How Nike initiated the Downfall of Reebok.

Key Takeaways

  • Reebok’s journey begins when the Foster brothers named their sports company after a South African gazelle.
  • It once held the no 1 spot in the sports segment with competition from Nike and Adidas.
  • It was making 1.82 b in sales as compared to Nike’s 1.71b in 1989.
  • Adidas bought Reebok in 2006 for 3.8 b dollars.
  • Adidas’s sidelining of Reebok bought up Reebok’s downfall.

Reeboks journey begins as it acquired the no 1 position in the sports industry during the ’80s until Nike came over and reclaimed its position by the ’90s. in the late ’80s, Reebok was minting 1.82B in sales as compared to Nike’s 1.71 B. Sports stars like Mick Jagger, Jane Fonda, and Cybill Shephard were donning the Reeboks in the late ’80s taking the company’s fame to new heights. In the early ’90s, misfortunes in Reebok’s journey began, the battle between Nike and Reebok got intensified and Nike through its exclusive branding zoomed past Reebok. In less than a decade after reaching the peak, Reebok was trailing Nike by a few billion as it posted sales of $3.64B as compared to Nike’s $ 9.2B and hasn’t looked back ever since. What Caused the Downfall of Reebok? Let’s find out

Laying the foundation

Reebok’s journey begins long before it was invented by its founders the Foster brothers. His grandfather had started a sports shoe company named J.W. Foster and Sons long back in 1895 which paved way for Foster to start his own shoe company as he could see the downfall of his family business. Foster wanted his company’s name to sound very sporty, he went through zillions of names be it bird or animal. And finally, one name that stuck in his mind was Reebok – the name of a South African gazelle and then begin Reebok’s journey.

The first obstacle was breaking into the American market. Then came forward Paul Fireman the icon in the history of Reebok’s Journey. He is regarded as the person who took Reebok to great heights but is also blamed for Rebook’s downfall. He went on to become the CEO of Reebok for a very long time. At first, Reebok was hesitant to hire Fireman but later hired him as the Distributor of Reebok in the USA. He helped Reebok open a new factory in South Korea and later bought a 95% stake in Reeboks USA market.

To get reebok into people’s eyes Fireman had the five-star runner’s world ratings in his mind. He knew that once Reebok would score five stars, People would start taking it as a serious brand and he had the marketing tricks to build the brand over it. And that happened in 1979 and that’s when Reebok took off.

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Growth towards the top

Reebok’s journey wasn’t set to explode just by winning the five-star rating. They had to get many more products under their belt to even get any chance of penetrating the sports market. And then came the idea of The Freestyle shoes. And it was the moment Fireman realized that could be the next big thing. He put all his might into marketing the product and soon it became the everyday shoes for aerobics and yoga instructors as it became a super hit.

The two existing players in the sports segment were Nike and Adidas, Reebok was aiming to be the third big player in that market. Soon enough celebrities started donning the shoes at music festivals and movie awards garnering more popularity for reebok and that became responsible to push Reebok to the throne of the sports market. Later a shoe called The Pump which was primarily branded as a basketball shoe lit up Reebok’s sales. It was a very innovative and unique concept that helped Reebok.

The scenario in India was no different. Reebok was the first foreign entrant in the sports segment in India. The growth of the Indian sportswear market started when the Indian economy was liberalized and foreign companies were allowed to invest in the Indian market. The Indian market back then was very price sensitive, underdeveloped, and majorly produced goods for men and kids. There was a lack of sports culture and awareness in India, and the demand for sports goods was mainly from educational institutes and government departments like police and railways. Reebok’s only competitor was Bata and Bata manufactured only essential footwear like office chappals and school shoes and did not emphasize on sports and trendy shoes. the sportswear market in India was untouched and concentrated with local manufacturers that had insufficient resources and money to invest in quality equipment and marketing of products. As foreign companies like Reebok, Nike, and Adidas entered the market in 1995-1996, they took over the Indian sportswear market with a bang and it evolved. This led to the establishment and sophistication of these brands. The Indian sportswear market was undeveloped and sports culture was non-existent Before the entry of these foreign players. However, post-liberalization, with new companies exploring the Indian market and with the increase in disposable income, coupled with the promotional initiatives undertaken by foreign players, the demand for sportswear including apparel rose in demand. To win market share, all the companies tried many different strategies.

However, since Reebok was the first entrant and it had the advantage of building the sports segment in India from scratch it outperformed Nike and by acquiring a share of 51% and emerged as a clear market leader in 2007. What Reebok had done right was accurately understand the Indian consumer needs and customize its products accordingly. Reebok had already established a nationwide retail presence and had an emotional connection with its customers. Moreover, Reebok’s leadership was firmly attached mainly to its association with cricket. While Nike was spending dollars endorsing international sportspersons for its products, Reebok garnered popularity by concentrating on the newly found cricket craze of the nation. To match up with reebok, Nike became the official kit sponsor of the Indian cricket team and invested a whopping 196.66 crore for the rights. But Reebok was one step ahead of Nike as it started endorsing bats of famous cricketers by simply placing a sticker on them and it turned out to be a simple yet effective strategy. And Reebok was successful in knocking down Nike from establishing its presence in cricket which was mainly reeboks domain.

