Nike's New Downmarket Strategy

Hoping to make good on its promise of growth, the company is launching Tailwind, a line of shoes for fashion- and value-conscious women

by Helen Walters

The Tailwind brand is all about cheap and cheerful: This sneaker costs $29.99. © Exeter Brands Group

The G Zone Runner is the most expensive shoe in the Tailwind line. It retails for $34.99. © Exeter Brands Group

This lightweight sandal, known as Mary Ann, is $19.99. The Tailwind brand is available exclusively at select Payless stores. © Exeter Brands Group

This shoe blends a mesh upper with a technical foam sole. It’s on sale for $24.99. © Exeter Brands Group

Story Tools

• post a comment
• e-mail this story
• print this story
• order a reprint
• digg this
• save to del.icio.us

Nike raised an eyebrow or two earlier this month when Chief Executive Officer Mark Parker outlined a bold plan to increase the company's business to $23 billion in revenue by 2011 (see BusinessWeek.com, 02/07/07, "Can Nike Do It?"). "We'll get there by creating innovative products and consumer experiences," Parker said at the investor meeting held at Nike's headquarters in Beaverton, Ore., in early February. "When we're innovating, we're leading. And leading is what we do best."

It was a soundbite-worthy—and entirely unspecific—comment. But now, a mere two weeks later, Nike (NKE) has taken a concrete step by launching a new brand aimed squarely at a market segment not previously served by its core lines of athlete-focused footwear and apparel. Parker, it seems, wasn't making idle promises.

Produced by the wholly owned Nike subsidiary, Exeter Brand Group, Tailwind, as the new brand is called, is a fashion-conscious line of footwear, officially launching in three Payless stores in Manhattan and Brooklyn on Tuesday. Initially, the line will be available in 400 stores in select markets, though by December it will be stocked in pretty much all of the retailer's nearly 4,600 stores nationwide.

Bright and Sporty

The launch came with all the hoopla and sports-star endorsements you would expect from Nike. Soccer great Brandi Chastain was involved in Tailwind product development and design, and she, along with teammate Hope Solo and volleyball player Logan Tom, are the front-and-center faces of the brand.

The line aims at what Exeter President and CEO Clare Hamill describes as the "premium value" space. In other words, cheap shoes, in this case for women. For now, there are six styles, ranging in price from $19.99 to $34.99. Constructed from various materials, including mesh, leather, and synthetic suede, the shoes feature cheerfully bright colors and are certainly sporty looking. Each design features a Nike-developed technology called "G Zone," a honeycomb gel that sits in the heel of the shoe, intended to soften the impact of life on the wearer's foot.

"This woman has a very active, busy life and is looking for a product that will perform and look great," Hamill says of the ideal Tailwind consumer. "The designs are on-trend but not trendy. They're expressive and beautiful—but we were also looking to get some performance, too."

New Audience

In fiscal 2006, the six Nike subsidiaries generated $2 billion in revenue. That's a drop in the bucket compared with the $8 billion growth the company projects over five years, but it's an area of the business that Nike is moving aggressively to expand—over the next five years, Parker predicts subsidiaries will contribute around 25% of Nike's revenue growth. He says the company is "bullish" on its subsidiary companies.

"We believe Nike's 'other' business—which is composed of Cole Haan, Nike Bauer Hockey, Hurley International, Nike Golf, Converse, and Exeter Brands—is a major driver of Nike's business," agrees Citigroup research analyst, Kate McShane, who describes the subsidiaries as Nike's fastest growing division and considers them one of its major growth drivers. "We estimate this category will generate around $2.3 billion in revenues, or grow 16.5% during Nike's fiscal year 2007," she says.

Tailwind gives Nike the opportunity to attract an entirely new audience at the lower end of the market, one previously alienated by the high prices and athletic focus of Nike's core brand offerings. "What this does is afford a big-name brand the ability to enter an even bigger market without diluting the core essence of its dominant brand," says NPD Group chief analyst Marshal Cohen. "Nike really has nothing to lose and a lot of volume to gain…. Consumers like the idea that Nike is behind [the new brand]—it seems like a good bargain."