Tag Archives: Fashion

Adidas vs. Nike: The Real World Cup Battle

As the world convened on the country of Brazil to passionately watch thirty-two countries compete for immortality on the FIFA World Cup stage, another epic battle unfolded between the sportswear giants, Nike and Adidas.

Much of how consumers interact with businesses is based on perception and taste, which is why so many resources are devoted to marketing and advertising.  Through sponsoring the countries’ football teams and famous players and countless commercials and marketing ploys, the two brands geared up for a month long sporting festival that was sure to entice the consumers and bring in large chunks of revenue.  Let’s take a look and see which industry leader came away with the upper hand.

Adidas

Overall, you probably saw the Adidas logo more prevalent in the World Cup competition because of the official partnership the company has with FIFA.  At around $70 million per four year cycle, Adidas has the rights to manufacture and sell the World Cup Brazuca game balls as well as the referee kit.   Such a deal aligns Adidas with the FIFA logo on pretty much any advertisement, as we saw on ESPN’s virtual scoreboard.  Needless to say, this deal, for any sportswear brand, is extremely lucrative since the brand was quite visible.  Expenditures for the German company did not stop there, though.  According to reports, Adidas spent $2.3 billion in advertising and marketing for the World Cup.  High numbers, yes, but the ratio between the marketing budget and revenues in 2014 has held steady with the ratio during 2010’s World Cup in South Africa (10.1% and 10.7% respectively).  The target revenue with this year’s World Cup was $21.2 billion.

Screen Shot 2014-07-15 at 10.29.59 PM

Another indicator of Adidas’ exposure at the World Cup was their share price throughout the entire tournament.  Starting on June 12th, Adidas was selling at $52.99 per share and ended the tournament at $50.22 per share.  Initially, I had thought both corporations would see increased stock prices during the tournament, seeing as they would have extreme visibility and favorable marketing, but this $2.77 decline may actually be completely unrelated to the Cup.  Just yesterday, Adidas agreed to a ten year, $1.3 billion kit deal with English football club, Manchester United.  Despite the fact that this deal severs the thirteen year partnership Nike had with the football club, concerns were raised (and consequently stock prices lowered) due to the staggering price of such a deal.  Thus, it is not certain whether the World Cup had a positive affect on Adidas’ share prices.

Lastly, and maybe foremost, Adidas’ triumph at the World Cup could’ve been cemented on the final day.  Out of the thirty-two teams, Adidas sponsored nine with two of those nine making it to the World Cup Final (Brazil and Argentina).  Furthermore, out of the 166 World Cup goals, 78 were scored with Adidas soccer cleats, which belonged to some of the tournament’s top performers including Lionel Messi (Golden Ball winner), James Rodriguez (Golden Boot winner), Thomas Mueller and Andre Schuerrle of Germany.

Nike

Although Nike did not have the official FIFA World Cup sponsorship, the Oregon-based company played as big of a role as its counterpart.  As usual, Nike had the most aggressive, yet artistic marketing campaign for the event.  You probably noticed their ‘Risk Everything’ campaign, which featured the cartoon versions of Brazil’s Neymar Jr., USA’s Tim Howard and Portugal’s Cristiano Ronaldo–all Nike sponsored athletes.  Prior to the World Cup, Nike introduced their first ever football-only store in Rio de Janeiro which boasted Brazil’s World Cup kits and the boots Nike athletes would wear during the games.  With such an extensive advertising scheme, its no wonder the company’s marketing expenses jumped 36% to $876 million in the quarter to end May.

Contrastingly, Nike saw share prices increase for the month of the World Cup, opening at $74.77 and closing at $77.95.   This could have occurred for several reasons:  Nike’s forecasted 21% growth in the global football business, its share of 80% of a $5 billion industry with Adidas or because of the potential the game of soccer has in the United States.

On field success for Nike was expected, as it out-kit Adidas with 10 sponsored countries including host nation, Brazil.  Furthermore, 53% more players wore Nike boots than any other brand.  However, a series of unfortunate events on the pitch, like Neymar’s back injury, Ronaldo and Portugal’s lackluster performance and Brazil failing to make it to the final hampered Nike’s exposure as the World Cup waned.

Conclusion

Adidas was the much more visible brand during the 2014 World Cup. In competition, their teams triumphed and it seemed like all the individual awards were also given to Adidas athletes.  Beyond this, Adidas’ YouTube viewership during the World Cup eclipsed Nike’s by six million.

The future is bright for Nike, though.  The buzz around the World Cup and for the Men’s National Team in the United States was created because of Nike’s marketing.  The brand understands that while Adidas may hold a stronger foothold around the globe, it is in control of the largest consumer market in the world.  With Major League Soccer growing in popularity, Nike is primed to capitalize on soccer equipment, apparel and footwear in the US.  As far as I am concerned, Nike is well positioned to make a run at Adidas again in 2018.

Maxwell

Sneaker Pawn Shop

“Young kids don’t have jewelry.  They don’t have cars, but what they do have is the thousands of dollars worth of sneakers in their house,” says Troy Reed, father of young entrepreneur and founder of Sneaker Pawn, Chase Reed.

