Sports Shoe Makers Are Running As Fast As They Can

They're making some big changes with hopes of ending their slump

The idea for Nike's latest shoe came from a car show. One of the company's designers, attending an auto show last year, spied a car with a paint job that seemed to change colors at different angles. Intrigued, he took the concept back to Beaverton, Ore., and Nike's design team began work on a dual-pigmented material that can be molded to a shoe. The results will hit stores this fall: the $160 Air Flightposite, a basketball shoe that looks as smooth as a sock, with metallic hues that alternate depending on the angle it's viewed from. "It's the kind of product that looks like a superhero shoe," says Michael Wilskey, Nike's vice-president for U.S. marketing.

Auto paint mixed with comic-strip fashion is just the sort of out-there tactic the makers of athletic shoes hope will lift them out of a sales rut and back into the forefront of trendiness. In the past year, the industry has slashed costs, ditched scores of athlete endorsers, and produced ad campaigns designed to dispel the "Just Do It" seriousness of previous campaigns with humor, music, and urban cool. Now, amid nascent signs of sales improvement, the companies are poised to launch a slew of radical new designs, marketing deals, and technological bells and whistles in hopes of igniting not just a recovery but a new sneaker boom. The summer and back-to-school seasons are key for athletic-shoe makers, so much of the action will take place in the coming months.

DEATH BY KHAKI. It won't be an easy rebound. Nike Inc. Chairman Phil Knight has likened the industry's 1998 collapse to that of the Chicago Bulls. Just as the Bulls fell from the pinnacle of a "threepeat" to the cellar, so the sneaker companies went from hotshots to brands dismissed as dead.

Until last year, sneaker makers were sprinting ahead. U.S. branded sneaker sales climbed 11.3%, to $8 billion in 1997, following a 9.8% jump in 1996, according to researcher Sporting Goods Intelligence. Then, suddenly, "athletic footwear lost its fashion component," says Doug Ford, a principal at Kurt Salmon Associates. Teens and young adults tired of the sameness of sneakers, and the hot clothing styles shifted from denim to khaki, which doesn't look good with athletic shoes. Instead of snapping up the latest from Nike, many shoppers began turning to leather shoes and sandals. Susan Kunchandy of Boston, 25, is a typical example. She once owned multiple pairs of athletic shoes. Now, she has one for jogging--and five sets of boots in different colors. Athletic shoes with her current wardrobe? "It's a fashion faux pas," she says.

NASTY SKID. Nor could other, less faddish markets make up for the drop. Exercise is not the popular pastime it was in the '80s and early '90s. Sales of sporting goods, from treadmills to baseballs, are sluggish. The result: Last year, total sneaker sales skidded 6%, the worst drop since the sneaker boom began in the '80s. And profits plunged with them: Nike's net earnings fell 50%, while Reebok International Ltd. suffered an 83% drop. And though Adidas-Salomon Inc. held on through 1998, this year, it, too, has seen global profits slip.

So after months of hoping sneakers would make a comeback, manufacturers have broken with the styles that made them famous. They hope to reinvent foot fashion, as they did in the '80s. Several new Nike offerings look like they'd be more at home on a spaceship than a basketball court. And Chuck Taylor wouldn't recognize the camouflage or even the label on Converse's new $100 basketball shoes, which are co-branded with rapper Master P's "No Limit" label.

The new looks are welcome, says Juris Pagrabs, a spokesman for Venator, which owns the Foot Locker chain, the largest specialty retailer of athletic shoes. "A kid will be in our store 12 times a year. If he sees the same product month after month, he loses interest," says Pagrabs.

Meanwhile, sneaker makers "are becoming substantially more customer-focused" by "moving away from white to colors" in shoes priced under $65, which account for the vast bulk of sneaker sales, says Robert L. Mettler, president of merchandizing at Sears, Roebuck & Co. Reebok's line of Classics--once sold in white and black--now come in red, orange, and blue. And sales at Saucony Inc. are on pace to double, thanks to the smash success of its Jazz Originals, offered in a rainbow of colors. "The industry is becoming a lot more pragmatic," says Shawn Neville, a senior vice-president at Reebok. "It's not just about $120 shoes anymore.

To be sure, companies are still counting heavily on expensive shoes, where they're introducing new technology to pump up sales. In November, Converse will launch the first-ever shoe cushioned by capsules of helium. "It's the most exciting thing we've ever done," says CEO Glenn N. Rupp. For holiday shoppers, Reebok will feature a new kid's shoe, the Traxtar, with a microprocessor that measures how far a child can jump.

CUSTOM FIT. But the biggest change may come in how sneakers are made. Most of Adidas' new efforts focus on improved technology for shoes, such as a surface on the toe of their line of soccer shoes that looks like a ping-pong paddle. Others, including Reebok and Saucony, are racing to develop high-tech devices to measure feet. The resulting digital image could then be used to produce a shoe that is "partly standardized, partly customized to the individual shopper's foot," says Saucony of North America President Arthur Rogers. While technical hurdles must still be surmounted, the potential is enormous. A 1998 study by Footwear Market Insights found that 60% to 70% of consumers find it difficult to find shoes that fit well.

The new looks and gizmos have been accompanied by a shift in marketing tactics. Win-at-all-costs messages have been ditched for commercials heavy on humor and real people. Adidas ads now feature real-life situations with nary a shoe in sight. The latest show kids playing backyard football. Reebok President Carl J. Yankowski ignored the incredulous howls of his staff and jetted to New York earlier this year to sign Rosie O'Donnell and her "Chub Club" as endorsers. Hard-core athletes they're not. "But these women wear a lot of shoes and have two feet. So what's wrong with this?" he says.

Something may be quite right. Reebok sold more than 50,000 pairs of shoes this spring via the Chub Club promotion. And they aren't the only ones finally seeing a bit of an uptick. Sales of all athletic shoes rose about 10% in 1999's first quarter, vs. the same period last year, reports research firm NPD Group, as the new marketing and designs began to bring customers back. Some smaller companies are doing a lot better than that. Sales at New Balance Athletic Shoe Inc. jumped 32%, to $350 million, last year and are on track to hit $525 million this year. Their secret: a focus on baby boomers, a segment where demand hardly flagged.

Most industry watchers believe sneaker companies as a whole have stopped the sales slide. Although some continue to limp badly--Converse and Reebok are still expected to post poor sales this year--others, such as Nike, have begun to recover. "The worst is over," says Ford of Kurt Salmon.

But will the boom be back? There's little sign of the surge that let companies like Nike quadruple in less than a decade. Athletic-shoe makers may have to "come to grips with the fact that prospects for long-term sales growth are fairly modest," says analyst Faye Landes of Thomas Weisel Partners. "After 10 years of huge growth, the industry has matured," concedes Jim Davis, CEO of New Balance. And that's a rough road for any shoe to travel.

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