Ged Carroll

Category: consumer behaviour | 消費者行為 | 소비자 행동

Consumer behaviour is central to my role as an account planner and about how I look at the world.

Being from an Irish household growing up in the North West of England, everything was alien. I felt that I was interloping observer who was eternally curious.

The same traits stand today, I just get paid for them. Consumer behaviour and its interactions with the environment and societal structures are fascinating to me.

The hive mind of Wikipedia defines it as

‘the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services.’

It is considered to consist of how the consumer’s emotions, attitudes and preferences affect buying behaviour. Consumer behaviour emerged in the 1940–1950s as a distinct sub-discipline of marketing, but has become an interdisciplinary social science that blends elements from psychology, sociology, social anthropology, anthropology, ethnography, marketing and economics (especially behavioural economics or nudge theory as its often known).

I tend to store a mix of third party insights and links to research papers here. If you were to read one thing on this blog about consumer behaviour, I would recommend this post I wrote on generations. This points out different ways that consumer behaviour can be misattributed, missed or misinterpreted.

Often the devil is in the context, which goes back to the wide ranging nature of this blog hinted at by the ‘renaissance’ in renaissance chambara. Back then I knew that I needed to have wide interests but hadn’t worked on defining the ‘why’ of having spread such a wide net in terms of subject matter.

  • Klad + more stuff

    Klad

    Klad is a new trends in illegal drug distribution. Klad sprang out of the online anonymity of the darknet. Breaking Klad: Russia’s Dead Drop Drug Revolution | Global Initiative goes into detail about how the Klad system works. Klad seems to be the narcotics equivalent of an Amazon locker. The customer pays the money via a dark web service and is directed to a concealed geocache with their product in it. These caches are refreshed by low level network members whose soul role is to service the klad network.

    Understanding Russia’s darknet markets and the logistics systems underpinning it offers insight into the future of drug trafficking (and other crimes) worldwide.

    Klad is likely to be further complicated by the tight linkage between the Russian state and international organised crime groups.

    China

    Blackpink’s Lisa ignites controversy on Chinese socials with cabaret performance | Jing Daily – an old article but shows the tension of feminist and male-centric themes, modern mindset versus tradition.

    Consumer behaviour

    The Future of Men from TEDWomen 2017 – by Jack Myers

    Climate emotions, thoughts, and plans among US adolescents and young adults: a cross-sectional descriptive survey and analysis by political party identification and self-reported exposure to severe weather events – The Lancet Planetary Health – more data supporting the idea of climate despair – poor mental health related to concerns about climate change.

    The Game Theory of Democracy – The New York Times – Adam Przeworski developed a theory that democracy is best understood as a game, one in which the players pursue power and resolve conflicts through elections rather than brute force. Democracies thrive when politicians believe they are better off playing by the rules of that game — even when they lose elections as it maximises their self-interest over time. It works when the stakes of power remain relatively low, so that people don’t fear electoral defeat so much that they seek other methods reversing it. Winners of elections need to act with restraint. They can’t make life miserable for the losers, or foreclose the possibility that future elections would allow the losers to win. But recent years suggest that even “working” democracies can be far more fragile than was once believed; Przeworski doesn’t see an obvious way to protect it from being weakened further.

    Using F-word at work is no sacking offence in the north, rules judge | The Times – As rude as the comment was, the so-called f-word had become commonplace “in the public sphere” — and that was particularly the case in the north of England. “Mong” is a derogatory term for someone with a learning disability, especially related to Down’s syndrome, and is also used as a synonym for “idiot”. Shergill was hearing a claim from Robert Ogden, who was said to have made the jibe during an office discussion about doughnuts and losing weight. His colleague was said to have felt “violated and shocked” by the remark and was left in tears before reporting Ogden to bosses, who eventually sacked him. Ogden is now in line for compensation after the judge ruled that his “lawless and toxic” office was rife with similar comments.

    Design

    Ideas We Love: Re.Uniqlo Studio

    Energy

    Norway’s electric car sales set new world record | VoA

    Finance

    Inside Goldman Sachs’ years-long power struggle over its China venture FT – Goldman Sachs had their face ripped off and they are still enthusiastic about the Chinese market. Senior executives gave themselves bonuses while the business shelled out a billion dollars for very little. In addition, looking at market timing it’s unlikely Goldman Sachs will realistically get the kind of returns their shareholders would want ever.

