Nike vs Adidas: Who Won The Game?

The sneakers industry can be described in one word: ruthless. This is precisely the reason why a handful of companies have continued to dominate the market for decades. But who are the top two leaders in the industry? Well, you might know the answer already. Billions of people are wearing their legendary logos every single day, and if you go out now and look around, you'll definitely spot them: Nike's swoosh logo or Adidas' three black stripes. They're literally everywhere.

But which is the better brand? Who offers the better products? And most importantly, what makes people pick one over the other? Well, the answer might surprise most of you. So if you're curious to know, make sure you watch until the end of this video. Welcome to a lux.

All right, so let's start off by rewinding the history tape to more than five decades ago. It's important to know where this fascinating story of rivalry began. Well, I'll start off with Adidas because they're the older competitor in the ring. Adidas was founded in 1949 by Adolf "ADI" Dassler in Germany. However, its roots can be traced back to 1924 when ADI and his brother Rudolph Dassler started a shoe company called "Gabruder Dassler Schuhfabrik." The brothers split in 1948, and Rudolph went on to create another sportswear brand that you certainly have heard about called Puma.

Now, as we said earlier, it's a ruthless industry. Adidas gained prominence in the 1950s when the German national football team won the 1954 FIFA World Cup wearing Adidas shoes with screw-in studs. The iconic three-stripe logo, which originated from a 1952 acquisition of the Finnish sportswear company Kahu, became synonymous with the brand soon after. The three stripes have been adapted into different designs such as the trefoil introduced in 1971 and the performance logo introduced in 1997, which is still in use today.

Adidas continued to expand, diversifying its product line to include clothing and other sporting equipment. In the following decades, Adidas sponsored numerous athletes and teams, becoming a global leader in sportswear. Some notable milestones in Adidas's history include the launch of the iconic Stan Smith tennis shoes in 1965, the Adidas Superstar basketball shoes in 1969, and the acquisition of Reebok in 2005. The brand's collaborations with influential designers such as Yoshi Yamamoto's Y-3 line and with Kanye West's Yeezys have helped Adidas to maintain its appeal and relevance in the fashion and streetwear scenes.

Nike, on the other hand, was founded in 1964 by Bill Bowerman and Phil Knight as Blue Ribbon Sports (BRS) in Oregon, USA. Now initially, BRS functioned as a distributor for Onitsuka Tiger, now ASICS shoes, in the United States. In 1971, the company rebranded as Nike, named after the Greek goddess of victory, and introduced its famous swoosh logo. Fun fact: it was designed by a college student for only 35 bucks. Crazy right? That’s around 250 dollars adjusted for inflation in today's money.

Now, Nike's first major breakthrough came in 1972 when the Nike Cortez running shoe debuted at the Munich Olympics. The company continued to grow through the 1970s and 80s thanks to innovative products like the Nike Air cushioning technology in 1979 and strategic marketing campaigns featuring prominent athletes like Michael Jordan. The 1980s and 1990s saw Nike expand its product range to include clothing and accessories while also moving into new sports like soccer and golf. Nike solidified its position as a global sportswear leader with the help of high-profile endorsements and collaborations such as the Air Jordan line and the partnerships with athletes like Tiger Woods and LeBron James.

Now on to business models and profitability. Let's return to the present and take a more technical approach. Nike and Adidas have similar business models; however, there are some differences in their approach to branding, distribution, and target markets. So let's start this time with Nike because, as you'll see later on, they're the current leader in the market right now.

Their business model rests on four important pillars: focus and innovation. Nike invests heavily in research and development to create innovative products using cutting-edge technology. The company's goal is to enhance athletic performance and provide a competitive edge to its customers. Nike relies on powerful storytelling and endorsements from elite athletes to create aspirational value for its products. The company is known for its emotive advertisements and campaigns that highlight the perseverance and dedication of athletes, and they're notorious "Just Do It" slogan is living proof of the success of their marketing. Some people even got the slogan tattooed on their bodies because, well, it's simply a good motivational reminder to get things done.

Next is direct-to-consumer (DTC) sales. Nike is increasingly focused on its DTC channels such as its website, mobile apps, and owned retail stores to provide a personalized and immersive customer experience. The company is also striving to reduce its dependence on third-party retailers, which allows them to generate more profit. Last, manufacturing and sourcing. Nike does not own its manufacturing facilities; instead, it outsources production to independent contractors predominantly in Asia. This allows the company to reduce overhead costs and maintain flexibility in production.

