Project Report

Part 1: Assessment of External Environment for Nike

a. Firm’s Direct Competitors1

Company Name Sales Revenues

Nike $150 billion2

Adidas $7.4 billion3

Puma $1.5991 billion4

Reebok $3.4853 billion

Sketchers $221.8 million5

Saucony $133.2 million6

K-Swiss $121.6 million7

Asics $111.1 million8

Keds $696 million9

L.A Gear $580 million10

Asics $465 million11

1 The Running Network: http://www.runningnetwork.com/news/stateofsport1July04.html2 http://portland.bizjournals.com/portland/stories/2003/12/15/daily41.html3 http://www.forbes.com/global/2002/0415/061_print.html4 ? http://about.puma.com/news.jsp?year=04&id=19&lang=eng, accessed 17 Oct. 2004.5 Skipressworld:http://www.skipressworld.com/us/en/daily_news/2003/11/6 Saucony, Inc: http://www.saucony.com/article_detail.aspx?articleID=17 Skipressworld:http://www.skipressworld.com/us/en/daily_news/2003/11/8 Asics: http://www.asicstiger.com/aboutus/pressroom/fall04/040721_asics_second_quarter.htm9 http://www.forbes.com/2001/08/06/062.html, accessed 17 Oct. 2004.10 Breeze Technology, Inc., http://www.businessplans.org/Breeze/breeze03.html, , accessed 18 Oct. 200411 Gardner Sydney, Customer Service, GBMI and Pony International, Personal interview, 19 Oct. 2004

1

Reebok Channel Structure:

Reebok

Manufacture

r

Aurora, Ont.

Warehouse

Specialty Sport

Retailers

Online

RetailersOutlets

Independent

Retailers

Customers

Market segments served

Reebok Caters to two main types of consumers, the Performance Conscious

Consumer and the Fashion Conscious Consumer. Their marketing scheme

changes from time-to-time depending on the particular demand for the current

campaign year. The main groups targeted are as follows:

Performance Conscious Consumers (Athletes)1

Runners

Aerobic

Dancers

Tennis Players1 http://www.utdallas.edu/~esteffes/6

2

Basketball Players

Step Exercisers

Golfers

Fashion Conscious Consumers (Non-Athletes)1

Comfort and Style

Conscious Walkers

Children

Split of Functions between firm and Channel Members:

Physical Movement of Goods

Reebok uses many different currier systems depending on the size and

relationship with a particular client. Some of these include UPS, Fed Ex, and

Sometimes even Canada Post. The contact we spoke with from Athletes World

receives their shipments through UPS.2 However not every retailer we spoke to

gets their goods from Canada. Stores such as Champs, Athletes World, and

Footlocker have buyers in the United States that choose their product line from

a National Shoe Exposé and each retail outlet receives shipment due to their

demand.

Training 3

Management trains all staff

Staff gets a manual on the merchandise and they get tested on the info

that they learn.

Staff gets trained on greeting, how to set up a shoe displays, how the

shoes should look (appearance, how to tie laces, etc…)

Staff has to be knowledgeable about their shoes (especially top selling

shoes)

Shipping 4

1 http://www.utdallas.edu/~esteffes/62 Lisa – Reebok Customer Service Rep (1-800-668-1800), Oct 19th 2004 3 April – Athletes World, Pickering Town Center, Oct 16th 2004 4 April – Athletes World, Pickering Town Center, Oct 16th 2004

3

Head office calls UPS and places an order of what shoes need to be

delivered to what store.

UPS picks up the shoes from a factory (warehouse) where Reebok and

other running shoes are stored.

UPS delivers shoes to Athletes world.

Warehousing

Reebok handles all of its major warehousing tasks through their main office

located in Aurora, Ontario. 1

Selling Function to Retailers

Reebok sends out catalogs to its retailers in which they can review and make

potential orders.2

Retailing Functions

The individual retailers handle these functions. Reebok may give some guidance

when it comes to a new promotion; however it’s only a guide to the retailers.

Advertising Functions

Reebok hires Advertising firms to handle the creative side of advertising.3

Customer Service/Return Policy

If you still have the receipt you should return the item to the retail shop where it

was purchased. If there is no proof of purchase available – you would call the

Reebok Consumer Relations Team at 1-800-668-1800 so that they could arrange

for the product to be returned for inspection.4

Financing Offered to Retailers

Reebok sets up an account with its clients, which includes shipping and

handling costs. The clients are then invoiced and billed.5

Consumer Promotions – See the Last 12 months of Promotions

1 April – Athletes World, Pickering Town Center, Oct 16th 2004 2 Lisa – Reebok Customer Service Rep (1-800-668-1800), Oct 19th 20043 April – Athletes World, Pickering Town Center, Oct 16th 2004 4 http://www.reebok.com/ca_en/about/faq/default.htm#q235 Lisa – Reebok Customer Service Rep (1-800-668-1800), Oct 19th 2004

4

In Store Merchandising

Reebok sends out merchandisers to its retail stores to help out with its retail

stores in house setup for their big promotions. At other times they send pictures

of their set up and the staff will set it up accordingly. 1

Reebok’s Differences and Similarities to Nike

Similarities

Both Nike and Reebok use a lot of athletes to endorse their shoes.