    FMCG

    Starbucks needs to cut the crap from its brand positioning | MarketingWeek – Starbucks is more than coffee. It does have brand appeal. But it’s more basic than its highfalutin mission would have you believe. It’s a combination of being in the right places to answer the right category needs at the right time, with a small but not unimportant wedge of American quality and efficient delivery.

    There is plenty of brand equity in Starbucks, it’s just apparent that Starbucks never actually worked out what it was. Professor Dolly Parton has the best definition for positioning: find out who you are and do it on purpose. To use her analogy, Starbucks never got to first base never mind second.

    Yes, Starbucks grew under Schultz’s second tenure. He was an exceptional leader twice over. However, there was a vacuity within the brand that was palpable when you entered its stores. The commoditisation of Starbucks that Schultz spotted so brilliantly continued, offset by other excellent decisions that kept it growing.

    The brand’s nonsensical mission statement did not harm it. It did not lose the company money. But its fundamental stupidness and overreach meant that the potential benefits of a more prosaic, practical, accurate position were missed. A problem deferred. Contrast with Why am I optimistic about Starbucks China ☕ | Following the Yuan

    Gadgets

    Why has the Internet of Things failed? « Pete Warden’s blog

    Interesting video by The Verge that covers how supply chains are crippling cassette players and compact disc players. Bottle necks include magnetic heads, cassette mechanisms (one factory in China makes a bad dupe of an old Japanese company design), laser pick-ups and compact disc mechanisms have a similar problem. The programme also misses out that the likes of Dolby Labs no longer licence their noise reduction technology.

    Health

    Telehealth’s GLP-1 ‘gold rush’ is powered by these medical groups | STAT News

    Hispanics and Mental Health: Gaming as a Pathway to Self-Care | Ideas Exchange by Klick Health

    Hong Kong moves to restrict business use of medical terms such as ‘treatment’, ‘clinical’ | South China Morning Post – Under the planned ban, which has already been added to the Private Healthcare Facilities Ordinance but not yet enforced, premises other than licensed healthcare facilities or exempted clinics would not be allowed to use terms such as “clinical”, “healthcare”, “medical”, “treatment” and “therapeutic”. Currently, it is not uncommon to see such descriptions used in non-medical settings. An online check by the Post found a gym claiming it could offer “targeted pain treatment” with a procedure called myofascial release. Another centre also claimed to treat various pain conditions “commonly seen in the city” by stretch therapy.

    Hong Kong

    Trump, Harris both like ‘poison’ for Beijing, says former top US envoy to Hong Kong | South China Morning Post – while the story leads on Kurt Tong being the former US consul general – you could rewrite the precise of the article as head of strategic advisory firm advises Hong Kong to employ advocacy tactics to detoxify Hong Kong government reputation in Washington (presumably including lobbying and think tanks).

    Innovation

    Watching Nintendo think out loud about radar and music (Interconnected)

    Marketing

    Great video hosted by Kantar featuring Mark Ritson on the benefits of consistency in brand building. I can’t embed here, you have to go to YouTube to watch it.

    Huddle 001 – Is strategy sick? – Outside Perspective

    Media

    OnlyFans Has Paid $20 Billion to Creators Since 2016, CEO Says | Variety

    Retailing

    Asos CEO ‘not worried’ about Vinted or Shein despite mounting losses | Retail Gazette – interesting. I wonder how the brand building work is going? I have seen lots of ads, but they’ve felt disjointed and flat

    John Lewis partners with Klarna for ‘buy now pay later’ option – Retail Gazette – the middle class now need the digital equivalent of ‘lay away’ – not a great economic indicator

    Security

    Chinese Group Accused of Hacking Singtel in Telecom Attacks – Bloomberg

    Software

    Split mixed tracks with LANDR Stems | SOS – this is huge

    Style

    Kizik Hires Nike Footwear Veteran Andreas Harlow as SVP of Design – Footwear News – moving prior to the new CEO Harlow was responsible for design of the Jordan line of footwear, but makes sense when you read my John Donahue and Nike related post.

