TakeAway: Just a small piece of the $2.5 billion U.S. market for basketball sneakers would meaningfully add to Under Armour’s $856 million annual sales.
Never mind that Nike owns 95% of that market and spends $2.4 billion annually on marketing to defend it. CEO Kevin Plank has set his sights on being the number one basketball shoe manufacturer.
That’s a quite lofty goal for a company that has already failed in other types of athletic shoes.
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Excerpted from Bloomberg Businessweek, “A Half-Court Shot for Under Armour,” by Matt Townsend, October 28, 2010
… Under Armour launched a basketball shoe line, called Micro G, to take on the longtime ruler of the court, Nike. …
In the $2.5 billion U.S. market for basketball sneakers, Plank confronts more than just Nike’s 95 percent share and the billions it spends on marketing. Sales of basketball shoes in the U.S. have slid for the past three years as fewer people play the sport …. And Under Armour’s earlier disappointments in cross-training and running shoes suggest its hoop dreams may be tough to realize.
If Plank harbors doubts about taking on Nike in its stronghold, he isn’t showing it. “Our goal for getting into basketball is to be No. 1,” he says. …
Despite the trash talk and Baltimore-based Under Armour’s fast growth (sales at its core apparel business have tripled in the past five years), Plank has had difficulty climbing the learning curve in sports footwear. In 2008, Under Armour spent big on a Super Bowl ad for a line of cross-training shoes—months before the shoes actually reached stores. Many shoppers had forgotten the ad by the time of the shoes’ debut. Meanwhile, tepid sales of the line of running shoes it introduced in 2009 have led the company to allow retailers to discount them or simply send them back to clean out inventories. …
As Plank prepared for the Micro G launch, he told employees to start thinking of Under Armour as a footwear brand, not just an apparel maker. “I called our marketing team and said, ‘Go through this building and find anything that says we are only an apparel brand and throw it away,'” Plank says. …
Plank expanded Under Armour by identifying profitable market niches, such as its namesake undergarments that pull moisture away from athletes’ skin …. Getting into basketball shoes, however, is “a whole other level,”…
One reason: Nike spent $2.4 billion on marketing in its last fiscal year, or almost three times Under Armour’s annual sales and 20 times its marketing outlays. Perhaps that’s why the Beaverton (Ore.) sports giant isn’t exactly running scared. “While our main focus is on fulfilling our own potential, which is unlimited, we thrive on competition of any kind,” says Nike spokesman Derek Kent when asked about Under Armour’s foray into basketball. “We expect to further expand our leadership position.”
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Full Article
http://www.businessweek.com/magazine/content/10_45/b4202024138269.htm
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