If customers had a problem with their shoes they can send them back to

the manufacturer (if the retailers cannot help them).

Both company’s websites have general information on the companies.

Nike and Reebok are always used as sponsors to support different

sporting events.

Reebok and Nike both compete for the same target market.

Both companies spend large amounts of money investing it in marketing

programs, technology research and development.

Differences

1 April – Athletes World, Pickering Town Center, Oct 16th 2004

5

Reebok uses music artists that are currently on billboards top ten list to

endorse their products as well as design shoes for them. Hip Hop artists

such as Jay-Z, 50 Cents, Eve, Fabolous and Canadian rapper Choclair.

Reebok has formed a partnership with the Indy Racing League.

Reebok does not sell as many women’s training shoes as Nike does.

Reebok’s focuses on more diversification where as Nike focuses on

product development.

Last 12 Months of Promotions

Three new lines introduced and promoted by hip hop artists in both Music

Videos and Commercials:

Jay-Z’s - S.CARTERS

50 Cent’s – G 6, By G-Unit

*NEW* Pharrell Williams – Ice Cream Footwear

JULY 2004 - Reebok and Jay-Z team up with Beyonce, Tyra Banks, Joy Bryant,

Fergie, and Queen Latifah to design custom kicks for charity. All of these artists

were involved with the fundraiser for charity where consumers could bid for

shoes designed by their favorite celebrities with bids starting a $100 US. In

6

addition to receiving the shoe, the winning bidder took home the celebrity's

sketch of the designed shoe accompanied with an authentic autograph.1

AUGUST 2004 – Pharrell Williams launches a new line of clothing with Reebok

called the “Billionaires Boys Club”2

SEPTEMBER 2004 – Reebok launched nationwide Ad campaign to promote the

famed Chivas Rayadas Del Guadalajara Soccer Team3

The Channel Structures for Adidas

1 http://www.reebok.com/useng/news/REEBOK+AND+JAY-Z+TEAM+UP+WITH+BEYONCE.htm2 http://www.reebok.com/useng/news/WHO+WANTS+TO+BE+A+BILLIONARE.htm3 http://www.reebok.com/useng/news/chivas.htm

7

Market Segments Adidas targets two main types of consumers: Performance Conscious and Style Conscious consumers. Performance conscious consumers would be any kind of professional or recreational athletes, who are interested in speed or comfort. Style conscious consumers would be mostly young people, who pay

1www.adidas-salomon.ca

Wholesaler(Adidas-Salomon Canada Limited)

Specialty Sporting Good Stores

Upscale Department Stores Independent Chains

Customers

8

Manufacturer(Adidas-Salomon AG)

a lot of attention to fashion. This target market doesn’t typically pay attention to the speed or comfort; these kids are more interested in trendy colors and shapes.

Split of FunctionsPhysical Movement of goods

All shipments that come out of Adidas-Salomon are done through UPS trucking company. Ups ships the Adidas merchandise to all retail chains that carry the Adidas brand name.1

Warehousing

Adidas-Salomon Canada Limited handles its warehousing tasks at head office located in Vaughan, Ontario.2

Selling function to retailers

Adidas-Salomon gives out product catalogs to all of their retailers. The retailers will have the choice of which shoes they would want to purchase for their store.3

Retailing Functions

All retailing functions are handled by only the retailers. Adidas-Salomon provides the retailers with the price range for Adidas merchandise.4

Advertising Functions

An outside firm advertising firm handles all the advertising for Adidas-Salomon.5

Training of Retailers

Sales Representatives from Adidas-Salomon give retailers a brief training session to teach the retailers about Adidas merchandise. They don’t actually teach the retailers how to sell the product, but explain the benefits and features that Adidas provides their customers.6

Customer Service

1 Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)2 2004 Canadian Business Directory3 Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)4 Adidas-Salomon Canada Limited-Facts from the Officer of Finance, Mr. Bob Adam5 Adidas-Salomon Canada Limited-Facts from the Officer of Finance, Mr. Bob Adam6 Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)

9

Customers can visit the Adidas-Salomon website and email experts at the head office about any particular concerns, suggestions or opinions. Adidas-Salomon customers are able to choose the brand on which he/she may have an interest in. There are three message categories for the customer to choose from which are, general information, sponsorship and promotional requests and warranty information.1 Customers are able exchange or get a full refund on the item purchased. Customers will receive the refund on the original method of payment. To be able to receive a full refund or exchange, the item has to be unworn and returned with the original receipt. It must be returned or exchange within 30 days from the original date of purchase.2 Any repairs that customer may have with an Adidas shoe, will be sent back to Adidas, where they will fixed the shoe.3

Financing offered to retailers

Adidas-Salomon would not disclose any information on financing. A quick discussion was conducted with Adidas-Salomon’s Officer of Finance, Mr. Bob Adam. The only information disclosed was that an account is set up for all the retailers, which will include an invoice and billing for the shipping of the products.4 Consumer promotions