    Technology

    She Built a Microcomputer Empire From Her Suburban Home | Every

    Telecoms

    Interesting article on the state of the internet. It looks as if the network might be maturing: Is the (US) Internet Really Slowing? – On my Om

  • Presidential election beliefs

    Why presidential election beliefs as a topic? The US presidential election happened and Democrats are looking at analysing the fallout.

    While it is easy to blame the qualities of the candidates, I wanted to take a look at the presidential election beliefs that underpinned the campaign. The reason why I am publishing a while after the fact is that I wanted the clarity of slower thinking rather than being wrapped up in the maelstrom of analysis, this then naturally took me to analyse presidential election beliefs rather than other aspects of the campaign such as the qualities of the candidates.

    GSFC_20211105_2022-1529-0_090
    NASA/Taylor Mickal

    I think that their campaign was built on presidential election beliefs that would seem foolish in retrospect.

    • Gen-Z would vote Democrat
    • Substance matters
    • Taking the moral high ground
    • Trust in the mainstream media
    • Vibes over policy

    Gen-Z would vote Democrat 

    I won’t get into the debate over how representative and helpful generations are as a descriptor and assume on good faith that this is just short hand for young adults. Evidence would suggest that this belief was untrue in election performance and underlying research available prior to the election.

    Group cohesion scores

    BBH London looked at  TGI’s Jan-Dec 2019 UK dataset, measuring the size of the average majority viewpoint across 419 lifestyle statements.

    As an entire populace, the UK’s Group Cohesion Score is 48.7%. In other words, the average majority opinion is held by 48.7% of the population. …On average, the generations have a Group Cohesion Score of +1.3, making them only marginally more like-minded than the nation as a whole. For Gen Z, this score falls to +0.2. People born between 1997 and 2013 have no stronger connection to each other than to the rest of the country. 

    This viewpoint was supported by a piece of research conducted by Stanford University researchers back in 1998 and presented to the annual meeting of the American Sociological Association. The researchers found that the beliefs attributed to young adults at the time in terms of cynicism, bleakness about the future and personal unhappiness were actually increasing across all ages – an empirical demonstration of group cohesion similar to the TGI data cited.

    Criteria affecting progressive political themes

    Oxford Analytica published a paper looking at the criteria affecting progressive political themes on a global basis, which had some lessons at a national level as well:

    • Manipulation of religious divisions will prevent an improvement in religious tolerance.
    • Wealthier economies correlate with better support for proactive measures to support women’s rights.

    A comment by Alexander Stubb at the Norwegian Business School struck me about this concept of wealthier economies. President Stubb was talking about struggling to understand Brexit, he recalled a politician commenting on how the UK benefited in terms of GDP, to be interrupted by and event attendee commented ‘Yeah mate, perhaps your GDP, but not mine’.

    What a wealthier economy is, is as much contextual as nation level quantitative data.

    This would probably explain why less well off women didn’t universally rally behind the Harris over Roe versus Wade when they may have been pre-occupied by the impact of inflation on their households.

    It also may partly explain the progressive / conservative political split between the genders highlighted in the FT. A new global gender divide is emerging – documented the split.

    gender split

    Richard Reeves in his book Of Boys and Men highlighted some of the factors driving it that affect the context of a wealthier economy by gender from the gender split in education attainment to better quality social support networks.

    Economically independent women can now flourish whether they are wives or not. Wifeless men, by contrast, are often a mess. Compared to married men, their health is worse, their employment rates are lower, and their social networks are weaker.

    Substance matters

    I was divided over whether I should include this in the next section as substance and taking the moral high ground seem to be closely paired. I think that this is based on a number of factors:

    • In most careers there is a fallacy where we think others think our work matters more than it actually does in the minds of the general public, the same goes for policy wonks.
    • From the Roman satirist Juvenal discussing ‘bread and circuses‘ to Orwell’s description of the ‘proles’ in 1984 it is obvious that their vision of a general public that want to be entertained rather than informed. The higher role for media exemplified by the likes of John Reith at the BBC is at odds with this reality. This goes hand-in-hand with the power that Elon Musk’s voter registration sweepstakes and Joe Rogan’s podcasts seemed to have; despite them being the antithesis of John Reith’s vision.

