Sep 3, 1996

Can Nike keep flying high on its Air shoes?

by Mark Hyman
Baltimore Sun

BEAVERTON, Ore. - "We don't sell dreams, we sell shoes," goes the latest marketing slogan from Nike.

How many? Thirty-six percent of the fragmented athletic shoe market in 1995. More shoes than any of its competitors since 1987.

At the core of Nike's success is Air, a line of shoes worshiped as a fashion accessory and admired for its high-tech, gas-inflated soles.

But Nike's "Reign of Air" is in doubt. And the threat comes from the unlikeliest of places: the U.S. Patent Office.

After 17 years, Nike will soon relinquish its rights to two "Air" patents. When the last of the nonrenewable patents expires in September 1997, Nike's rivals are free to develop their own lines of atmospheric shoes.

Nobody can be sure which competitors, if any, will enter the race. Some say brand-name shoe manufacturers may be the ones to rush out with new models.

Others predict a glut of Air imitators in the bargain stores. As the thinking goes, such outlets would be havens for consumers hungry for shoes that look like Nike but cost a fraction of the price.

"You'll see a lot of knock-offs," predicts Robert Liewald, USA general manager at Fila, a competitor whose U.S. operations are based in Hunt Valley, Md. "But among (major) brands, nobody is trying to get where Nike is - they'll be someplace else when you get there."

Nike is reluctant to speculate. President Tom Clarke deflects such questions, saying he doesn't know what other manufacturers are planning. But for the record, Clarke adds, "I think a smart competitor wouldn't do it."

"It's going to be very difficult for other companies to come in without more or less conceding that Nike was right all along."

The air sole is a unique system of gas-filled pockets and channels that minimizes jarring hits when shoe meets court or pavement. Nike claims its cushioning system is the best, superior to alternatives, including Reebok's Hexalite, Brooks' Hydroflow, Etonic's Stable Air and Fila's 2-A.

Air may be unmatched in another critical respect. It can be explained. "It's such a simple engineering concept, it's hard to beat," says Clarke, a former track coach with a doctorate in sports-related biomechanics. "Everybody understands an air mattress or air in tires."

Now, the Air shoe is the engine that drives a company with revenue in the billions and customers from Cleveland to Calcutta. Nowhere are the fruits of Nike's success more evident than at its opulent headquarters near Portland. The complex has restaurants, manicured lawns and a Japanese garden.

The lavish setting is far removed from Nike's beginnings. The company was founded in the early '60s by Phil Knight and Bill Bowerman, Knight's former track coach at the University of Oregon. They ran a small, profitable company for a decade, slowly gaining on industry leaders Adidas and Puma.

A turning point came in 1977, when Frank Rudy, an unemployed aerospace engineer, pitched an invention to Knight: the air sole.

From a gimmick limited to a few models, Nike expanded Air to 50 lines. From 1986 to 1993, Nike sold more than $2 billion in Air shoes. Now Nike remains No. 1 and continues to gobble market share.