The Rise of Nike: How the Brand Became a Retail Giant
When people hear success stories, they often imagine the people and companies involved were always at the top. In truth, a lot of steps are taken — usually some in the wrong direction — before a company or person achieves success.
For most people, Nike is an icon in the world of athletic shoes and fitness apparel. It may even be difficult to remember a time when Nike wasn’t at the top. However, it took the company 60 years to become the behemoth industry leader it is today. Let’s take a look at how the brand became a retail giant.
The Meeting of Minds
In the 1960s, two innovative minds came together when University of Oregon student Phil Knight ran track and field under the guidance of Coach Bill Bowerman. Bowerman was continually trying to provide better shoes for his runners, using the skills he learned from a local cobbler to tweak existing shoes.
Phil Knight was the first to try Bowerman’s shoes, and then team member Otis Davis wore them to run the 400-meter dash in the 1960 Olympics and won the gold medal. Davis always said the shoes were specially made for him.
A Radical Thought Emerges
After graduating from the University of Oregon, Knight went on to earn an MBA at Stanford University. During his time there, he wrote a paper focusing on the manufacture of running shoes. He asserted that running shoes should be produced in Japan instead of Germany, where most were made at the time.
The location merely related to labor costs, as labor was cheaper in Japan. It’s not clear whether his specific interest in running shoes was inspired by his former running coach, but Bowerman definitely played a role, thanks to his interest in improving his team’s shoes.
The Beginning of an Empire
In 1962, after graduating with his MBA, Knight took a trip to Japan that turned out to be a rather lucrative journey. Before returning to the United States, he met with Onitsuka Tiger shoe company and made a deal to export Japan’s Tiger shoes and sell them in the U.S.
Knight’s former coach found the venture intriguing, and he eagerly entered into a 50/50 partnership with his former student. Thus, Blue Ribbon Sports was born in Eugene, Oregon, on January 25, 1964. It’s hard to imagine that either man knew how big the company would eventually become.
Humble Beginnings in the Trunk of a Car
In the beginning, Blue Ribbon Sports wasn’t a large enterprise, but Knight and Bowerman were determined to make their venture a success. That determination led Knight to start selling shoes out of his car, but it wasn’t necessary for long.
Bowerman and Knight quickly discovered they were not the only ones interested in high-quality shoes. Quite a market was developing for athletic shoes, especially running shoes, that didn’t have the expensive price tags of Adidas and Puma. Selling Tiger shoes in the U.S. wasn’t going to be a problem.
The Tiger Cortez Was Created
In 1965, Coach Bowerman came up with a new design for runners that provided support, soft sponge rubber in the toe area and at the top of the heel, a cushioned innersole, a firm rubber outsole and hard rubber in the middle of the heel. The design was intended to provide great support and comfort and is still in use today.
The company’s Japanese producer used the design to create the Tiger Cortez. When the running shoe was introduced to the public in 1967, it became extremely popular, and Blue Ribbon Sports had a hit on its hands.
A Lawsuit Changes the Path of Blue Ribbon Sports
Unfortunately, the relationship between Blue Ribbon and Onitsuka Tiger hit a sour note when Tiger began selling its own version of the hit shoe. Tiger named the shoe “Nike” and used it as a way to break free from its contract with Blue Ribbon. In 1971, a judge decided that both companies could continue to sell their versions of the shoes.
At that point, the two shoes were called the Nike Cortez and the Tiger Corsair, the latter of which is now sold by Tiger’s company Asics. Blue Ribbon Sports assumed the Nike name and began using it as the company name.
Acquiring a Logo on the Cheap
After deciding to rebrand to Nike, Phil Knight paid a Portland State University design student to create some sketches for a logo. Carolyn Davis created the well-known swoosh design, and Knight chose it from an assortment of ideas. Unaware of how popular the design would grow, Davis only charged Knight $35 for the logo.
After becoming successful, Knight expressed his ongoing appreciation of the swoosh by gifting Davis with 500 shares of Nike stock. Those 500 shares have a value of around $1 million today.