    Taking the moral high ground

    The Republican campaign threw out a number of ‘dead cat’ tactics that distracted media, outraged their political opponents and entertained their supporters:

    The average member of the public probably doesn’t care about the high ground. We can see this in marketing history. Going back to Christmas 2016, Poundland’s social campaign around its ‘naughty’ elf on a shelf that outraged the ad industry and regulators at the ASA, received positive responses from the general public online. We see this mirrored in the interests and pleasures of the ‘proles’ in George Orwell’s 1984. Elections aren’t a debate class, but entertainment.

    Trust in the mainstream media

    One of the great differences between the campaign run by the Democrats and their Republican counterparts was the role played by the mainstream media. The Harris campaign relied on institutions like Saturday Night Live and interviews with serious journalists.

    By comparison, Donald Trump gave his interviews primarily with podcasters (though some of those podcasters were faces in the mainstream media before becoming podcasters like Sean Hannity) including:

    • Sean Hannity
    • Let’s Go! with Bill Belichick, Maxx Crosby, Peter King & Jim Gray
    • Brian Kilmeade (Fox Radio podcast show)
    • The Joe Rogan Experience
    • Six Feet Under with Mark Calaway
    • The Dan Bongino Show
    • The Glenn Beck Program
    • Bussin’ With The Boys
    • Andrew Schulz’s Flagrant with Akaash Singh
    • The Ben Shapiro Show
    • The Ramsey Show also syndicated in their clips podcast The Ramsey Highlights
    • The Howie Carr Radio Network
    • Lex Fridman Podcast
    • The Dr. Phil Podcast
    • Shawn Ryan Show
    • This Past Weekend w/ Theo Von
    • The Adam Carolla Show
    • Impaulsive with Logan Paul

    Altogether Trump appeared on 22 podcasts in 2024 alone. Many of them on multiple occasions. If you discount mainstream media programmes republished in a podcast format, Harris appeared less times in less podcasts than her rival. In terms of absolute reach the Joe Rogan Experience is bigger for US audiences than equivalent shows on Fox News. Progressive-leaning TV networks MSNBC and CNN combined are about only half of Rogan’s reach.

    The problem is that trust in mainstream media has declined, at a faster rate than their newer online media rivals according to research conducted by IPSOS. So the Democrats spent time focusing on ineffective media interactions in comparison to their Republican rivals based on presidential election beliefs about the primacy of mainstream media publishers with regards to politics.

  • Layers of the future

    This post about layers of the future was inspired by an article that I read in the EE News. The article headline talked in absolutes: The external power adapter Is dead. The reality is usually much more complex. The future doesn’t arrive complete; instead we have layers of the future.

    GITS 3

    Science fiction as an indicator.

    The 1936 adaption by Alexander Korda of HG Wells The Shape of Things To Come shows a shiny complete new utopia. It is a tour-de-force of art deco design, but loses somewhat in believability because of its complete vision.

    https://youtu.be/knOd-BhRuCE?si=HfIDYsaa7nUZKrYE

    This is partly explained away by a devastating war, largely influenced by the Great War which had demonstrated the horrendous power of artillery and machine guns. The implication being that the layers of architecture assembled over the years had been literally blown away. So architects and town planners would be working from a metaphorical clean sheet, if you ignore land ownership rights, extensive rubble, legacy building foundations and underground ground works like water pipes, sewers, storm drains and cable ducting.

    In real-life, things aren’t that simple. Britain’s major cities were extensively bombed during the war. The country went under extensive rebuilding in the post-war era. Yet even in cities like Coventry that were extensively damaged you still have a plurality of architecture from different ages.

    In the City of London, partly thanks to planning permission 17th century architecture exists alongside modern tower blocks.

    Contrast the blank sheet approach of Things To Come with the immersive story nature of anime Ghost In The Shell; which based its architecture on Hong Kong.

    GITS 2

    You can see a mix of modern skyscrapers, tong tau-style tenements and post-war composite buildings that make the most of Hong Kong’s space. Given Hong Kong’s historically strong real estate marketplace, there are very strong incentives to build up new denser land uses, yet layers of architecture from different ages still exist.

    COBOL and other ‘dead’ languages.

    If you look at computer history, you realise that it is built on layers. Back in the 1960s computing was a large organisation endeavour. A good deal of these systems ran on COBOL, a computer language created in 1958. New systems were being written in COBOL though the mid-2000s for banks and stock brokerages. These programmes are still maintained, many of them still going long after the people who wrote them had retired from the workforce.