In 2004, Adidas has many athletes endorsing their product such as: Laila Ali(Boxer) Kevin Garnett (Basketball Player) The Bryan Brothers (Tennis Player) Justine Henin-Hardenne (Tennis Player) Run-DMC (Rap Artist)

These athletes and celebrities have appeared in varies advertisements throughout the year of 2004 to promote Adidas merchandising.5

In regards to any in-store sales, Adidas has not had any sales or promotion on Adidas merchandise. Retail stores such as Foot Locker have had discount on Adidas shoes and other major shoe brands.6

In-store Merchandising

All in-store merchandising is handled by the retailers. Adidas-Salomon ask there retailers to position their product with the popular brands, such as Nike, Puma Reebok, etc. Adidas-Salomon wants the retailer to place the product in visible reach and view for the customers. If there are any special

1 http://www.adidas-salomon.ca/new_email_us.htm2 http://www.footlocker.ca/en/aboutus.aspx.3 Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)4 Adidas-Salomon Canada Limited-Facts from the Officer of Finance, Mr. Bob Adam5 www.adidas.com6 Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)

10

promotions on a new shoe from Adidas, they ask the retailers to position the shoe in the front of the store with banners and poster of the shoe throughout the store.1

Adidas’s similarities and differences to Nike

Similarities

Both companies concentrate on using innovation to improve the quality and performance of their shoes. Adidas is using Ultraride technologies with a first ever full-length foamless midsole, which provides consistent cushioning from first step to the last. Nike is using FIT technologies that manage temperature and moisture to help athletes train and compete in any conditions.

Both companies develop various programs to help the environment. Adidas is concentrating on controlling and monitoring hazardous or restricted substances by eliminating PVC-containing materials from products, reducing VOCs (Volatile Organic Compounds) used to apply as a layer like paints, cements and glues. Nike is concentrating on developing a reuse-a-shoe program and using organic cotton to eliminate the content of synthetic fertilizers and pesticides.

Adidas and Nike are both using famous athletes to endorse their products. Adidas is using such athletes as David Beckham and Ian Thorpe. Nike is using such athletes as Tiger Woods and Andre Agassi.

Both Nike and Adidas get involved in sponsoring various events such as Olympic Games in Athens, Sixth Annual Walk and Bike and Nike’s Sixth Annual Community Involvement Day.

Differences

Adidas established a first ever partnership with a high-end fashion designer Stella McCarney, who will be launching the first true sport performance design collection for women.

Unlike Nike, Adidas deriving almost all its sales from its Original Classic style line of shoes, where Nike is making all its money from its Athletic Ware.

Adidas is attracting more fashion conscious youth not only with its shoes but also a wide variety of accessories such as bags, clothes, perfume, hats and so on.

Split of functions between firm and Channel members:

1 Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)

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Physical movement of goodsAthletes World receives its merchandise once every two months from their Bata Head Office Distribution Center located in Vaughan. UPS trucking company delivers the merchandise to the actual store. In order to deliver the product to the retailer’s Head Office, Adidas usually ships the product to the Central Distribution Center location, where the various companies are able to pick the merchandise from.

Training The store employees are trained according to the store’s Training

Manual The employees are tested on various levels of product knowledge by

filling out a number of training modules The complete training lasts for about 4 weeks

Shipping The Bata Head Office’s Distribution Center places an order with UPS

trucking company The UPS picks up the merchandise from the Central Warehouse

location The UPS delivers the merchandise to the Athletes World stores

WarehousingThe central warehouse location used by Distribution department of Bata Head Office is in Bradford, Ontario

Selling Functions to retailersThe Bata Head Office conducts line reviews 4 times a year, where Adidas sales representative meets up with the Bata’s own team of buyers and negotiates the terms for sale, variety of styles and quantity of the new or existing Adidas shoes, which the Athletes World stores request for or already carry.

Retailing FunctionsThe Bata Head Office handles various retailing functions. After negotiating a deal with Adidas about the products requested, The Bata Head Office makes the decisions that have to do with in-store promotions and training.

Last 12 months of promotionsIn the last 12 months, Adidas didn’t organize any type of promotions, except for a couple of $10/$20 off sales, which were decided upon by the Bata group, after closing a purchase deal with Adidas. One of the reasons for advertising a sale would be the fact that Adidas classics style shoes tend to sell very well, but the Adidas brand does not sell well at all in comparison with other shoe brands in the store.

The contacts were:Meaghan Wattie (The manager of the Athletes World store at Sherway Gardens)

12

Brent Symonds (Vice President of Distribution at the Bata’s Head Office)Ted Varty (The Adidas’s Sales representative)

Channel Structures

13

Wholesaler

Specialty Sport Stores

Department

Stores

Independent

Chains

Customer

Retailer

Manufacturer

14

Puma’s Market Segments Served

Currently, puma’s market is worldwide. Their segments served are footwear,

apparel, and accessories. However, within the footwear industry Puma’s market

segments in North America are focused on the youth. They will segment

sporting goods stores, department stores (most stores that carry Diesel

footwear seek out Puma to enhance their merchandise), and urban retailers.