A Breakfast Fiasco
Would you believe Coach Bowerman’s breakfast led to Nike’s next big thing? He had been searching for a way to provide more traction. As he ate a waffle his wife cooked for him one morning, the grooves in the waffle ignited a spark of inspiration. He added melted urethane to the waffle iron to create an inverted waffle design.
Of course, Bowerman was thinking more about the design than the waffle iron. He forgot to coat it with non-stick spray before pouring on the urethane, so the waffle iron basically glued shut — but not before the idea formed.
The Frenzy of the Initial Public Offering
Coach Bowerman didn’t let the waffle iron mishap hold him back. He performed his next experiment with urethane, some non-stick spray and a new waffle iron. The end result led to the creation of another big money maker for Nike. The “Waffle Trainer” took Nike up another notch, and the company continued to grow at a consistent pace.
In 1980, Nike’s IPO launched at a mere 18 cents per share. If you think that sounds like nothing, the IPO’s release made Phil Knight a millionaire, with shares totaling $178 million. People wanted a piece of the up and coming sportswear giant.
A Nasty Endorsement Deal
In 1972, Ilie Nastase, a Romanian tennis player, became the first athlete to sign an endorsement contract with Nike. He was known for his talent on the tennis court, but that wasn’t the end of the story. His official nickname was “the Bucharest Buffoon,” but most people just called him “Nasty.”
The nicknames were mostly due to his outbursts on the tennis court. Sometimes, the displays were playful and came across like a star putting on a show, but some episodes were threatening and angry. Throughout his career, Nasty’s anger on the tennis court led to fines, disqualifications and suspensions.
Catching a Tailwind
In 1978, “Air” technology first arrived on the scene in the new Tailwind shoe. The technology was invented by former NASA engineer M. Frank Rudy and used a version of an aerospace technique referred to as “blow rubber molding.” This technique — previously used for astronaut helmets — was adapted to create pouches for the midsole of the Tailwind shoe.
Rudy patented the design in 1979, and Nike marketed it as a shoe that felt as good as running on air. Initially, they focused the campaign mostly on “elite” athletes but eventually started marketing it to the general public.
Coaxing a Reluctant Michael Jordan
Ilie Nastase was just the first of many celebrity endorsements acquired by Nike. The company set its sights on Michael Jordan, even before his first NBA season in 1984. (Yes, he was that good.) Jordan had his eye on an endorsement deal with Adidas and had never even worn a pair of Nikes.
After meeting with Nike executives, Jordan signed an endorsement contract that promised him $500,000 a year for five years when he hadn’t even played a single game. Additionally, executives gave him two die-cast Mercedes and custom shoes.
Cashing in on Some Royalties
The endorsement contract turned out to be a wise choice for both Nike and Michael Jordan. The potential Nike saw in Jordan was dead-on, and the Air Jordan line made more than $100 million before 1985 came to a close. More than three decades later, the shoe line still rakes in huge profits for Nike.
Jordan still receives royalties for his Nike gear that add up to about $100 million every single year. When the superstar sat down in that meeting with Nike in 1984, he never could have imagined what both were about to gain.
The Revolutionary Nike Air Max 87
On March 26, 1987, Nike introduced the first Air Max shoe. It broke the mold as the first shoe to actually let you see the Air cushioning unit in the heel. It also had Air units that were three times larger than previous Air designs. Strangely, the shoe is known as both the Air Max 1 and the Air Max 87.
Nike used the Beatles’ song “Revolution” to launch the Air Max TV campaign. Amazingly, it was the first commercial to ever use a Beatles song. Nike felt the song would get people excited about the new shoe.
Just Do It: The Famous Slogan’s Strange Inspiration
Nike’s famous “Just Do It” slogan first showed up in an ad campaign in 1988. However, the inspiration — and it’s an odd one — occurred more than a decade earlier. Gary Gilmore, a career criminal, murdered two men in robberies. He was convicted in 1976 of first-degree murder and sentenced to death by firing squad.
