New Balance: Shoe Fits - ' Just Do It Yourself ' (
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Just Do It Yourself
That's driving Nike executives crazy.
"Nike is a manufacturer, but really it's just a marketing company," says Wells
Fargo's Shanley. "New Balance is a pure manufacturing company and, in my opinion,
that's why they're gaining on Nike. They understand how to use technology to
gain an advantage on their competitors."
Retailers say Nike has been on top for so long that it no longer feels the need
to be responsive to its customers' demands. In fact, Nike operates much like
the playground bully.
"Nike tells its retailers what shoes they're going to get—in what styles
and sizes and colors—and retailers just have to accept it," says one athletic-shoe
industry analyst based in California. "New Balance works with the retailers
and calls them partners. Nike never refers to anyone as a partner. They determine
what the retailers are going to get and if they don't like it, what are they
going to do?"
Where "Just Do It" is Nike's tagline, New Balance's philosophy might be described
as "Just do it yourself."
Take Holland, as an example. She didn't start out as a champion of new methods
of gathering, presenting and acting on statistics. But she doesn't shy away
from doing whatever it takes to get an answer. At her previous job, for a consulting
firm that designs compensation packages for overseas employees of multinational
corporations, she traveled the world "comparing the cost of Skippy peanut butter
in Boston versus Bangkok," she says. Only with precise local data could she
calculate the appropriate cost-of-living adjustments for each country.
Holland joined New Balance partly so she wouldn't have to travel so much. But
she also bought into the take-charge culture, which she felt chairman and chief
executive officer Jim Davis had created. For example, a single product manager
and two assistants now "take charge" of more than 200 different styles of cross-training,
tennis and basketball shoes.
It's that kind of focus that has helped New Balance surpass Reebok and Adidas
to stand second only to Nike in the sale of running shoes. For all types of
athletic shoes, New Balance ranks third, behind Nike and Reebok.
New Balance's core customers—serious runners and middle-aged weekend warriors—aren't
swayed by superstar endorsements and fancy advertising campaigns.
Moreover, because it had started talking to its retailers, New Balance discovered
that the sweet spot of sales had shifted from the $120-to-$160 basketball shoes
that Nike dominated to less-expensive, multi-purpose shoes that cost between
$60 and $90 a pair. So it flooded the market with styles of all widths in that
price range.
New Balance also shows more responsiveness to retailers' own timetables. Nike
requires retailers to take ownership of shoes after they are shipped to its
distribution center in Memphis. New Balance allows retailers to take possession
in the Far East, where most shoes are made. That allows retailers to cut transportation
costs—and get shoes into their stores faster. This is no small consideration
for back-to-school and holiday shopping seasons, when shoe retailers make most
of their profits.
"Nike wants to control everything," Shanley says—even how its best customers
sell its product in their stores. "That's just the way they do things. It's
not a collaborative process with Nike."
Nothing illustrates this disconnect more than Nike's ongoing tiff with Foot
Locker. In late 2002, Foot Locker, recognizing customers weren't as willing
to pay for high-priced sneakers as they had been in years past, began reducing
the shelf space for Nike's high-end shoes in favor of lower-priced shoes from
New Balance, K-Swiss and Adidas.
Instead of providing more shoes in this new sweet spot, Nike's response was
punitive. The company stopped supplying Foot Locker with its most-popular shoes,
including the Jordan IX model.
"That sums up the difference," Shanley says. "We're talking about Nike's biggest
retailer here. New Balance does everything they can ... to get retailers what
they need. Nike tells retailers what they're going to get."
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