Giannis Antetokounmpo shoe deal is Nike being its own worst enemy again

As Nike’s overall business continues to decline, with the basketball vertical being amongst the worst in sales, Nike has continued to repeat the same practices that have led to the downturn.

After a short stint as a shoe free agent, Milwaukee Bucks star Giannis Antetokounmpo announced that he was re-upping with Nike last Tuesday. While that is great news for Antetokounmpo and his fans, it’s a head-scratcher for Nike considering trends in the industry.

While official terms of the deal have not been released, Antetokounmpo called it a “long-term partnership” and Matt Rodriguez of the Milwaukee Journal-Sentinel placed the value between $7 and $10 million per year. That value seems right because Nick DePaula and Darren Rovell of ESPN reported that the deal includes a signature shoe for Antetokounmpo.

That news prompted a succinct response by athletics apparel industry analyst Matt Powell.

Just a day later, many companies revealed their third quarter sales numbers to shareholders, which included the three biggest players in the North American athletic apparel game: Adidas, Nike and UnderArmour. There were some common threads between the three reports, like the continued decline of basketball and football performance gear.

The news was much more grim for Nike and UnderArmour than it was for Adidas, however. While Nike still sits atop the mountain in North America, Adidas continued to climb toward that peak. Adidas’ overall sales grew by 31 percent during the quarter while Nike and UnderArmour both suffered overall drops. What the market seems to be telling Nike is that its apparel is no longer seen as an athletic brand, but a casual line. More Nike merchandise was sold at places like Kohl’s than at stores like Dick’s Sporting Goods during the quarter.

Yet despite what the market is telling Nike about the basketball shoe market and demand for specialty athletic gear, Nike seems determined to protect its interests in the vertical. It’s reminiscent of a decision that Nike made years ago which is still producing negative consequences today.

Back in 1984, Nike uncovered a gold mine with the creation of Air Jordans. The limited runs of the shoes bearing the iconic Jumpman created not only an insane demand on the secondary market, but produced a demand for all Nike products that aided greatly in Nike’s ascension to the top of the North American athletic apparel mountain. Just two years later, Nike reported an annual revenue surpassing $1 billion for the first time. The Swoosh was something that everyone wanted to be seen wearing, and Nike could have thrown its logo on a bag of trash with a reasonable expectation to sell it at a premium price.

Then Nike took a turn from their highly-profitable and sustainable business model. Grown tired of seeing individuals re-sell Jordans on the secondary market for hundreds if not thousands of dollars and getting no cut of those transactions, Nike ramped up production of the shoes. It was billed as adjusting supply to meet demand at the time, but the results couldn’t have been worse for Nike.

With hundreds more Jordans available, what made the shoes special was lost. In turn, so was what set Nike apart from emerging companies like German athletic apparel company Adidas. Adidas has since eaten up huge portions of Nike’s market share because it has embraced the demand for “ath-casual” apparel, and Jordan sales continue to decline today.

When Nike let New York Knicks star Kristaps Porzingis walk last year, declining to match Adidas’ offer, it looked like Nike had learned from what the market was saying. It signaled an opportunity to put the reported $3-$6 million a year that Porzingis is getting from Adidas toward more fruitful ventures, like designing new ath-casual apparel to meet that demand.

The Antetokounmpo announcement looks like a step backward now. The days of an athlete’s signature shoe having the power to buoy an entire brand are gone, and most likely never coming back. The Swoosh’s power to sell anything will likely never be regained, regardless of how many high-profile athletes collaborate with Nike staff to put their own tweaks on a pair of sneakers.

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Antetokounmpo has a bright future and may take the Bucks to great heights, but he won’t give Nike back the once-unchallenged ability to produce sales. There’s nothing wrong with Antetokounmpo’s marketability, it’s just that the market no longer cares what Antetokounmpo or any other athlete is wearing.