The athletic shoe industry is one of the largest markets in the United States today. This segment operates globally with many competitors. This industry provides us with T-shirts, sweatshirts, sweatpants, shorts and of course, athletic footwear. Three major corporations dominate the industry itself: Nike, Adidas, and Reebok. Nike controls 44% of the entire market, Adidas owns close to 12%, while Reebok maintains about 12% as well. The Nike Corporation was established in 1981, and in its first year as a public company, it led the industry and was sold in more than forty countries worldwide. They have remained on top for the majority of their existence, due to their diverse and ever changing product line.
Nike’s largest concentration is on the sneaker market itself. They sell all kinds of athletic apparel and equipment, from sneakers and warm-up pants to soccer balls and football pads. Adidas and Reebok also sell more than just sneakers; all three dominate the industry in footwear as well as apparel. There are many competitors such as New Balance, Puma, Champion, and Fila. These companies do not run the market like Nike, Adidas and Reebok, they own much smaller segments. Due to the fierce competition in the industry, the only way to pull ahead is with product differentiation.
Nike pulled ahead in 1988, with the concept of Nike-Air Cushioning. This sparked the differences between all companies. The idea of air pockets, air consoles and cushioning seemed to become the biggest trend in the sneaker market. Later on the product differentiation became the tool to capitalize on. Rubber grip sneakers became popular, which spun the concept of different kinds of shoes for different activities. There became separate shoes for walking, running, cross training, basketball, indoor soccer, football, wrestling and aerobics. The sneaker industry has so many products to choose from. The products differ in color, shape and category. The price is basically the same. The average pair of athletic sneakers is around $70 to $85. Nike Air Max sneakers are much more expensive, the average price of this model is $125. The quality of sneakers are basically equal. The sale usually comes down to preference and how much the consumer wants to spend.
Sneakers are not a total necessity, but then they are not quite a luxury either. Almost everyone has at least one or two pairs of sneakers, but the only difference would be the brand. There are many generic brands to choose from, so if you do not want to spend $70, you honestly do not have to. The industry itself is basically elastic. As the economy goes down so do sneaker prices, when the economy is on the rise, sneaker prices skyrocket.
Nike has been able to sustain a competitive advantage since their first year. They have established their name through advertisements and quality. The name Nike is known worldwide, so are Adidas and Reebok. These firms have created a link between a solid product and a solid company. Consumers trust the products that these three companies sell, that is why they are able to charge the prices that they do. Consumers are not just buying the shoe, they are also investing in the label.