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The global fashion business journal

Nov 14, 201912:45pm

Nike and its scandals: how to remain valuable after a year full of polemics?

The cancellation of Oregon Project after the sentence against coach Alberto Salazar has been the last crisis that the American sportswear company has faced, which, far from being affected by the controversies, has increased its sales and the value of its shares.

Oct 16, 2019 — 8:57am
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Nike and its scandals: how to remain valuable after a year full of polemics?

 

 

The latest Nike scandal happened this week with the penalty to coach Alberto Salazar for doping, but this is not the only scandal that splashed the brand in the last year and a half. The group has faced lawsuits for sexual harassment, has modified its maternity regulation and has positioned itself socio-politically with Colin Kaepernick. Of course, all cases have a common ground: despite the initial negative impact, this have not made a dent in their image and brand value in the medium to long term.

 

“This situation, along with ongoing unsubstantiated assertions, is a distraction for many of the athletes and is compromising their ability to focus on their training and competition needs; I have therefore made the decision to wind down the Oregon Project,” states chief executive officer of the company, Mark Parker. Despite its scandals, the price of Nike’s share has increased by 24%, to 94.8 dollars.


Documents made public by the American Athletics Federation (Usatf) even revealed that Parker himself appeared in a copy in different emails informing him of the progress of the investigations. In fact, the Nike team of lawyers is the one that is taking care of the Salazar case.

 

 

 

 

Even so, Nike has managed to emerge unscathed from another scandal, as with the crisis between China and the NBA. The retailer, that in 2015 signed an exclusive contract with the American basketball league valued at one billion dollars, has avoided positioning itself in the diplomatic conflict, as it considers the Asian giant a strategic market. In fact, despite the fact that the competition business has already suffered, as commissioner Adam Silver said last week, Nike’s has not experienced any setbacks.

 

On Monday, Bank of America Merrill Lynch raised Nike’s growth forecast due to “accelerated democratization will offset the many winds it has faced in the last three years, including the closing of stores and wholesale liquidations, the stumble in the sales of the athletic and fitness categories ”. Previously, the Susquehanna Financial Group agency had stated that “Nike is stronger than ever in China” and that the impact had been “exaggerated” in media. 

 

In this case, the company has opted for silence, since unlike the Salazar case did not affect it directly, but the absence of statements is also striking, as it clashes with the image that it has wanted to transmit in the last campaigns carried out alongside athletes. “There are values ​​that are more important than the brand and the company and we are not going to shy away from it; we are going to position ourselves, it is obvious that we already do it but it is part of who we are, ” Parker stated this year.

 

 

 

 

Another scandal happened with Colin Kaepernick last year, whose’ Believe in Something campaign resulted in symbolic protests from consumers burning Nike products and resulted in a 4% temporary drop in the price of its shares.

 

The slogan was extended to other athletes such as LeBron James, Serena Williams and the American women’s football team, and has been awarded an Emmy. In fact, calls for boycotts of Nike products had little significance, and have not even had an impact on sales. According to the latest estimates of the consulting firm NPD Group, two-thirds of Nike’s revenue comes from customers under 35, who received it positively on a global scale, and at the end of the first quarter increased its sales by 7%, to 10.6 billion dollars.

 

“Nike has been built as a brand around the values ​​of authenticity and in this new scenario it has understood that it is no longer worth just covering the emotional factor, but that you have to approach people’s values,” explains Héctor Saracho, director of strategy  in Interbrand. That is why its campaigns with athletes are not only a reinforcement as a brand, but also a fundamental part of their direct sales strategy to the consumer.

 

Any link with actions that could generate criticism among its potential audience had been cut off. In summer, Kaepernick criticized the sneaker model with which Nike intended to celebrate American Independence Day. The company withdrew all units, which sparked the confrontation with the most conservative factions. “If the Betsy Ross flag is too offensive to Nike, they may be able to commemorate July 4 with a model more suited to their vision,” American President Donald Trump tweeted, along with a photo with the Chinese colors and a communist logo.  

 

 

 

 

The last case, of Antonio Brown, who after a controversial summer was accused by several women of sexual harassment. With whom he did not break relations was with Neymar, who also faced a similar accusation in Brazil, nor in his day with Tiger Woods, being one of the few companies that maintained its support for the golfer. Even with Lance Armstrong Nike kept its commitment until the last second, when he was officially sentenced to lose all his titles by doping.

 

What is the difference between one and other athletes? The commercial pull that each one has. Precisely because of that, at the beginning of the year Zion Williamson, the last number one in the NBA draft, broke a shoe in the middle of a game, Nike was quick to design a custom model for the player without even being one of his sponsored.

 

The biggest scandal in the Ncaa did not come from the hand, or from the feet, of the now pivot of the New Orleans Pelicans, but from the plot of orchestrated corruption to ensure the sponsorship of the players.

 

Michael Avenatti placed Nike in the spotlight uncovering how different executives had offered payments to athletes to sign with Nike once they left the competition, which does not allow any athlete to receive income. Among them were Williamson himself and the previous number one in the draft, DeAndre Ayton.

 

 

 

 

Nike, that during all this time has refused to make any kind of statement, has been forced to respond to two more serious cases: its maternity policy for athletes and cases of sexual abuse within the company. Broker Alysia Montaño uncovered the conditions imposed by the company led by Mark Parker for pregnant women, and voices like Serena Williams and Allyson Felix quickly joined.


Felix said that Nike offered him a new agreement 70% lower than the previous one after knowing her pregnancy. "If I, one of Nike’s most commercialized athletes, couldn’t get those protections, who could?" She said in her letter. Finally, the company modified the regulation to guarantee equality. “Our mission is to support them to give their best and to be great mothers and athletes,” the company said in a statement.

 

 In summer of 2018, Nike was sued by several former workers for gender discrimination in salary matters and because the company had “deliberately ignored allegations of sexual harassment in the workplace raised to the human resources office.”

 

 It is not the first time that Nike faces a case of such seriousness, because at the beginning of 2010 it had to face a controversy that it has never finished getting rid of: the children of Southeast Asia who sew their balls in the factories of Southeast Asia.

 

A recurring bullet that, once again, has not taken more bill than the consequences that in its day had in the short term. And as John Thompson explains in his book The Theory of Scandal, “It has become an endemic feature of contemporary western media culture.” And, of course, Nike seems to have found the vaccine to be immunized against them.

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