More specifically, Puma is segmenting their markets to alternative and urban

individuals, the fashion/athletic market, and to a more controlled distribution.1

Split of Functions between firm and Channel Members:

Physical Movement of Goods

The companies that are under the regional accounts (buyer) have to pay for part

of the shipping for Puma products. There are options to shipping. Shipping can

be request 6 to 8 weeks in advanced. Footwear and is ordered based on season.

Many of the stores that carry Puma, the footwear are transported from the

states to head office and then to specialty stores such as champs, footlocker,

athletes world, etc. Trucks, rail, ships, and air are all responsible for the

transportation of puma footwear. As well UPS, Speedy and Purolator deliver

products to there retail chains in-between the wholesaler and the retailer.

Trucks are the central transportation method of puma because they are the

main transporters to ensure just in time delivery. It is necessary that stores

order Puma in advance because there can be border delays from the U.S to

Canada mainly because of the September 11th incident. Fees have to be paid

1 “Hal Plotkin,”http://www.halplotkin.com/cnbcs049.htm>Nov 1 1999

15

especially when there are delays on the American side. Many companies that

carry the brand have devices to keep track of inventory for Puma.

Financing offered to Retailers

Regional discounts are offered to small businesses. Strategic discounts are

offered to the bigger businesses like Footlocker, Athletes World, Sports Chek

and etc.

Ex. 100 units = 1% off, 200 units = 2% off.1

Training for employees

For puma Footwear, many companies offer the four step program and trainee

programs where employees will learn things such as customer service skills,

product skills, as well as many will be rained for management skills. Many

employees will learn the basic skills of selling and closing a sale. 2 Individuals

will have to have knowledge of the puma products as well as know the basic

features and benefits of the product.3 Though Puma does not send a direct

representative for the company, all the training programs are done internally

either by employees from head office for the retailer or by managers from the

retail store.4 Many employees of the retail chains will have the opportunity to

meet with Head office staff and ask any questions or concerns they might have

1 Spoke with representative from Puma Canada-October 17th,20042 Interview with Travis-District Manager of Champs Canada-October 15th, 20043 Interview with Melissa Lewis-Sales Associate Footlocker Canada-October 16th4 Interview with Travis-District Manager at Champs Canada-October 15th

16

on any Puma products. Many members of head office for the retail store will

come in and educate the staff about store procedures, as well as the right way

to sell products to customers. (Told by district manager at Champs Canada,

Travis)1

Training for Retailers and Functions

Training for retailers is many mainly based on the ability of the retailers to be

able to do personal selling as well as customer service functions. The retailers

are not specifically trained but are able to handle management responsibilities

in more than one department for a specific location that carries the Puma brand.

Retailers should have basic knowledge of how to operate a computer because

many functions such as monitor and holding inventory will have to be done.2

The retailers as told by Travis, should have a strong background in different

areas to be able to retail to stores or individual franchises.3 The basic

background involves tasks in: accounting, human resource issues,

merchandising, etc. Lastly retailers will be trained how to provide assortments,

and break bulking.4

Customer Service for End Users

Some stores that carry Puma have a worry free guarantee within 14 days of

purchase; it actually depends on the retail chain because other stores can be up

to 30days. If you have a damaged or defective item you can return the item to

the store nearest you, with original receipt and unworn product, or call the

hotline of the store and tell them exactly what’s wrong with the product. The

1 Interview with Melissa Lewis-Sales Associate Footlocker Canada-October 16th2http://www.google.ca/search?q=cache:Gq28qyn1nSIJ:about.puma.com/downloads/112.pdf+annual+report+from+puma&hl=en3 Interview with Travis-District Manager at Champs Canada-October 154 about.puma.com/downloads/112.pdf

17

store will happily refund the shoes for you as long as they haven’t been worn.

Once you wear them the store automatically considers them to be yours. The

store will refund your shoes if there is something wrong with them, give you

back your money, then examine and test the defective product and that’s only if

it’s a manufactured defect. 1 If there is something wrong wit the product the

company will gather all its defective products from Puma and then send them

back to head office to see if they can be reimbursed from Puma. For exchanges

it’s the same 14 or even up to 30 days and as longs as the shoes have not been

worn, you can get a straight exchange for the same items that you purchased. If

the customer has a valid complaint (such as defects) the company will exchange

or refund the shoe with the exact pair. If they want to send there written

complaints they will have to send a letter to the store they purchased their

shoes from to the head office of the store. 2

Selling Function to Retailers

Many Retailers buy products at wholesale prices from the manufacturers. The

wholesales will buy Puma products in large quantities but will sell to the retailer

in smaller amounts than what they bought. By doing this saves the retailer some

money because they won’t have to hold so much stock. The retailer buys what

they feel are the best products to sell in their stores from the manufacturer.

