Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 6, 1992 TAG: 9201060107
SECTION: SPORTS PAGE: B5 EDITION: METRO
SOURCE: GLENN RIFKIN THE NEW YORK TIMES
DATELINE: LENGTH: Long
BASKETBALL SHOES, SALES HIGH-TECH HIT
When Michael Jordan of the Chicago Bulls began advertising basketball shoes a few years ago - the Air Jordan line by Nike Inc. - he was selling high-tech style as much as performance.Unlike their low-tech, black-and-white predecessors, today's basketball shoes are made of lightweight leathers and synthetics dyed in a dazzling array of colors, with vivid, high-contrast, graphic designs. They are also constructed with sophisticated cushioning devices and fitting systems.
They are expensive. PF Flyers and U.S. Keds, standbys of a generation or two ago, rarely cost more than $10 or $15 a pair, and are roughly $20 now. Today's popular styles can cost as much as $160.
High style - and higher prices - have made basketball shoes big business. They are now the largest niche in the $7.66 billion wholesale market for sports shoes. According to the Sporting Goods Manufacturers Association, an industry group in North Palm Beach, Fla., wholesale sales of basketball shoes - high tech as well as canvas - totaled about $1.7 billion in 1990. About 75 percent of the sales were for just six brands: Nike, Reebok, Converse, L.A. Gear and adidas.
The market for basketball shoes has been growing rapidly, too. Between 1986 and 1990, the market grew at a rate of about 19 percent per year, according to Sporting Goods Intelligence, an industry newsletter in Glenn Mill, Penn. Last year, the market expanded by only 4.1 percent, largely because of the recession and market saturation.
However, industry analysts hope growth will be strong in 1992. "With excitement building around the Olympics, I expect 1992 to be a peak year for basketball shoes," said Dick Silverman, associate publisher of Footwear News, a trade newspaper in New York.
When it comes to breeding, Converse Inc., the North Reading, Mass., athletic-shoe maker, is the original. Converse has been making its popular All Star canvas basketball sneaker since 1917. In 1923, it renamed the shoe the Chuck Taylor All Star after Chuck Taylor, a popular basketball player of the time who joined the company as a spokesman in 1921. Converse has sold more than 500 million pairs of All Stars.
Despite Converse's early start, the market is now dominated by Nike, of Beaverton, Ore., and Reebok, of Stoughton, Mass. Nike, which sells about $500 million worth of basketball shoes every year, has about 40 percent of the market. Reebok, which sells about $100 million worth of basketball shoes annually, has about 16 percent. Converse retains 9 percent.
Nike and Reebok spent about $130 million each in 1991 on television advertising for their products, in what was called the "sneaker wars." The commercials featured players from the National Basketball Association and claimed the companies' high-tech shoes gave the players an edge.
"I can't deny that a lot of this is about marketing," said Peter Ruppe, Nike's manager for basketball marketing. "But the key thing is to make a great product."
While the companies' advertising appeals may be pitched to athletes, 80 percent of the sports shoes purchased are never used in play. "A large majority of these shoes are being worn as street wear," Silverman said. "The companies don't want to own up to that."
Even so, play-related advertising sells shoes. John Horan, publisher of Sporting Goods Intelligence, which surveys retailers, said that in 1990, 37 percent of all basketball-shoe buyers based their decisions on advertising; 25 percent based their decisions on technology; and 23 percent were motivated by fashion. Only 10 percent bought basketball shoes because of quality and price.
Even its competitors admit that when it comes to marketing and promotion, Nike is without peer. Mickey Bell, executive vice president of Converse, credits Nike with changing the rules of the game in the early 1980s by focusing on marketing rather than manufacturing issues.
The breakthrough came when Nike signed Jordan, a rising superstar, and introduced the Air Jordan line in 1985. "That changed everything," Bell said. Building brand recognition by tying it to one star athlete fueled Nike's success.
Along with Jordan, Nike features National Basketball Association stars like David Robinson, Charles Barkley and Scottie Pippen to sell its Air Force and Air Flight lines. It pays John Thompson, coach of Georgetown University's basketball team, $200,000 per year to wear its shoes.
Ruppe, Nike's marketing manager for basketball, acknowledges that Jordan, who is paid $6 million annually by Nike, was the "paradigm" for today's advertising.
Television advertisements featuring Jordan and filmmaker Spike Lee continue to win awards and drive Nike sales. Nike's overall slogan is "Just Do It." But after a stirring play in a pickup game, the cry usually heard in the commercial is: "It's gotta be the shoes!" Ruppe said Air Jordans, which sell for about $130, make up about 10 percent of its basketball shoe sales.
For the fall of 1992, Nike will offer 17 models of basketball shoes, ranging in price from $50 to $130. The most popular model sells for about $75.
Nike and Reebok produce most of their shoes in South Korea, Taiwan, China and Indonesia. With minimal production costs, basketball shoes are quite profitable. The wholesale cost of the $130 Air Jordan is $68.75, said John Ruppe, Nike's manager for basketball-shoe marketing. The cost of making them is about $30.