Can Reebok Regain Its Balance?Geoffrey Smith
Last January, Reebok International Ltd. launched a sneaker that it hoped would be a slam-dunk. Called the Shaq Attaq, it was endorsed by the Orlando Magic's sensational rookie Shaquille O'Neal. And it seemed tailor-made for teens. But the Shaq Attaq arrived in stores with a resounding thud. The problems: The sneakers were white, with light blue trim. And they cost $130. But black shoes were the hot look, and customers wanted them for under $100. In the first six months of 1993, sales of Reebok's basketball shoes fell 20%. Says Reebok fitness President Angel Martinez of the Shaq Attaq launch: "It was a comedy of errors."
It was also vintage Reebok. Ever since Nike Inc. usurped the company as the top maker of athletic shoes in 1989, Reebok has been flailing wildly in attempts to get back on top. Half a dozen ad campaigns have fizzled. It has been plagued by poor designs. And it missed a key fashion shift toward outdoor shoes that began a couple of years ago.
But now, Reebok Chief Executive Officer Paul Fireman says he has finally found a cure for his company's long-standing ailments. His strategy: attack Nike's jugular, the performance athletic-shoe market. Reebok plans to introduce dozens of new sneakers, including the next generation of Reebok's legendary Pump. Dubbed the Instapump, this high-tech sneaker has no laces. Instead, it's inflated with CO2 cartridges to fit the foot. At the same time, Fireman is now pushing Reebok into the fast-growing outdoor-shoe business.
Reebok also means to overhaul what Fireman acknowledges has been until now a "chaotic" marketing effort. After eschewing Nike-style hero-worship advertising for years, Reebok has done an about-face. Signing O'Neal last year was a start. Now, Reebok is closing endorsement deals with some 400 football, baseball, and soccer stars. And to boost its image, it has also come up with a brand-new logo that will appear on many of its new shoes--an inverted "v" with a slash through it that Reebok hopes consumers will identify with high performance. "We'll be the market leader by the end of 1995," Fireman vows, "or at least on a pace to be the leader soon after."
Still, many Reebok-watchers are skeptical. "It's not a doable feat," says Ford D. Ennals, Reebok's former marketing chief and now an executive at QVC Network Inc. The doubters point out that the sneaker market's days of booming sales growth are behind it. They add that Reebok's new line of pricey sneakers--the Instapump will retail for $130--seems out of step in an increasingly budget-conscious market. "It's pretty expensive and probably a little too complicated for most people," says Converse Chairman Gilbert Ford.
And there's Nike to worry about. With 21.5% of the U.S. athletic-shoe market, Reebok lags way behind Nike's 32%. And Nike isn't standing still. Last year, it took direct aim at Reebok's dominance in the fitness market by launching a line of aerobic shoes. "They have their work cut out for them," says a Nike spokesman.
Even so, analysts figure Reebok has picked up new momentum in its race with Nike. Kidder, Peabody & Co. analyst Gary M. Jacobson says Reebok's profits could climb 7% next year, to $241 million, as its sales hit $3.1 billion, up 6%. By contrast, Nike's profits could fall 9%, to $310 million, as its sales slip 2%, to $3.8 billion, because of the weakness in the high end of the sneaker market.
CHANGES. That's certainly encouraging to Fireman, who argues that Reebok is a different company these days. A big part of Reebok's past problems, he says, had to do with inconsistent leadership. At the board's urging, Fireman gave up day-to-day operations in 1987. With Reebok growing so fast, directors felt they needed an executive who had experience running a big company. Fireman, who purchased Reebok in 1984 and still owns 20% of the company's stock, didn't object. He retained the titles of chairman and CEO and went off to pursue several private ventures, including building a new golf course on Cape Cod.
But the change in leadership didn't help Reebok. It went through three different top managers. The last was John H. Duerden, a former Xerox Corp. executive. But it continued to lose ground against Nike. So Fireman came back in August, 1992. He wasted no time in shaking up management. Within days, he reassigned Duerden to head Ree-Reebok's international division. Next, he hired former Pony Sports & Leisure owner and CEO Roberto Muller to head Reebok's sports division. Muller's former company specialized in high-performance cleated shoes for athletes.
Now, with a new management team firmly in place, Fireman believes it's time for a new-product blitz. The centerpiece of the attack on Nike is basketball. Nike's share of the basketball sneaker market is nearly 50%, compared with only 15% for Reebok. But since Michael Jordan retired from the National Basketball Assn., Reebok's O'Neal has become the clear favorite to be the next enduring superstar--and marketing machine. "Nike's success has become their albatross," Fireman crows. "Jordan is no longer on the radar screen." Nike begs to differ: The company says Jordan's marketing appeal remains strong, and plans new Jordan ads in January.
Reebok intends to step up the pressure on Nike at the NBA All-Star game in February, where it will launch a national ad campaign for its Instapump. Fireman says he expects the sneaker to account for 10% of Reebok's sales in three years. Retailers who are test-marketing early models are encouraged. "People love to try them on, and most people who do buy them," says Jennifer Olberich, assistant manager of Olympia Sports Center in Cambridge, Mass.
A HIT? Reebok is launching an assault on another Nike stronghold: the $250 million market for cleated shoes, about 80% of which are sold by Nike. Fireman hopes a new line of cleated shoes Reebok launched last January will catch on with high-school athletes. If so, he reckons sales could triple in 1994, to $45 million. Next year, Fireman plans to offer 12 new outdoor hiking and mountaineering shoes, which he hopes will generate $100 million in sales. Jaron M. Abrams, head buyer for Larry's Standard Brands Shoes Inc., a men's shoe chain in Fort Worth, has ordered most of the line for his stores but says they're not a guaranteed success. "There's other products for equal money or less that are superior," he says. Still, he says Reebok's Cliffhanger shoe is a probable hit. "It's a street shoe with a look," he says--a shoe salesman's highest praise.
Fireman isn't just depending on good looks to sell his footwear. Endorsements will help, he says. In addition to O'Neal, Instapumps are already being used by such players as Dallas Cowboys running back Emmitt Smith and the Notre Dame football team. Moreover, Fireman says Reebok will start presenting a consistent marketing message next year. Over the past few years, Reebok has tried a number of slogans, including "UBU" and "Physics Behind Physique." But nothing seemed to have the resonance of Nike's streetwise "Just Do It" that appealed to younger audiences. Next year, Reebok will use one moniker in all its ads: "Planet Reebok," a unifying theme for its global marketing.
Fireman's plans are ambitious. And considering the Shaq Attaq launch and other Reebok blunders, his chances of recapturing first place may seem slim. But then again, faced with a fierce race in the sneaker market, Reebok can't afford to be running in place forever.
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