The wholesaler will help the retailer invest in any purchases that the retailer

has made from them.3 Many retailers, if they pay direct cash for the products

they choose from the wholesaler will have to pay lower prices on the preferred

products, as well as if the retailer purchases the products in bulk form. There

1 Interview with Travis-District manager at Champs Canada, October 15th 20042 Interview with Melissa Lewis-Sales Associate Foot Locker Canada-October 16th, 20043 Spoke with Representative from Puma Canada Annette-October 14th, 2004

18

are also different methods for retailers to buy from wholesalers such as looking

at the items that are made available from the wholesalers through catalogues.1

Warehousing

At this time there is not a warehouse for specifically Puma shoes.2 There are a

few outlet stores for a variety of shoes that carry puma in the stores located in

Mississauga as well as Calgary and Alberta. Puma operates flagship retail

concept stores in London, Paris, New York, Tokyo, San Francisco, and many

companies in Germany. There is though, the first Canadian Puma concept store,

which is located on 2532 Yonge Street, Puma, offers a wide selection of their

shoes.3 The company for the store orders all their products from the states and

has them shipped here on their selected transportation method. There are

about 30 warehouses around Europe and about 12 in the Middle East.4

Advertising Functions

There are many advertising functions that Puma employs for it products. The

company wants Pumas image for the dedication of sports to reach the entire

market place and to be recognized for the leading shoes in sports. The company

advertises shoes especially in the Olympic. The company advertises in

magazines such as Vibe and the source. Puma also has commercials with

athletes such boxer Oscar De La Hoya and Tennis star Serena Williams. Posters

for the shoes are also posted in the retail stores. 5

1 Spoke with Melissa Lewis-Sales Associate footlocker Canada-October 17th,20042 Interview with Travis-District Manger of Champs Canada-October 15th, 20043 http://www.newswire.ca/en/releases/archive/July2003/31/c7097.html4 http://about.puma.com/downloads/112.pdf5http://www.google.ca/search?q=cache:Gq28qyn1nSIJ:about.puma.com/downloads/ 112.pdf+annual+report+from+puma&hl=en or http://about.puma.com/downloads/112.pdf and www.puma.com

19

In-store Merchandising

The retail chains are informed by head office that there will be retail

merchandisers coming in to set up the specific area for Puma. 70% of the time,

head office will contact the manager of the retail store and inform the staff how

the visual layout should look by providing them with detailed pictures. They are

also informed to place the shoes in order either based on price, and style. 1

Customer Promotions

There are promotions that run throughout the retail chains for puma throughout

specified seasons from Head office. Such promotions that many retail chains

run are buy one and get the second pair of shoes ½ price. Save up to 30% off,

employee appreciation where the employees have a chance to save up to 30%

off and this is for employees only, and family and friends days where employees

bring them and they receive 30% off if you have the 30% off card. This is not

always available on Puma brand shoes, and many times they exclude puma from

these promotions, because Puma shoes are expensive and there is a high

demand for them. 2

Puma’s Differences and Similarities to Nike

Similarities

Much like the classic Nike shoes, to a great extent Puma was and still is

known as the classic shoe with its 1986 suede detailing. Even back then it

was considered a classic and the look is remaining consistent in today’s

Puma footwear.

1 Spoke with Melissa Lewis-Sales Associate Footlocker Canada-October 17th,20042 Interview and spoke with Melissa Lewis-Sales Associate Footlocker Canada-October 16th and 17th

20

In attempts to grow awareness and endorse their athletic products, Puma

brings in an NBA basketball player, Vince Carter to help position their

brand. Nike is well known for continuously bringing all star endorsers to

boost their company sales. 1

Both companies are highly regarded and recognized, consequently

resulting in targeting the same markets.2

Differences

What sets Puma apart from Nike is that the company tries to concentrate

on young people who are not just athletes, but people who have a sense

of style.

The image of Puma shoes appeals to alternative people and skaters. The

look has an urbanized, retro style than the casual Nike shoes.

Unlike Nike’s consistency in recognition and sales revenue in the world-

wide market, Puma has just recently regained their strength after falling

off the marketplace for over a decade.

Puma sets itself apart from the competition by creating a strategic

alliance with New Regency. This allows Puma rights to be an event

sponsor to the Women’s Tennis Association events, therefore helping

Puma increase exposure to their company. 3

Nike’s market segment diversification is much larger and extensive than

Puma’s, having the most comprehensive range of products.

