strategies, raising many of their shoes’ prices to upwards of $200 and releasing new shoes every week at a substantial increase to their volume pre-2013. 

This comes bitter-sweet to the next stakeholder, the customer. A positive for this group is that they can now have a good chance at being able to purchase a pair of Air-Jordan’s in store without being pressured by the shoes selling out in less than a day. They will also have a larger selection to choose from as a new release each week means something new all the time. The downside of this new business strategy is that the cost to the consumer will be far greater for each shoe, and hence they will be less inclined to buy every release (thus the retailers will be unable to sell every shoe they stock). 

The final major stakeholders affected are the sneaker resellers, individuals or businesses that make a profit off buying limited releases at retail price and selling them to the customers who weren’t able to buy them at retail for a substantial mark-up. These stakeholders rely upon the hype and the exclusivity surrounding the shoes to make a profit, and the flood of new Jordans into the market prevent them from making the profit necessary to sustain the business. Hence the shoes they can sell at a profitable mark-up (generally celebrity endorsed collaborations or retro releases of old shoes) come at a higher price, meaning that a customer wishing to purchase a limited sneaker may have to pay much more for the same sneaker than they would have three years ago.

There is no obvious need to fix this change currently as the only stakeholder who really loses in this situation is the re-seller. The customers get the shoes they want (albeit at a higher cost) and the Nike brand makes substantially more profit. Retailers will still be able to make high returns and the new releases of shoes will continue to bring new customers into their stores. It’s unclear whether Nike’s plan will remain sound and whether or not the Jordan Brand will survive despite the dying of hype for each of their releases but as of the present it is too early to make judgement.

Article Referenced:

http://au.complex.com/sneakers/2015/12/why-air-jordans-arent-selling-out