Why Nike's path is not paved to Luxury

Lara O'Reilly of Business Insider has written a thought provoking article today showcasing Nike's potential to be a luxury brand based on its product innovations and Q2 Earnings.

I do agree that Nike may be able to move a diffusion brand into the premium segment with limited editions of innovative products, customisation and a premium manufacturing, distribution, pricing and communication strategy. However, if you understand the laws of luxury, Nike will never be able to secure "luxury" status under its current brand heritage, reputation or architecture. There are 7 sound reasons for this.

1. Heritage - Nike was founded as a company in 1962 and the Nike brand was introduced to the mass market at the US Olympic Trials in 1971. It does not sport the 100+ years of heritage, traditionally deeply rooted in an artisan manufacturing process, focus on quality and craftsmanship and selective distribution and communications.

2. Local Origin and Expert Craftsmanship - A luxury brand is always made in its country of origin and by expert craftsmanship. When luxury brands move their manufacturing offshore they are no longer abiding by the rules of luxury. Nike started its company operations manufacturing offshore. Nike is also notorious for being mass produced by machines and the addition of low skilled sweat shop labour, not artisans.

3. Quality - Luxury brands never compromise on quality. Your record with your own Nike products would tell the story here. Luxury has the deep heritage of a high-quality product rooted in its production process - held in the knowledge and attention of the artisans, which typically is passed from generation to generation. In contrast, low skilled sweat shop labour heritage based on Quality Control criteria rooted in volume, is hardly that of a highly skilled artisan.

By default in a luxury brand, this craftsmanship has almost always been carried over to strict care and attention not only its production process but also to the products waste and the conditions offered to its workers. While recently Nike has been focused on improvements in its supply chain thanks to consumer and NGO feedback, it has never had a strong track record when it comes to its products impact on the environment, or its social track record.

4. Product and Price - Luxury is the savoir faire of consistently being the extraordinary. It’s when a brand consistently exceeds the ordinary. While Nike's FlyKnit, LunarGlide and TechFleeceApparel may for a short time outpace the competition, time will tell if it can consistently exceed the ordinary. In addition, to honour this characteristic, luxury brands current collections are never on sale in the same year. Any luxury brand that is, has compromised their brand position and is now operating under premium/mass brand rules. Google search "Nike sale"...the answer is within 3 clicks.

5. Distribution - Luxury brands never compromise their distribution - Nike products are distributed globally in almost every retail direct and indirect channel - not only in their own branded stores or store within a store.

6. Communications - Luxury brands never compromise their communications. They tell stories linking their heritage to the here and now, encouraging the audience to aspire to the dream or a specific lifestyle. They do not tell stories that focus only on the product. While many of Nikes communications and advertising campaigns tell a good story, it's typically about the celebrity not about the brands heritage (which is not luxury in its origin) and it almost always focuses directly on the product.

7. Economic Performance - To conclude, profitability/earnings do not maketh the brand. Any luxury brand owner can tell you that - especially if you have broken any or all the rules above to achieve it.

No doubt, reading this, many will lay claim to favourite "luxury" brands that have broken all or many of these rules in the ambition for market share and profitability via "new luxury". Alas when your favourite brands (e.g. Burberry, Prada, Gucci and others) made these compromises they were no longer operating by the laws of luxury and had moved their products by default into the "premium" and in some cases, even "mass" brand category. This is notable today by the droves of true luxury customers that have departed these brands.

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About Leesa Soulodre:

Director of RL Expert Group, an international reputation and risk management think tank and consulting practice. A Member of the Global Advisory Council of NY Investment Advisory Firm, Cornerstone Capital; an Innovation Advisor to the University of Illinois Urbana Champaign Advanced Digital Science Centre, Singapore and Board Advisor to Belgian PR Software firm, Prezly and US Sports Analytics firm, Autoscout.

An Adjunct in Corporate Communications at Singapore Management University, lecturing part time on "Risk Issues and Crisis Management "and "Content Strategy" at the Lee Kong Chian School of Business. Prior to moving to Asia, she spent 7 years part time in European Academia, lecturing on the Luxury MBA programs in Marketing, Communications and Reputation Management at two french business schools, Ecole Superieur de Gestion and Mod'Art International.

Connect: Leesa Soulodre, Managing Partner, RL Expert Group - [email protected]