1 Lefton, Terry. “Puma sets real-athlete push via Carter TV Spot.” Brandweek Vol.40, Issue 34 (Aug 13 1999): p.52 Geiger Andrew, “Puma Claws Carter for Breach of Endorsement Contract,” Awards $13.5 million in damages, injunction for breach, http://www.sportslawnews.com/archive/Articles%202000/CarterPuma.htm, accessed 17 Sept. 2004.3 Tedeschi, Mark. “The SGB interview.” Sporting Goods Business Vol.34 Issue 8 (Jun 11, 2001) p.44 Leand, Judy, “Pony Footwear is ready to Gallop.” Sporting Goods Business Vol. 36 (Jul 2003): p.12

21

Last 12 Months of Promotions

Consumer Promotions

Within the last 12 months, promotions for Puma where mainly dealt with, within

the store. Promotions would vary depending on the size, and popularity of the

footwear. An example of the promotions would be in-store merchandising, which

would include Puma shoes shelved inside coolers that are inside igloos. The

effect was to demonstrate that the shoe was “cool.” 1 More simply, retailers will

put together an outfit in order to merchandise or sell the shoe.2

Trade Promotions

In regards to trade promotions between manufactures and retailers, Puma does

very little to promote their products, nor do they need to. After interviewing

several management employees from different sporting goods stores, each

1 Spethmann Betsy, Delia’s Deal Strengthens Alloy, 1 Oct. 2003, http://promomagazine.com/deals/marketing_delias_deal_strengthens/, accessed 17 Sept. 2004.Leand, Judy, “Cool Cats.” Sporting Goods Business Vol. 34 (Jun 11, 2001): p.442 Blanchard Ashley, Manager, Athlete’s World, Personal interview, 17 Oct. 2004

22

indicated in their own words that very little needed to be done to sell Puma

products.1

“Their big fashion name and they sell fairly well. Pumas are trendy and really

big right now.”2

Richard Tyrell, Joggers

Manager.

Puma Interviews

Contact Name: Richard Tyrrell

Position: Manager

1 Walsh Russ, Regional Manager, Footlocker, Personal interview, 14 Oct. 2004 Blanchard Ashley, Manager, Athlete’s World, Personal interview, 17 Oct. 20042 Tyrell Richard, Manager, Joggers, Personal interview, 15 Oct. 2004.

23

1. What firm does your sales rep

work for?

A. Joggers

2. Who gives you your

merchandising materials for

this product?

A. The shoes all come from head

office. They do the ordering

and we receive the products.

3. What kind of relationship do

you have with your vendors?

A. We really don’t have a

relationship with our vendors,

compared to other vendors; the

reps don’t come in the store

and talk to us.

4. What kind of retailer support

does Puma offer?

A. Through us, not much.

5. How far in advance are shoes

ordered?

A. They buy everything a year

ahead of time.

6. What truck does it arrive on?

A. It arrives in a Speedy truck.

7. Who provided sales training for

you?

A. No, there’s no need. Basically

everything is the same and we

know how to sell them.

8. Is there any special education

or training provided by the

manufacturer in order to sell

new products successfully?

A. No.

9. Are their any incentives to sell

this product (store/regional)

A. No.

10.How well does Puma sell in

comparison to Nike?

A. Because they are more of a

causal shoe it varies.

11.What is the age range that

comes in to buy Pumas?

A. I would say, 15-23, but also

younger to older.

12.What types of promotions have

been set up within the last 12

months?

A. Their big fashion name and

they sell fairly well. Pumas are

trendy and really big right now.

We never have promotions. The

product sells out at full price

and the store carries enough to

all be bought out.

Refund Policy: 30 days with a receipt.

24

25

Contact Name: Russ Walsh

Position: Regional Manager

1. What firm does your sales

rep work for?

A. Footlocker (*Foot Locker,

Inc., Nike’s largest retail

channel member)

2. Who gives you your

merchandising materials for

this product?

A. Head office does all the

ordering.

3. What kind of relationship do

you have with your vendors?

A. It’s a give and take

relationship; we see them as

partners and have an open

partnership with them. They

will take products back that

do not perform well and if

they have something new

that is selling very well,

they will offer us the

product with quotas.

4. What kind of retailer

support does Puma offer?

A. N/A

5. How far in advance are

shoes ordered?

A. Head office is in control of

all those functions, it’s the

marketing manager’s job to

do the ordering.

6. What truck does it arrive

on?

A. It arrives in a Purolator

truck.

7. Who provided sales training

for you?

A. There is a four step training

program. Basically, everything

is done internally, there’s no

puma person to actually train

the employees one on one. We

go through stages of training.

8. Is there any special education

or training provided by the

manufacturer in order to sell

new products successfully?

A. If anything, the company will

send us product knowledge

information every once in a

while.

9. Are their any incentives to sell

this product (store/regional)

A. No.

10. How well does Puma sell in

comparison to Nike?

26

A. I would say very well, if you

were to compare them by

category, head-to-head. About

a 50 to 50 ratio.

11. What is the age range that

comes in to buy Pumas?

A. Anywhere from 14-35.

12. What types of promotions

have been set up within the

last 12 months?

A. We don’t really have

promotions for Puma

Refund Policy: “worry free

guarantee” Full Refund 60 days with

receipt.

Contact Name: Ashley Blanchard

Position: Manager

1) What firm does your sales rep

work for?

A. Athlete’s World

2) Who gives you your

merchandising materials for

this product?

A. Head office.

3) What kind of relationship do

you have with your vendors?

A. Basically, the buyers

buy Pumas, and then

its goes to the

distribution centers.

4) What kind of retailer support

does Puma offer?

A. There’s no retailer

support.

5) How far in advance are shoes

ordered?