For a time, his execution was delayed due to public disputes over the death penalty. Strangely, Gilmore did not oppose his sentence, maybe because he didn’t believe he could change, given his upbringing and criminal history.
A Dying Man’s Final Words
Regardless of his reasons for choosing not to fight, Gilmore spoke his last words — “Let’s do it” — in January 1977 just before being put to death by firing squad. Nike changed these three simple words to “Just Do It” and has used the slogan ever since.
It may seem strange to steal a slogan from an infamous killer, but Gilmore’s willingness to face what was coming his way was somewhat inspiring. The slogan has reminded many people to simply get up, push through and get it done for many years.
Bo Knows All About Perfect Timing
The 1989 Midsummer Classic saw the introduction of the “Bo Knows” campaign, a marketing ploy to promote Nike’s cross-training shoes. Bo Jackson was the first athlete of modern times to play both professional football and baseball. Nike hoped for good results and got an incredible surprise that night.
Bo Jackson hit a 450-foot home run, cutting off President Reagan in mid-sentence in the announcer’s box. Although it wasn’t planned, Jackson’s incredible performance set himself and Nike up for success. Bo Jackson’s shoes quickly dominated the cross-training market with approximately 80% of sales.
Welcome to NikeTown
In 1990, Nike set up its world headquarters in Beaverton, Oregon. By November, the first NikeTown store opened in downtown Portland — the city where the company originally began. It took little time for the store to achieve high sales and earn awards for its retail design and business acumen.
Over the next decade, Nike opened 14 other NikeTown stores in the U.S., England and Germany. The largest store is in central London and features four floors with 42,000 square feet of Nike products.
Facing Down Some Dark Accusations
In the midst of all the company highs, a heart wrenching low hit the company when activist Jeff Ballinger published an unflattering report in 1991. The report called Nike out for the mistreatment of workers in its Indonesian factories. The accusations included miserably low wages of 14 cents per hour, child labor and indoor pollution, among other things.
The report brought negative attention to Nike right when the company planned to expand. The 1992 Olympics showed Nike just how the public viewed this issue. For the next seven years, protests and threats of boycotting the company continued.
A Tiger Won’t Change His Stripes
In 1996, Tiger Woods signed his first endorsement contract with Nike — a five-year contract totaling $40 million. In 2001, he signed his second five-year contract, which totaled $60 million more than the first. He extended his contract term to seven years at the next renewal in 2006, and his 2013 contract was worth $200 million.
The endorsements continue to this day. Even after negative publicity due to Woods’ infidelity, DUIs and back problems, Nike has remained loyal to the golf star. In equal fashion, according to his agent, Woods plans to remain loyal to Nike until his career comes to a close.
A Manufacturing Overhaul
After hordes of protests, negative attention and demands for Michael Jordan and other stars to denounce Nike, the company initiated plans to make some changes in its manufacturing plants. A reasonable minimum age was established for factory workers, and OSHA’s clean air standards were implemented overseas.
In 1999, Nike created the Fair Labor Association to audit hundreds of factories over a two-year period, and executives made the reports public. Although it took time to fix all the problems, even some of the most outspoken activists admitted the company made great strides in rectifying problems. These steps helped restore the company’s reputation.
Saying Goodbye to a Legendary Innovator
In December 1999, Bill Bowerman passed away at the age of 88 after living a long, eventful life filled with brilliant innovations. As the track-and-field coach at the University of Oregon for 24 years, he coached 19 Olympians and 44 All-Americans during his career.
Bowerman was chosen for induction into the National Track and Field Hall of Fame in 1981, but he turned it down because his own coach — a man he deeply respected — hadn’t been inducted. He served on the Nike board of directors for more than 30 years and contributed to numerous company developments.
Nike Goes Surfing
In 2002, Nike dove into a new market when the company bought Hurley, a Southern California surfwear company. Nike’s desire to expand into surfing, skating and snowboarding came to life through this acquisition. The deal also gave former owner Bob Hurley the chance to live his dream of taking Hurley global.