    Computer History Museum 10

    These systems were run on mainframe computers, though some of these have been replaced by clusters of servers. IBM still serves its Z-series of mainframe computers. Mainframe computing has even been moved to cloud computing services.

    In 1966, MUMPS was created out of a National Institute of Health project at Massachusetts General Hospital. The programming language was built out of frustration to support high performing databases. MUMPS has gone on to support health systems around the world and projects within the European Space Agency.

    If you believe the technology industry all of these systems have been dead and buried by:

    • Various computer languages
    • Operating systems like UNIX, Linux and Windows
    • Minicomputers
    • Workstations
    • PCs and Macs
    • Smartphones and tablets
    • The web

    At a more prosaic level infrastructure like UK railway companies, German businesses and Japanese government departments have been using fax machines over two decades since email became ubiquitous in businesses and most households in the developed world.

    The adoption curve.

    The adoption curve is a model that shows how products are adopted. The model was originally proposed by academic Everett Rogers in his book Diffusion of Innovations, published in 1962. The blue line is percentage of new users over time and the yellow line is an idealised market penetration. However, virtually no innovations get total adoption. My parents don’t have smartphones, friends don’t have televisions. There are some people that still live off the grid in developed countries without electricity or indoor plumbing.

    Diffusion_of_ideas

    When you look at businesses and homes, different technologies often exist side-by-side. In UK households turntables for vinyl records exist alongside streaming systems. Stuffed bookshelves exist alongside laptops, tablets and e-readers.

    Yahoo! Internet Life magazine

    yahoo internet magazine

    Yahoo! Internet Life magazine is a microcosm of this layers of the future co-existence . Yahoo! is now a shadow of its former self, but its still valued for its financial news and email. The company was founded in 1994, just over 30 years ago. It was in the vanguard of consumer Internet services alongside the likes of Wired, Excite, Go, MSN, Lycos and Netscape’s Net Center.

    Yahoo! Internet Life magazine was published in conjunction with Ziff Davis from 1996 to 2002. At the time when it was being published the web was as much a cultural force as it was a technology that people adopted. It was bigger than gaming or generative AI are now in terms of cultural impact. Yet there was no incongruity in being a print magazine about online media. Both existed side-by-side.

    Post-print, Yahoo! Life is now an online magazine that is part of the Yahoo! web portal.

    Technology is the journey, not the destination.

    Technology and innovation often doesn’t meet the ideals set of it, for instance USB-C isn’t quite the universal data and power transfer panacea that consumers are led to believe. Cables and connectors that look the same have different capabilities. There is no peak reached, but layers of the future laid on each other and often operating in parallel. It’s a similar situation in home cinema systems using HDMI cables or different versions of Bluetooth connected devices.

  • Ghost signs + more stuff

    Ghost signs

    I took this picture almost two decades ago on a visit to Hong Kong of ghost signs.

    Former industrial units in Fotan

    I was reminded of this picture when I watched the below documentary on ghost signs. Specifically it reminded me of the former industrial units I saw in Fotan, which is in the New Territories of Hong Kong. Their structure used as a giant billboard advertising their former uses making fur coats or plastic flowers. The ghost signs of Hong Kong were fast-fading evidence of an industrial golden age in Hong Kong extinguished by China’s entrance into the World Trade Organisation (WTO) at the end of 2001.

    The UK ghost signs highlighted in the documentary benefit from a slower rate of building replacement and a more temperate climate that helped preserve lead paint over a century old.

    Ghost signs show that history is all around us, if we care to look around us.