A. They order a year in

advance.

6) What truck does it arrive on?

A. They come in a UPS

truck.

7) Who provided sales training

for you?

A. No one does, usual

training is done on

higher end

merchandise, not

Puma. Puma is a more

casual shoe, more

urbanized.

27

8) Is there any special education

or training provided by the

manufacturer in order to sell

new products successfully?

A. No.

9) Are their any incentives to

sell this product

(store/regional)

A. No, we will display an

outfit with the shoes to

help sell them.

10)How well does Puma sell in

comparison to Nike?

A. I would say 20:80.

11)What is the age range that

comes in to buy Pumas?

A. Anywhere from the age

of 16-40.

12)What types of promotions

have been set up within the

last 12 months?

A. They don’t really have

promotions; if anything

$10-20 off to get rid of any

old inventory.

Refund Policy: 90 days unworn.

90 day manufacture guarantee.

Full refund with receipt,

exchange without a receipt.

SOCIAL TRENDS:

“Now that the kids are moving out and debts are under control, the dominant generation is bursting from its cocoon.” North Americans are beginning to leave their cozy homes and see more of life. The 10 million baby boomers and 7 million echo kids have been having a great impact on social trends concerning Nike. They are emerging from their cocoons and watching less television and emphasizing more on exercising and spending time at restaurants, movie theatres and engaging in other social activities. While the baby boomers were focused more on their family values, their concerns were targeting work, income, and spending quality time with members within the family. As their children have moved out, this large aging population has been interacting with others at social outings, moved into urbanized areas, and have become large money spenders. The echo kids are carrying on this new social trend of moving away from family oriented experiences to enjoying and exploring more of life’s common activities. Now, running shoes have become walking shoes, and the treadmill is being purchased to replace visits to the fitness center1. Nike can benefit from these new social trends. Since many individuals are going out more often, they obviously want to wear comfortable shoes and Nike can fulfill that need. This target market seems to be more focused on health and keeping fit. Walking, running, being part of sporting events is part of staying or becoming healthy. So Nike can begin to target not

1 http://www.footwork.com/globe5.html

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only the younger but older generations also. However, the younger population is more fascinated with fashion trends and going out so Nike’s attention should be towards this group too. In an American Express survey of 1,300 U.S. consumers, 22% said that kids spend more on clothing than anything else. Most of these consumers said they developed their own personal style, but they also look to friends, magazines and newspapers, siblings and sports figures, MTV and musical artists and TV shows. “Where it used to be parents who made the purchasing decisions and had the ultimate say in what was being bought, now it’s driven by what kids want, largely because of media influences.” “Kids are more aware of the rights they have, and we as parents are giving them more say than we used to.1” The newer generations are more independent these days when making purchase decisions. This affects Nike because they need to have more celebrity endorsements in order to maintain the percentage of this market segment. The new generation is manipulated by celebrities, their peers, and others who they look up to. Nike has had basketball players and tennis players to capture the attention of today’s youth; so far, it has had a great impact on today’s social trends.

POLITICAL AND LEGAL TRENDS:

There have been many issues concerning child labor law in North America and the Middle East. In North America, children under the age of 16 are not allowed to work in any industrial, commercial, or service sector. However, in the Middle East, there is a low standard of living with a high number of populations. Majority of the population is under the age of 18 and these children have no choice but to leave school and attend the working environment. For example, children 13 years and older are allowed to work in certain industries in Thailand. These children are exploited with low wages, excessive work hours, and hazardous working conditions. Western countries are determined to build trading barriers to any products that have been produced by child labor. However, developing countries will not end child labor; instead they will result in underground industry of child workers2. Nike has had a major problem with sweatshops and child labor. They were known to produce goods through using children in the Middle East. Although these families needed income, a higher standard of living, and a source of food and nutrition, Nike is affected by using this as an advantage. By having sweatshops, this has lowered their image in North America. Amnesty International recently blamed third world environmental and human rights abuses on "globalization" due to millions of products being produced, such as running shoes3. Although, politics in the Middle East allows child labor in some countries for specific industries, it may seem as though Nike is permitted to use this to their advantage. However, there will be trading barriers which discontinue the privilege of products produced in developing countries to be imported into developed countries. The political environment definitely affects Nike now because they need to have individuals of the appropriate age to manufacture goods, have new factories, pay their employees at an average rate, and build their image. If they continue to have workers in the East to manufacture their goods, then eventually people will want to fight to boycott the company and their products.