Reebok’s growth to the crown was so overwhelming that the company was barely managing to keep up the pace. They hardly has any time to savor the number one spot as the competition started intensifying. Reebok was doing all it could to keep the crown on its head as it started to penetrate many other sports. Reebok even sponsored the Russian Olympic team in the 1992 Olympics. Later a controversy lit up when Nike didn’t allow its contracted players to wear a Reebok branded uniform at an award ceremony. That only did good for Reebok as people interpreted it as Nike’s cowardness. But then fortunes turned and Reebok’s downfall begin, it lost the no 1 spot as Nike and Adidas had a larger organizational strength for the global market. As 2004 came by, Reebok had its existence in all four major sports leagues and was giving Nike nightmares. Reebok’s journey was set to become a success story and achieve the spot of third-largest sports brand globally, its sales reached $3.79 billion, but it was around $3 billion less than Adidas and around $9 billion less than Nike. But then came the shocking news, Reebok’s downfall was about to start as it was being acquired by Adidas, and thus begin Reebok’s downfall its dream of becoming a global brand went down with it.

The downfall

People give firemen all the credit for building reebok as a brand and call him a motivator and a challenger, as he was. He knew how to promote a good product and grab customer’s attention. But he also has been called impatient, unreasonable and has been criticized for Reebok’s downfall as he had become less about building the brand and more about maintaining the sales. And that’s how Reeboks innovative approach began fading and thus started its downfall.

When Fireman was thinking to change leadership, he was unable to find one, and hence he had to turn to Adidas for help. By that time Nike was getting bigger and that was the reason Adidas and Reebok getting together seemed to be a good idea. Moreover, Reebok was struggling to find a successor, and hence getting a partner seemed to be a great idea. By the time Adidas and Reebok got together, Adidas had only a 5% market share as compared to Reeboks 17%.

The two companies had their markets and had a great opportunity to grow to a great expand into their respective markets and they also have several meetings over it. But as the deal was closed, these plans fell apart. Adidas took over Reebok’s deal for NBA and NFL was handed over to some other brand. Adidas had different plans than reebok and the two brands fell apart. Adidas had bigger motives to grow its brand and Reebok has left aside in this process. Adidas grew stronger into the sports segment and that meant the fall of Reebok out o the sports market. Adidas tried to push Reebok into physical fitness but it greatly failed due to Nike’s strong presence. The downfall of reebok was due to Adidas stealing Reebok’s market share and it became a game of tug of war between two brothers. Both brands started believing that they were better off separate and prioritizing any one brand will damage the other brand and will suffocate the other brand even more. This complicated issue ultimately brought the downfall of Reebok but also frustrated its founders who were watching from the sideline. Reebok also had to change its logo multiple times which made Reebok look like a smaller brand and tainted its image. Despite paying $4 b, Adidas couldn’t get reebok running as it should have and were not able to keep the two companies running simultaneously.

Reasons of downfall

Adidas cannot be excused for the demise of Reebok but there were many other reasons for reeboks downfall. There was a lack of strong brand identity for Reebok, moreover, it changed its style of shoes more frequently and tried expanding into too many market segments and categories all at once. For example, when one says Adidas, a shoe with three distinctive black straps and a superstar donning it comes to one’s mind. But reebok lacked that image. Reeboks only hit shoes were its freestyle and pump and those too were not very stylish and prevailed only in the ’80s. Reebok has a few decent products which have a decent presence in the market but it lacked a strong product or an experience to keep the momentum going for it for too long.

Reebok had become inconsistent with its shoes as it tended to change its designs too often. Once reebok put out a range of premium running shoes and people loved it but the following year reebok changed the cast used to shape the shoe and customers who went to buy the same shoe weren’t comfortable wearing them. Such inconsistency tainted reeboks image a few too many times. Reebok signed a few stars in the sports segment and they turned out to be huge hits but unlike Nike’s bet on Michael Jordan, none of them turned out to be massive cash and brand for reebok. Another gamble reebok placed on was getting into an unexplored sneaker market by partnering with musicians like Jay-z and 50 cents. They launched S. Carter and G-Unit shoes in the same year. Though this idea was a first off in the industry, Adidas partnering with Run DMC became a superhit. Run DMC wore Adidas as a part of their unofficial uniform and it became a trend for the commoners. Moreover, DMC sang a hit song called ‘MY Adidas’ wearing the Adidas which overpowered reebok’s success with musicians. Despite being the first company to get involved with the musician reebok was too early for the music movement for sports brands. Reebok’s fault was that it missed on carrying momentum for the buzz it created for its products and missed out on creating a cult following.

Another reason was Reeboks’ supply and demand miscalculations. Reebok initially sold 500 then 5000 then 50000 and then manufactured half a million shoes as the demand was increasing. It never let the customers feel the shortage of shoes and it worked out against reebok. They manufactured more products than what the customers could digest. Reebok had a small team as compared to Nike and it outperformed Reebok in every sector because of it. Reebok aimed to become a Nike killer and that tarnished its image even more as people didn’t take it as a serious brand.

Now that Adidas is selling off Reebok, Reebok’s chances of reviving itself have risen again. Analysts feel Reebok has a good chance of comebacks like companies like Vans and Champion. Reebok’s sales have already seen a rise in sales in the second half of 2020 due to its concentration on retro shoes. Reebok needs to start from ground level up and then the sky is the limit. “We could do it again,” Litchfield said of beating Nike. “But we could do it as Reebok for Reebok to represent Reebok. Not to be Lululemon and not to be Nike. No: We can be Reebok pretty good. We did it once, we could do it again.”

The only question that remains is how big can Reebok get? And can it ever catch Nike?

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Sanchit Kelkar

Content writer

Ashutosh Agarwal

Graphic designer

Akshit Mittal

 Editor 

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