    Beauty

    Avon mulls franchise stores and widens tie-up with Superdrug | Retail Gazette

    China

    Volkswagen China CMO deported from China for drug use | News | Campaign Asia – Volkswagen Group China’s chief marketing officer, Jochen Sengpiehl, has been expelled from China following a positive drug test upon his return from a holiday in Thailand. This development has caught significant attention on Chinese social media, as reported by the German tabloid Bild-Zeitung. AFP reported that German officials confirmed the news on Tuesday. Sengpiehl was detained for over 10 days and instructed to leave the country immediately after Chinese officials detected traces of cannabis and cocaine in his blood, according to AFP’s coverage. He was held in custody before Volkswagen and officials from the German embassy managed to secure his release. However, he was required to leave the country instantly, as reported by Bild. Campaign Asia-Pacific reached out to Volkswagen Group for comment. A global spokesperson offered a terse response: “We ask for your understanding that we will not comment further on the content of your questions in light of our contractual and data protection confidentiality obligations.” The incident throws a harsh spotlight on the differing legal landscapes around drug use. While Germany legalised cannabis use earlier this year, and Thailand became the first Asian country to decriminalise it for medical purposes in 2022 (though recreational use is slated for prohibition by the end of the year), China maintains extremely strict anti-narcotics laws, with severe penalties for violations. – This also says a lot about how little China needs Volkswagen in the country now.

    Why Are Airlines Quiet Quitting China? | Skift

    Consumer behaviour

    Gen Z’s joy in chaos: Why maximalism is back | Jing Daily – at odds with the sleek pared down looks currently driving Chinese fashion. Not really that much of a surprise given how young people over the years have rated thrift shops, army surplus stores and shopped while travelling in search of authenticity and a story behind their eclecticism.

    54: Double 11 (Is Ralph Lauren a victim?), The fall of Will’s and ClassPass | Following the Yuan – Chinese consumers using returns policies to hit ‘boycotted’ western companies in the pocket by exploiting the elevated business costs of returns in e-commerce. Double 11 or singles day is one of the premier shopping days in China. If this movement is real, the results for targeted brands like Ralph Lauren would be exceptionally brutal.

    Culture

    Camcorders are now going through a ‘lomography‘ phase now – where creators love their limitations and flaws.

    Finance

    Hong Kong exchange launches crypto index for Asia | Tech In Asia

    Luxury

    Why do people queue up outside luxury stores? | FT

    Kering and Hermès tell tale of luxury inequality | FT

    Marketing

    Why global brands are failing in Africa | WARC

    Beyond the horizon: The holistic path to measuring media investments | WARC

    Online

    Preparing for Apple & Google’s certificate lifespan changes | The Stack – interesting that this transition is being compared to Y2K in terms of technology experience disruption

    Security

    TSMC cuts off Chinese chip designer linked to Huawei • The Register

    Software

    OpenAI and Anthropic present two possible futures for AI – The Verge

  • The John Donahue post

    Who is John Donahue?

    John Donahue is the outgoing CEO at Nike. Full disclosure, I have Nike in my wardrobe and I own a share in the company at the time of writing. Anyway back to Donahue, according to his biography on the Nike website:

    John Donahoe is President & CEO of NIKE, Inc. He is responsible for the continued growth of NIKE’s global business portfolio, which includes the Nike, Jordan and Converse brands. John became president and CEO of NIKE in January 2020 and has served on the Board of Directors since 2014. Previously, he was the president and CEO of ServiceNow and of eBay Inc., and he continues to serve as chairman of the board at PayPal. Earlier in his career, he worked for Bain & Company for nearly two decades, becoming the firm’s president and CEO in 1999. A former basketball player and lifelong sports fan, John received an MBA from Stanford Graduate School of Business and a bachelor’s degree in economics from Dartmouth College.

    john-donahoe
    John Donahue via the Nike website.

    He is a business strategy wonk and has extensive experience in online businesses and online commerce. When Apple had the vision thing, they hired Tim Cook – a famed operations and logistics executive in the technology industry to deliver. John Donahue had been hired to do great operational execution, by a company that was running low on the vision thing.

    Donahue may not have had permission to deal with some of the systemic issues in Nike and some of them issues might be due to the board itself.

    Penetration

    Nike’s collective strategy to move to D2C via its own retail stores and e-tailing platform was ostensively a way to increase profitability and presumably focus on heavier, brand loyal users. I can understand why they might have felt that due to the ubiquity of their products on the backs and feet of customers around the world.

    Secondly, prior to 2010 (and in most business schools still) the perceived wisdom was that modern marketing is supposedly about focusing on loyal, heavier buyers; focusing on retention (not acquisition) and return on investment.