Hurley remained president of the company he built. Nike’s resources to turn the company into an international brand coupled with Bob Hurley’s wisdom and vision led to years of success for the company.
Capitalizing on More Basketball Endorsements
Lebron James made a significant career move when he signed a lifetime contract with Nike in 2015. The deal will reportedly make James more than $1 billion by the time he is 64. Not bad for a business-savvy superstar who has already made hundreds of millions in other ventures.
Just a few days prior to the sexual assault allegations against Kobe Bryant in 2003, Bryant had signed a $40 million contract with Nike. Facing negative publicity, Nike could have backed out of the deal, but the company stood by the star, and he currently makes around $8 million a year on endorsements.
Acquisition of a Classic Competitor
Remember classic Converse high tops? You probably have a pair in your closet right now. In 2003, Nike spent $305 million to purchase Converse, an American icon that had suffered dropping sales in recent years. By 2016, sales for the brand had skyrocketed to $2 billion, with almost 20% growth in sales every year.
Nike carried its innovative spirit over to Converse shoes as well, as seen with the creation of the Converse Auckland Modern, dubbed a “hybrid running shoe.” The Chuck Taylor line makes up about 10 percent of Nike’s revenue, making the Converse acquisition a smart move for the company.
Phil Knight’s New Career Moves
After a long and fulfilling career, Phil Knight chose to step down as Nike’s CEO and president in 2004. William D. Perez took on Knight’s former responsibilities, while Knight served as chairman of the board for an additional 11 years.
In 2015, at the age of 78, Knight opted to step away from his chairman role. At that time, he had a net worth of $24.1 billion, mostly from his stake in Nike. The co-founder of the brand played a key part in building the $96 billion retail giant that dominates the sportswear market. He is one of the richest people in the world today.
The Celebrity Endorsements Continue
In 2008, professional baseball player Derek Jeter signed a Nike endorsement contract worth $100 million. The contract paid Jeter $10 million per year for 10 years. He also had other sponsors, such as Gillette and Avon.
Now that Jeter has retired from the sport, Nike’s Jordan Brand extended the endorsement deal. Additionally, he helps select new athletes for endorsements and is the captain of Jordan Brand Baseball and Training. Through this position, Jeter gets to help other baseball players reach their maximum potential, just as he did.
Scoring a Uniform Touchdown
The year 2012 marked another big move on Nike’s part. The National Football League (NFL) signed a contract making Nike the NFL’s official uniform provider, replacing chief competitor Reebok. Nike provided all 32 NFL teams with uniforms, footwear, gloves and sideline apparel for a period of eight years.
Since that time, the NFL has already extended the agreement with Nike. When the current contract expires in 2020, another eight-year contract is set to begin. As the deal seems to work well for both Nike and the NFL, it’s not unrealistic to predict an ongoing partnership for the two organizations.
Establishing a Uniform Monopoly
In June 2015, Nike continued its uniform contract takeover. The NBA signed an eight-year deal with Nike, kicking competitor Adidas to the sidelines. Nike produced both on-court uniforms and other apparel — all with the iconic Nike swoosh on them.
Nike also has a new deal with Major League Baseball going into effect in the near future to become the official provider of baseball uniforms and apparel. By 2020, Nike will provide uniforms for three of the four major sports leagues in the country. The NHL is currently signed with Adidas, but it shouldn’t come as a surprise if that league makes a deal with Nike as well.
A Risky Endorsement
Perhaps Nike learned that negative attention sometimes pays off, thanks to endorsements from beleaguered stars like Tiger Woods and Kobe Bryant. More recently, the company chose to renew an endorsement deal with Colin Kaepernick, even though his national anthem protests essentially tanked his NFL career.
Even with many consumers burning their Nike apparel in protest, the brand hasn’t suffered much overall. As of August 14, Nike closed at $81.03 per share, a bit down, but it shows that Nike continues to do well, even in the face of controversy.
