Internet Mini Case #14 Nike, Inc. Maryanne M. Rouse Can Nike (NKE) find enough shelf space to make up for lower sales to its top customer? In February 2002, Foot Locker told Nike that it wanted to reduce the number of Nike’s marquee shoes—the Air Jordans, Shox, and others that sell for well over $100—because the retailer believed that consumers were turning more to midpriced shoes. Because Nike refused to change its product mix to support Foot Locker’s product line reshuffling, Foot Locker, the dominant global footwear retailer, with over 3,600 stores, cancelled approximately $150 million in Nike orders. (Nike’s premium segment accounts for approximately 15%–20% of total global revenues and although neither company discloses details of total orders, Nike noted in its 2002 10-K form that sales to Foot Locker represented approximately $1 billion of Nike’s $9.9 billion worldwide sales.) According to Foot Locker, Nike retaliated by cutting the retailer’s allotment of key products, including the highly popular Air Force One. The feud escalated in December, when Nike announced that Foot Locker would no longer be its launch customer for marquee products and, in fact, gave rival FootAction access to high-end basketball shoes that had been exclusive to Foot Locker. In mid-February 2003, Nike’s “Hall of Hoops” displays in Foot Locker stores came down and were replaced by Reebok’s “Above the Rim” campaign. In 2004, Nike was aggressively lining up new outlets, while Foot Locker faced a significant challenge in maintaining a broad, attractive, and profitable product line (for 2002, Nike comprised 47% of Foot Locker’s sales). Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 1