    However, things changed in 2010; Ehrensberg Bass researchers Byron Sharp and Jenni Romaniuk summarise the marketing science research that their institution had been doing in their books How Brands Grow part one and part two. A key part of their findings was that brand loyalty is positively correlated with brand penetration – if you have higher levels of penetration then your customers will tend to be more loyal. However, if you have lower levels of penetration then your customers will tend to be less loyal. Smaller brands suffer from a double jeopardy of sorts: their sales are lower because they have fewer buyers, who buy the brand less often. 

    Which kind of makes sense. When you go to a supermarket, you can only buy what’s on the shelf when you’re in the supermarket. It would take a lot to go and try another supermarket to just buy one product. Most people will just buy what they can on their list and maybe look at substitute products.

    Nike is a huge brand, but it wilfully reduced its marketing penetration, by reducing the amount of places it appeared. It withdrew or reduced engagement with a range of partners:

    • Amazon
    • DSW
    • Footlocker
    • JD Sports
    • Macys
    • Olympia Sports
    • Urban Outfitters
    • Zappos

    When Nike goes back to those partners, there will be a shift in the power dynamic away from Nike. These retailers have options because Nike let other brands in to fill the void it chose to leave behind.

    On LinkedIn, people have talked about this as Nike has a brand problem. This is far beyond a brand problem; but brand has suffered.

    Where’s the community?

    Nike’s Londoner celebrated community back in 2018. Nike has continued to win in culture with collaborations including Nigo and Yoon Ahn of Ambush. But the culture didn’t translate into the degree of sales that Nike wanted so far.

    Part of the reason for this is Nike’s focus on sub-cultures rather than broader transformational trends in middle class and working class consumers.

    On Running have built their brand around running groups. Nike used to have running clubs ran by staff at their retail outlets. They were also were supporting Charlie Dark’s Run Dem Crew in the early 2010s.

    When did Nike give competitors space in communities? Was it down to a pivot win focus from retail to online? Given that part of the rationale for Nike’s move to selling direct to customers was to be closer to them, this all seems really odd.

    Charlie Dark has since become a global running ambassador for Lululemon.

    Core competences

    In the late 1990s and early 2000s Nike sold watches. The most famous of which was the Triax range that angled the display to make it glanceable for runners. There were also Nike MP3 players made with Philips. There was also the Nike fuelband, an in-house attempt at a wearable.

    The company decided to focus on what it did well and has since made products that are complementary to Apple’s product line like watch straps and apps. Under Donahue’s watch Nike extended itself into the technology space with NFT offerings and metaverse experiences. Both of which seem to have been expensive follies.

    Fading stars

    Nike was formed at a unique point in time and over the decades has worked with a range of game-changing athletes who were known globally thanks to mass media and the internet.

    Nike’s biggest brand and star is still Michael Jordan. The Air Jordan 1 was launched in 1984. That means that the shoe design and when he played in it is older than the young people it is sold to. The linkage between the iconic jumpman performance and his signature shoe is becoming elongated by time.

    Granted Adidas sells the Superstar, the Stan Smith, the Samba and Gazelle shoes which are older than the Jordan 1. But Adidas doesn’t lean as heavily on any one design. Instead they rotate in and out of style. Even then Adidas has suffered from problems executing consistently such as the Yeezy scandal.

    Nike’s Dunk design comes from 1985, the Air Force 1 came out in 1982. They are not bad shoes, but they will fade in and out of style.

    Nike had also been relatively slow to take advantage of the surge of interest in women’s basketball with Caitlin Clark only getting a signature shoe deal this year.

    Nike also managed to grossly underestimate the demand for replica jerseys of its England and Australia women’s football teams.

    Jordan has since expanded into a brand that Nike has used to sponsor the likes of French football team Paris St Germain.

    In golf, Nike parted ways with Tiger Woods this year. Woods is launching his own line instead. While Nike has other golfers on its roster, they don’t have the cultural impact that Woods had on the game.

    The brand has better news in football where it has a deep bench of both teams and player sponsorships to draw on. Nike still has a great bench of athletes comparable to rivals like Adidas, and that’s the problem. They glitter like the Milky Way rather than radiate like the sun.