1 http://www.lfpress.ca/cgi-bin/niveau2.cgi?s=generic2&p=48105.html&a=1

2 http://www.magma.ca/~thaiott/childlabour.htm3 http://www.free-eco.org/articleDisplay.php?id=30

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ECONOMIC TRENDS:

The Canadian economy has had its ups and downs. For example, it managed to create 43,000 (0.3%) net new jobs in September 2004. The labor force increased more than 0.1% in September and the unemployment rate is now at 7.1% compared to 7.2% a few months ago1. This may have an impact on Nike if they choose to have a factory in Canada. There would be more opportunities for Canadians and much more productivity. If Nike is able to hire a number of individuals, this can drastically reduce the unemployment rate. Statistics Canada shows a change in consumer price index and other major components. Higher prices for women's clothing and footwear (+1.7%) slowed the fall in the CPI in August of 2004. There was a percentage change between July and August which amounts to 0.9% for clothing and footwear2. Although there was a slowdown, Nike seems to still have an opportunity because women are increasing their purchase amounts for these specific goods. If Nike increases their prices though, there is a higher probability that consumers will not purchase their products as much as they used to. Canada’s economy has just been given a boost and it would be difficult to maintain that if prices go up. Also, consumer spending is changing to 1.3% compared to 6.4% growth in the first quarter of 2004. Canadians’ personal disposable income rose 8% from 6.6%. Their spending behavior has slowed down compared to their disposable income. Real Consumer Spending and Household show that the disposable income in millions is $745,344 which is an 8% increase for the second quarter of 2004. Although, consumers are saving more and show an increase in their personal disposable income, their spending behavior is still going at a slower pace. As for consumer prices for clothing and footwear, the percentage change from 2003 to August 2004 were -0.7% to -1.0%3. Nike will have to look at this as a threat for now. This specific trend means that Nike might have to become more price sensitive for the next few months since Canada has recently recovered their downfall. Conversely, an increase in disposable income is an opportunity for Nike because consumers have more to spend. If Nike maintains a lower price for their shoes for the next 6 months, then eventually, they can increase their prices by 5-10%.

COMPETITIVE TRENDS:

Nike’s primary competitors are Puma, Reebok, and Adidas. These brands have been around for decades and do not seem to be exiting the market. Once again, Nike is having trouble in the Middle East with their sales while competitors’ products are flowing smoothly. According to the Sporting Goods Manufacturers Association (SGMA), global sneaker sales are estimated to be worth over $15 billion annually. The five dominant categories are running shoes, basketball, cross-training, walking and casual/retro. In 2002, Nike held a 34.1% international market share while Adidas had a share of 16.5%4. Nike seems to be so involved in the NBA but the Middle East is not interested in it. In the Middle East, consumers perceive Nike as an American brand while Adidas is seen as a comfortable brand that fits in. The Middle East has a huge youth

1 http://homer.ca/business/economy/2 http://www.statcan.ca/english/Subjects/Cpi/cpi-en.htm

3 http://strategis.ic.gc.ca/epic/internet/ineas-aes.nsf/vwapj/mei200409e.pdf/$FILE/mei200409e.pdf4 http://www.ameinfo.com/news/Detailed/42006.html

30

demographic, with a very high percentage of the population under 14 years old: 42 percent in Saudi Arabia and Oman, for example, compared to just 21 percent in the United States. Average ages in the Middle East are 19 years in Oman, 18 in Saudi Arabia and 25 in Kuwait. By comparison, the average age in the United States is 361. So, there is a large market but Nike is allowing Adidas, Reebok, and Puma to gain more market share in those areas. Nike and Adidas are continuing to have their rival competition in the East while Reebok, Puma, and other companies are focused more on style, comfort, and brand strategies. Based on these facts, Nike should be focusing more on how to satisfy and gain market share in the East to be at the same level as their competition. In addition to Adidas current success with there image in the East and their newest technology, rumors say that they will buy Reebok2. If this occurs then Nike will be facing fierce competition because Adidas will be taking control in the current and future market and footwear industry.

TECHNOLOGY TRENDS:

Technology has become more advanced in today’s world compared to a decade ago. It not only has improved electronics but it has also helped to improve our everyday tangible products, such as running shoes. Who would ever guess that technology can be used in athletic footwear? It is assumed that it can be used in machinery to produce products but chips in shoes are extremely innovative. Nike's Air technology, which used a gas-filled bag of air inserted in the sole of the shoe to cushion the impact of running, first appeared in 19793. Athletic shoes have become increasingly specialized since that time and prices have grown in accordance to new technology. LeBron James, Tracy McGrady, and Allen Iverson have the latest running shoes reserved for them which will be changing the footwear industry. Adidas is distributing these new pair of shoes at a price of $250 and it contains a computer microchip and operating system. Basically, this can analyze a runner’s step and begins making cushioning adjustments in the heel of the shoe. Adidas officials claim the shoe can take up to 20,000 readings and make 10,000 calculations per second4. Nike will definitely be behind Adidas new trend. Running shoes and other athletic pairs are purchased based on comfort, reliability, durability, etc. This new pair will be able to push Nike into second place of the entire market. The fact that these new shoes will adjust on its own, it will make it difficult for Nike to produce a new product to compete against it.

1 http://www.ameinfo.com/news/Detailed/42006.html2 http://www.skipressworld.com/eu/en/daily_news/2004/08/adidassalomon_on_shopping_trip.html?cat=Finance3 http://www.arch.mcgill.ca/prof/adams/arch350/fall1999/students/jmckim/history.htm4 http://www.sportsbusinessnews.com/index.asp?story_id=36393

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