The recent return of Elliott Hill as Nike’s CEO has been met with much acclaim by analysts, with a noticeable initial surge in Nike’s stock price signaling faith in his leadership. Early victories—restoring employee morale and repairing relationships with retail partners—are promising. Yet, Hill inherits a company that has been adrift, marred by the missteps of his predecessor, John Donahoe. Nike’s future hinges on innovation and repairing the damage of lawsuits that alienated its audience and stifled creativity.
Under Donahoe, Nike strayed from what made it iconic. The brand that once defined innovation in sportswear seemed content to flood the market with rehashed classics until they lost their “cool factor.” Bloomberg even dubbed the former CEO, ‘The Man Who Made Nike Uncool,’ a stinging critique that portrayed him as a tech-savvy outsider rather than someone at home on a basketball court.
But it wasn’t just the products that suffered under his leadership. Nike’s aggressive shift to
direct-to-consumer (DTC) sales came at the expense of its relationships with traditional retailers, paving the way for competitors like New Balance, Hoka, and On to gain market share.
Even more damaging was Nike engaged in “lawfare”—a barrage of lawsuits targeting the very communities and creatives that helped cement its place in sneaker culture. Instead of nurturing customization and resale markets that have driven consumer demand, Nike went to war with them.
A low point came in its 2022 lawsuit against StockX, a popular sneaker resale platform. Nike accused it of facilitating the sale of counterfeit sneakers despite previously praising StockX for its efforts to combat counterfeiting, even as the platform helped drive sales of highly anticipated releases like Nike Dunks. Last week, Nike’s motions for summary judgment filed in their StockX case were unsealed, showing the aggressive and misleading strategies that Nike took to vilify StockX.
The legal attacks didn’t stop there.
Nike filed lawsuits against artists and brands that reimagined its products, from Japanese streetwear label BAPE to small-scale customizers like Global Heartbreak and Drip Creationz. Perhaps the most puzzling case involved Dominic Ciambrone, better known as the “Shoe Surgeon,” a renowned sneaker customizer Nike and worked with on multiple projects. Despite hiring Ciambrone to create custom pairs for celebrities, like Lebron James, and even charity events, Nike turned on him, filing a $60 million lawsuit for trademark infringement, counterfeiting, dilution, and unfair competition.
Analysis of the Shoe Surgeon’s response shows just how baffling these claims are. Not only did Nike hire Ciambrone to create a custom pair of shoes for Usher mere months before the suit was filed, but Nike also repeatedly worked with Ciambrone. They hired him to teach Nike’s staff about the art of customization, lead workshops for non-profit groups, and create customizations for charity auctions. Even more galling, “Nike led the Shoe Surgeon to believe not only that its ongoing work for Nike would be compensated, but that a formal deal between the parties was on the table—as long as the Shoe Surgeon kept coming through regardless of Nike’s failures to pay. Nike thus lured The Shoe Surgeon into a false sense of security that its continuing to work for Nike was part of an ongoing business relationship.”
Other incidents of Nike’s “lawfare” have led the company to be criticized for abusing its large dominant position in the athleisure market. Just last month, Nike was deemed to have “acted in ‘bad faith’ through ‘vexatious litigation’” in an effort to crush a small business, Lontex, which holds the patent for the “Cool Compression” technology Nike began using in its products in 2015. Lontex, which registered the patent in 2008 sent Nike a cease-and-desist letter when it became aware of the infringement in 2016, but instead of negotiating a resolution, Nike attempted to drown Lontex in legal costs, a strategy Nike can afford but a small company, like Lontex, cannot. This has become a “reputational challenge” for Nike, according to Forbes, and the company must reassess its aggressive legal strategy.
To regain its footing, Nike needs to focus on what it does best: innovation and design. The company’s greatest successes—collaborations with artists like Parra, Billie Eilish, and Travis Scott—demonstrate the power of partnerships in capturing the cultural zeitgeist. Formalizing relationships with customizers like the Shoe Surgeon could enhance Nike’s brand for generations to come. Partnering with legitimate resale platforms like StockX would not only combat counterfeiting but also build trust with consumers.
Ultimately, Nike must recognize that its sneakers are more than products—they’re canvases for art and self-expression.
By fostering creativity instead of fighting it, Nike can reclaim its status as a cultural icon. For decades, Nike was the brand that redefined sportswear and streetwear alike. Under Hill’s leadership and the appointment of a new chief legal officer, Rob Leinward, it has a chance to do so again.
Danielle Zanzalari is an Assistant Professor of Economics at Seton Hall University. Her research focuses on an array of economic issues. Many of her students are interested in Nike’s most sought-after sneakers, which has led her to a keen interest in Nike’s financial performance.
Read Full Article »