KEY POINTS:
By the 1970s, adidas had seen off its sibling rival, Puma, to dominate the global sportswear industry. But a new US upstart was making its presence felt. In the third of five extracts from Barbara Smit's Pitch Invasion, Nike is riding high
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Bill Closs slammed his fist on the table. Sitting in Herzogenaurach for his meeting with German managers in the early 1970s, the adidas distributor for the American West Coast was hugely frustrated. Over the previous years, they had repeatedly shrugged off his warnings about a small-time operation called Blue Ribbon Sports, up in Oregon. Their Nike running shoes were popping up on more and more Californian shelves. Unless adidas reacted swiftly, there was no telling what kind of damage these people could inflict on the business.
"You have to kill them right now," Closs hammered. To illustrate the phenomenon, he brought back several pairs of Nike shoes and handed them over for inspection by the Germans. But to his dismay, the sneakers were cast aside with disdain.
"I told them they were selling like crazy but they didn't care," Closs recalled. "They just didn't want to build running shoes. They said their shoes were as good as they could make, and that was it."
The same happened to international managers who attempted to bring attention to Nike. Gunter Sachsenmaier, export manager in Landersheim, spotted the brand on his United States travels and thought that the technicians would be interested but the response was invariably dismissive. The Waffle, the trainer designed by former coach Bill Bowerman in his kitchen, provoked outright hilarity. "They inspected the sample as if it was a piece of dirt, pulled at it and threw it over their shoulder," Sachsenmaier recalled. "They thought it was all a big joke, 'these lunatics who designed shoes with a waffle-iron'."
The Nike managers themselves had to admit that their early production was far below the German standards. They faced an embarrassing series of mishaps, with shoes falling apart and parts coming unglued. Yet Phil Knight and his small crew relentlessly improved and pushed their product until they had conquered a group of hardcore runners. Then they began to snatch shelf space from adidas.
From Herzogenaurach, the Nike problem didn't seem all that urgent, because the adidas distributors continued to clamour for more products. Yet the dearth of supplies which they had to endure strongly played into the hands of Nike. In the exploding American market, retailers became so weary of the haphazard adidas deliveries that they could not afford to turn down an alternative brand.
To push its advantage, Nike introduced a shrewd mechanism known as futures. The principle was that they convinced retailers to place firm orders and to guarantee payments in advance. With these commitments, Nike could increase its orders from Asian manufacturers without gambling too much. In other words, they shifted some of the financial risk to the retailers.
In return, the retailers who took part in futures trades would obtain a sizeable rebate on their orders and they could rest assured that they would actually obtain the goods. In a market driven by wild demand, this was an irresistible argument.
With the jogging boom in the 1970s, Nike's advances turned into a tidal wave. At the forefront of the movement, Bowerman led thousands of otherwise unathletic Americans on daily jogs and millions more followed all around the country. The Oregon coach had discovered jogging during an encounter in 1963 with renowned New Zealand track and field coach Arthur Lydiard. Bowerman took up the habit and set up jogging classes in Oregon. A guide he published in 1967, praising the advantages of jogging as a form of light exercise, turned into a national bestseller. As he rightly predicted, jogging was so easy and practical that it would spread like wildfire. America's newly formed army of joggers turned to Nike en masse.
In Herzogenaurach, the German technicians generally dismissed the jogging trend by contending that "jogging is not a sport". When they finally gave in to the pleas of the American distributors, they still couldn't bring themselves to turn out what the customers wanted. While Germans tended to run on forest trails, the Americans jogged on roads and pavements; they needed plenty of cushioning. The adidas distributors clamoured for soft shoes, but their pleas were placated with anatomical drawings, showing the alleged damage such shoes could inflict on ankles and knees.
When adidas responded to the jogging boom at last, it was too little, too late. In the late 1970s, the company came up with a training shoe called SL, which sold about 100,000 pairs during its first year in the US. Looking at the explosion of the market, the distributors pushed their orders up to at least a million pairs for the second year, which would have forced adidas to increase its capacity. "Adidas refused to make the required adjustments, because that would have entailed considerable investments," said Horst Widmann, Adolf Dassler's personal assistant at the time. "It turned out to be a bad mistake."
Horst Dassler was equally guilty of aloofness when it came to Nike. Larry Hampton, former marketing manager at adidas France, long struggled to convince Horst Dassler that he should learn more about Nike. He eventually agreed to meet Phil Knight and some other Nike executives at a trade show in Houston in February 1978. Hampton was disappointed by the meeting, which he deemed uneventful. But the Nike men couldn't believe what they had just heard: Horst Dassler had let it slip that a strong adidas shoe sold about 100,000 pairs each year in the United States. Blue Ribbon Sports was selling roughly the same number of Waffle trainers a month.
Until the mid-1980s, adidas continued to report double-digit sales hikes in the United States each year. The Dasslers failed to grasp that, in this ballooning market, Nike was growing much faster still, grabbing market share at a staggering pace. Blinkered by their competition with Puma, the adidas technicians were not prepared to regard any other company as a serious contender.
Just months before his death, Adolf Dassler finally acknowledged that adidas had dozed through a complete overhaul of the sports market. He gathered his closest lieutenants and spoke with uncharacteristic virulence. He finally understood that Nike was taking over the market. He even scheduled an unprecedented journey to the United States, but died before the set date.
BRAND WARS
* In the big business world of sport, adidas and Puma are two of the major global brands paying stars, clubs and competitions millions to wear their label.
* It all started in the 1920s when brothers Adi and Rudi Dassler started a shoe business in a small German town. Their passion for sports shoes coincided with the rise of organised sports and was an immediate success.
* But World War II resulted in a bust-up between the brothers, who then set up competing operations - adidas and Puma.
* The book Pitch Invasion charts their story and the expansion of the sports industry under the management of their children.