    The secondary market

    Hypebeasts

    The rise of streetwear as an industry took off in the late 1980s. Its origins go further back. You had Dapper Dan in Harlem in the 1980s, football casual culture, Japanese fashions and the California surf culture influence. Soon after it took off you had unobtainable items:

    • Major Force t-shirts – (Major Force was a Japanese hip hop and house label featuring artists like Hiroshi Fujiwara)
    • The Tommy Boy Carhartt Detroit jacket
    • Numerous Stüssy Tribe letterman jackets
    • Supreme drops from 1994 onwards

    Trying to scratch that itch made you a hype beast. I know hypebeasts who are 60 years old and have college age children. The signs of this secondary market being bubbly could be seen back before COVID.

    The end of easy money

    Nike like other premium brands benefited during COVID-19, when interest rates were low and consumers had money in their pockets. Interest rate rises, inflation and an economic dip took away the easy money. Nike doesn’t seem to have factored this into its expectations. The decline in Chinese economic growth, seems to have hit Nike particularly hard.

    The polyurethane problem

    Nike shoes took off on them being tradable alternative assets like sports cards, or vintage bottles of wine. Nike trainers have a shelf life due to the materials that they are made from. Adhesive bonds can be reapplied, stitching can be repaired, but polyurethane midsoles crumble over time and can’t be replaced.

    The plastic breaks down and and the soles disintegrate. I have had pairs go at the four year mark. Chemistry undermines the collector segment that supports much of the secondary market for Nike products.

    A long train running

    Passengers relax and view the scenery from the lounge car of the Empire Builder enroute from Chicago to East Glacier Park Montana, and Seattle, Washington, June 1974

    John Donahue was in charge when Nike had unprecedented decline in sales. But there have been issues for a long time. Donahue was executing on a strategy for direct-to-consumer sales via its own retail stores and online, that Nike had committed to prior to his arrival as CEO.

    This is obvious from John Donahue’s recruitment process.

    • Donahue’s reputation was helped by his roles at ServiceNow and eBay
    • Donahue was a former partner at Bain and a friend to many in Silicon Valley
    • He received his MBA from Stanford School of Business – which is a great institution and happens to be the one that Phil Knight went to.

    What Nike didn’t do was commission a headhunter, hold a beauty parade or anything akin to a rigorous recruitment process in hiring their CEO.

    All of which points a board-wide issue rather than just a CEO issue. Which begs the question, will Nike become the sports apparel version of Yahoo!? A rotation of CEOs, intractable board level issues and an inevitable slide out of the limelight? Nike has been wrong-footed before, it was clobbered by the rise of Timberland in the early 1990s driven by the brown boots usefulness for standing on cold wet street corners in the criminal underworld adjacent to hip hop culture. But Nike came back. That was a different Nike with a more energetic Phil Knight and Tinker Hatfield.

    The scale of this stumble seems bigger and faster than before. Nike might not be resilient enough to withstand it.

    The innovation problem

    Former Nike designer Steve McDonald has painted a very different picture on Nike innovation internally within the company than has been seen on the outside. Outdoor sub-brand ACG was ‘never supported‘ when it was launched back in 1989. It was an immensely political environment with star-designer Tinker Hatfield warring with rival designers. Instead Nike used golden birdcage contracts to lock up and stifle talent. Hatfield is in charge of Nike’s Innovation Kitchen, but there seems to be a lack of commercially beneficial output.

    Hatfield’s days as a star designer are numbered following several decades at the top and there doesn’t seem to be a star-status worthy successor coming though.

    Nike seemed to abandon mainstream sustainable innovation some time after 2012, with its ISPA range as a sporadic tokenism to green issues.

    NikeLab – a premium line that fits in with On Running’s apparel seems to receive only sporadic support. All of which implies that product innovation had problems way before Hoka and On Running turned up.

    Nike’s Vaporfly running shoes were originally released back in 2018 and by 2020, World Athletics rule changes meant that Nike has a range of competitors providing similar shoes.

    The next battle ground has been fought over consumers focusing on wellness and fitness. When Hoka and On Running did turn up, Nike didn’t have much in the tank to respond.

    It was really brought home to me in sportswear-loving Merseyside where On Running shoes are the universal choice of everyone from office workers to scallies. Before COVID they’d all be in Nikes with the Air Max 95s being particularly popular.

    More information

    Nike withdraws full-year guidance ahead of CEO transition | FT

    Nike tries to get back in the race as sneaker sales gather pace | FT

    As Nike cuts ties with retailers, competitors try to take its wholesale place | Modern Retail

    Steve McDonald on Instagram