Sneaker Pawn, located in Harlem, New York, is the latest venture to capitalize on the budding sneaker culture that is prevalent within today’s younger generation.  The shop, manned by Chase and his father, offers secured loans to people with limited edition or dead-stock sneakers, which are used as collateral.  The two place a value on the sneakers by checking for odors and wear around the toe box and heel counter.  Just like any other pawn shop, if the pawner wants to retrieve their sneakers he/she must pay the original loan back plus a storing fee, almost like interest.  In the case that someone else makes an offer on the pawned shoe, the pawner is notified and has the right of first refusal, so long as they can provide the cash.  When the sneakers sell for more, the pawner keeps 80% of the profit and the rest goes to the store.  Besides lending money in exchange for kicks, Sneaker Pawn also customizes and refurbishes sneakers.

Chase and his father used to be the obsessed sneakerheads who would stand in line for hours and sometimes days for the newly minted Air Jordan and Nike limited releases.  Like all entrepreneurs though, the two saw an opportunity to capitalize on this hobby.  Chase, 16, sold his own collection of shoes (around 200 pairs) to gather the $30,000 of seed money for Sneaker Pawn.

The store is the current holder of some pretty exclusive kicks, such as the Kobe 9 Masterpiece, the Air Jordan 6 Infrared, and the Lebron X Crown Jewels, which are valued at $1,400–more than five times their retail price.  The shop has seen immediate success amongst consumers as collectors have pawned their kicks to pay for funerals, prom dresses, and even a move from the Bronx to Brooklyn.

Lebron X Crown Jewels
Lebron X Crown Jewels

Sneaker Pawn is effective because it enables young people to have access to fast cash.  Like Chase’s father said, kids do not always have jewelry or the expensive items that are normally used to borrow money against, but with so many investing in shoes that appreciate over time, their assets are much more liquidable.

Check out the New York Post’s article on Sneaker Pawn and check out some of the shoes the shop has to offer on their website.

Maxwell

 

Why Lululemon is The Perfect Buy For Nike

Lululemon is an athletic-wear brand with a primary focus on yoga apparel.  Having captured the attention of young women, Lulu has become quite popular across the globe.  Lulu has been apparent in my own life because of my active mother and because of the [unfortunate] leggings trend that has nestled its way into the hearts of seemingly every woman.  Lulu has been so successful because of the balance it has struck, making it’s clothing sensible and stylish while still maintaining it’s athletic roots.

Over the past year, however, Lulu has seen a slight fall from grace.  In 2013, the company was under fire due to a recall for a line of yoga pants that were too sheer.  In response, the founder of Lululemon Athletica, Chip Wilson, stated that customer’s fat thighs were to blame for the yoga pants being see-through.  As a result, Wilson relinquished his chairman’s seat and Lulu’s CEO, Christine Day, stepped down.  The company has since wilted.  Considering Lululemon’s status in pop-culture and their current lack of direction, it is primed for acquisition by none other than the world’s leading athletic-wear brand, Nike.

Nike is no stranger to acquiring other brands, as it owns Converse and skateboarding company, Hurley (Nike also purchased Cole Haan in 1998 for $95 million and sold it in 2012 for $570 million).  Right now, Lulu lacks a sense of direction.  New CEO, Laurent Potdevin, has filled the holes with empty remarks on reclaiming the company’s creative destruction in the market, but the truth is Lulu is floundering.  Through Nike’s experience in operations and marketing, it would be able to right this ship.  Lulu would gain access to some of the best manufacturing plants and Nike’s rebranding of the company would bring back the positive image it lost hold of.

Financially, this purchase would make sense as well.  Lululemon is a direct competitor of Nike.  Buying the company would give The Swoosh increased market control and better pricing power.  Moreover, Lulu is trading at a relatively inexpensive share price.  In 2013, before the company ran into turmoil, Lulu was trading as high as $82 per share.  If Nike attempted to buy the brand at this time, it would not have been feasible, as Lulu’s valuation would have been way too high.  Since the debacle, though, Lulu is trading around $44 per share, making their valuation much more affordable.

As bad as Lululemon’s situation may seem, their immediate value to Nike would be tremendous.  In terms of revenue, Lulu has gone from annual sales of about $453 million in 2010 to $1.6 billion for 2014.  This indicates that Lulu is still growing and that it is still relatively popular.  Lastly, while Nike does a fantastic job of marketing their clothes for both athletic an street-wear use, there are just certain styles that other clothing company’s manufacture or market more effectively.  For example, on campus I never see girls wearing Nike leggings, but I always see them rocking Lululemon’s, recall or not.  Its not that Nike’s yoga pants are poor quality, its that Lulu’s ability to be trendy and different has made their yoga pants more attractive.  Adding their product to Nike’s line would only make Nike that much more profitable.

