Now that the home is empty as Lance has moved out on his own, Nike and Trek have realized that they have grown apart. Faced with severe “empty nest” syndrome, they have decided that it is time to split. After 2007, Trek will no longer be the exclusive distributor of Nike Cycling attire.
Why does this distribution agreement warrant a post? Actually, I believe that this is a signal of Nike’s quiet retreat from cycling. If that is the case, we don’t see the boys and girls from Beaverton Or walk away with their tails between their legs very often. So, let’s dig deeper.
Lance Armstrong reinvigorated the cycling market with his 7 Tour wins. No company was a bigger recipient of this market growth than Trek. This is very easy to see. First the association. In cycling, no piece of equipment is as readily credited with helping in the success as the bike. All the other equipment, save the time trialing skinsuit (more on that later), is merely window dressing on the person and the bike partnership. Second, Trek showed us some very tangible improvements in the bike itself making us believers in Trek’s role in the Lance Armstrong phenomenon. For example, Trek was one of the leaders of the Carbon Revolution, it made forks with no rake standard, and it formed a unique symbiotic relationship with Mr. Millimeter.
This is an association that Nike should understand. A company whose roots are in running has been on the receiving end of this kind of synergy. Having the main piece of athletic equipment, the shoes, taking partial credit for an athlete’s success. They have also shown technological advances in the science of shoes as athletic improvement devices. Think Nike Air.
From that association was born Nike’s philosophy of Athlete endorsements. From Bill Rogers and Alberto Salazar to Bo Jackson to LeBron James, Nike has liked the primary athletic equipment to the primary athlete. Of course, the ultimate partnership was with one Michael Jordan. This success built a strong brand and allowed Nike to charge a hefty premium.
When Nike entered cycling, it did so in an industry where shoes are not the primary equipment. Nike also introduced clothing. Outside of trademarking the terms Dri-FIT and Sphere Dry, it gave us nothing tangible that we could touch, see, attach our feelings of athletic accomplishments. Yet they wanted a premium.
The only area where Nike really stood out is in the time trial skinsuit. Taking tons of speed skating experience, Nike really took the leadership position here. The problem is I don’t see too many skinsuits on my club rides.
Relying on the endorsement method of marketing, Nike really did not gain the traction it was looking for. Tiger Woods wears Nike clothes and they sell well too. But while I may wear a Nike golf shirt to work, I will not wear a Discovery Channel jersey any day soon.
That leaves us with clothing that serves us only while we participate. Among riders, there are two potential markets that Nike could go after; Premium and Ultra Premium. In the Premium market, you have a lot of very good and established brands. Brands like Pearl Izumi and Giordana come to mind. I would put Nike quality up against any of these brands. Unfortunately, Nike prices it’s products in the Ultra Premium market with brands like assos. Assos has two things Nike does not. First, technically better clothing. Visual/tactile difference and while riding, assos is like no other. Second, the European/Swiss cache that hearkens to cycling’s European roots. The Nike brand equity has little carry over effect in cycling.
So the Nike formula is not working. Rather than trying to adopt a new strategy, they seem to be cursing cycling and moving on. I guess that there are bigger markets to conquer and they would rather spend their energy trying to take soccer from adidas.