Maxwell

J. Crew Going Public Once Again?

J. Crew, a brand that is one of Michelle Obama’s favorites, a brand that is defined by utility; contemporary style and an essence of preppiness has been rumored to be in talks with financial giants, such as Bank of America and Goldman Sachs, to refinance their debt and possibly become a publicly traded company, once again.  Just several years ago, J. Crew went private in a $3 billion deal with investment partners, TPG Capital and Leonard Green & Partners.  The reason being for such a departure from the trading floor was a decrease in sales.  During that year’s third quarter, net income had fallen by 14% due to weaker women’s clothing sales (J. Crew must certainly be grateful for our First Lady’s endorsement).  Moreover, stores that were open for at least one year saw their revenue fall by 1%.  In terms of the financial sector of the retail industry, J. Crew has been inconsistent; perhaps this is due to the constant shuffling of chairs in the New York based offices.

However, with the revitalization of J. Crew by CEO Millard Drexler and President Jenna Lyons, we are seeing an increase in sales and popularity.  Sales last year rose 9%, which was more than publicly traded brands, like Gap and Ralph Lauren.  I believe more time is necessary to see the true growth of J. Crew, but if it were to go public, the company would look to mirror the successes of similar brands that are ruling pop culture, such as Michael Kors (trading at $98) and Vince, a newcomer to the public market in 2013 seeing its stock rise 43% in its debut.

Further indicators of a public offering shall be debated with news surfacing about Japan based Fast Retailing Company’s Tadashi Yanai (chairman, president and CEO) wanting to acquire the J. Crew brand.  This would align Uniqlo, one of Japan’s largest clothing purveyors and one of my personal favorite shops, and J. Crew under one umbrella, making it an immediate giant in the fashion industry.  The $5 billion deal would enable the ambitious Yanai to attract more customers in the U.S. market to the rapidly expanding Uniqlo stores.  As J. Crew weighs the option of an IPO, stay tuned for more news on this potential acquisition.

As a prospective investor, pay attention to companies such as these, as their audience is global and quickly growing.  I’m certainly a novice when it comes to the financial sector, but I would suggest to invest in what you know.  Why would you financially concern yourself with corporations that you yourself are not personally involved with?  I love clothing.  J. Crew is a staple in my wardrobe and when I walk around my campus I can see its increased popularity.  If I were to invest in such a company, I wouldn’t just monitor its daily position in the market.  Since J. Crew is a part of my wardrobe, because I like to shop there and because the college style is very much catered to the J. Crew look, I would be able to observe my investment in a much more profound way.  Much like the clothing brands I mentioned above, J. Crew is a chic, urban brand while remaining relatively affordable for their followers.  I find this especially important for the college crowd, which is why J. Crew’s audience has room to expand.  Whether J. Crew is actually seeking to release an initial public offering remains to be seen.  The company may not even be a suitable long-term investment option, but for new, young investors and short-term stock options, J. Crew may be viable.

Maxwell

Lammily: Challenging the Perception of Beauty

Societies’ perception of beauty is completely based on a false reality that is perpetuated by television, the fashion industry, and even the dolls our children play with today.  The debate over this issue, this craze, has long been discussed; however, little has changed.  Each year we can count on watching “Angels” seductively walk down a runway which promotes borderline unhealthy physiques that women all across the world painstakingly try to achieve.  Every time we walk into a toy store we can count on seeing the iconic Barbie doll, an idealized, yet implausibly, shaped blonde figurine which millions of girls and boys have grown up with. Nickolay Lamm, creator of Lammily , has finally challenged these surreal desires.

Lamm, a Pittsburgh based artist and researcher, has begged the question: What if fashion dolls were made using standard human body proportions?  Provided by the CDC, Lamm has used the average body measurements of a nineteen year old women to generate a 3D digital prototype of a doll he hopes to produce.

Just two days ago, Lamm used Crowdtilt to garner crowd-sourced funding for his venture.  His target amount to cover the costs of manufacturing was $95,000.  Today, he has succeeded this goal by over $100,000 with twenty-nine days left in the first round of financing.

Lamm has been lauded for his previous work by Buzzfeed, Business Insider, Huffington Post, and many more news outlets.  The USA Today featured Lammily just yesterday.  Lamm’s ability to ask the unthought of questions and then visualize the answers in artistic renderings is the reason why Lammily is so innovative.  In our terms, Lamm is an entrepreneur.  A clear void in the fashion doll market was apparent and he has created a way to effectively exploit it.

I would also like to comment on his use of crowd-funding, a brilliant idea in my opinion.  Rather than trying to meet with investors to back his project, which we know can often lead to failure, he opened Lammily up to the public for support.  This suggests (A) his confidence and the market potential for the fashion doll, and (B) his understanding of the intended retail audience.  I do not think crowd-sourcing works for every entrepreneur, as it is necessary that your product receives the proper amount of attention for such a decision to pay off.  With that being said though, I believe this way of financing is an under-utilized option within the entrepreneurial community.

Nickolay Lamm and Lammily are prime examples of why entrepreneurs and innovation are integral parts of our society.  Lammily challenges a convention that, frankly, is unattainable while creating a new socially progressive alternative.  This is what pushes boundaries.  This is how new paradigms are created.  Congratulations on a wonderfully thought out product.

Maxwell