Now when it comes to Adidas, the strategy is pretty similar, but there are some differences in the vision. Their business model generally revolves around the following: a diversified product portfolio. Adidas offers a wider product range than Nike encompassing performance sportswear, lifestyle products, and streetwear. The company operates under two major divisions: Adidas performance and Originals.

Lifestyle and fashion-focused collaborations and partnerships. Adidas places a strong emphasis on collaborations with designers, musicians, and celebrities, resulting in unique and fashionable product lines. Old school but efficient distribution channels. Adidas follows a multi-channel distribution strategy, selling products through owned retail stores, e-commerce platforms, and third-party retailers. The company maintains a more significant presence in third-party retail channels than Nike, which some would argue cuts a lot from their profit margins.

Manufacturing and sourcing are similar to Nike's, where Adidas also outsources its manufacturing to independent suppliers primarily in Asia to reduce overhead costs and maintain production flexibility.

Now let's explore some general differences to pinpoint exactly where their common ground and business diverges, and this will be really important later on when we look at the finance stuff. So first up, brand focus. Nike primarily targets performance-oriented customers while Adidas caters to a more diverse customer base, including performance, lifestyle, and fashion-focused consumers.

Marketing and collaborations: Nike places more emphasis on athlete endorsements and emotional storytelling, while Adidas focuses on collaborations with designers, musicians, and celebrities to create fashionable and unique product lines.

Distribution channels: Nike is putting more effort into expanding its DTC sales channels, while Adidas maintains a more significant presence in third-party retail channels.

Product portfolio: Adidas definitely has a more diversified product portfolio with a strong focus on lifestyle and fashion products in addition to performance sportswear.

Geographic market presence: Historically, Nike has had a stronger presence in the United States, while Adidas has enjoyed greater popularity in Europe. This is primarily due to their origins: Nike being an American brand and Adidas being a German brand.

Lastly, subsidiaries and acquisitions: Nike and Adidas have made different acquisitions to expand their brand portfolios. Nike owns brands like Converse, Hurley, and formerly owned Cole Haan and Umbro. Adidas, on the other hand, has acquired Reebok and Runtastic, and previously owned TaylorMade, which was sold in 2017.

Now considering everything we've gone over so far, you would expect Adidas and Nike to enjoy the same kind of prosperity and have similar results when it comes to finances, but you'd be dead wrong. So let’s take a quick look at some graphs and tables to get an idea of how far they are from each other.

This is Nike's income statement for 2022, and this is Adidas—ouch! This first round is going to Nike for sure. We'll get to the explanation soon enough; just bear with us for a bit. This is Nike's stock performance in the past year, and this is Adidas. So another round goes to Nike. Finally, this is how the graphs look when you put them side by side. So clearly, Nike was the better investment than Adidas over the past year by a mile, and the income statements reflect that.

In fact, over the last decade, Nike's been the smartest kid in class and the top performer by far. So why is that the case? Why is Nike more profitable and, as a result, a better investment than Adidas? Well, a disclaimer first: the sportswear market is not a high-growth sector; it’s pretty saturated. In fact, the industry could reach 365 billion dollars by 2027, registering a compound annual growth rate of only 3.70 percent, and that's worse than the forecast for the S&P 500. So TL;DR: this sector might not be the best to invest in individually. But we digress.

Here's why Nike is the winner from an investment perspective. This is the revenue graph for both Adidas and Nike, so clearly over the past 10-plus years, Nike's just been making more money than Adidas, and that gap seems to continue to increase.

Now the primary cause of the divergence between the two brands stems from consumers' differing perceptions of their quality. Both brands are appreciated for their product quality but are not regarded equally. There are two factors that have strengthened Nike’s competitive edge.

Firstly, Nike's capacity for innovation and successful partnerships across various domains sets it apart. In addition to the iconic Michael Jordan collaboration, Nike has ventured into high fashion by partnering with brands like Louis Vuitton. Although Adidas has also worked with high fashion brands such as Gucci, the excitement generated has been comparatively less. It’s often perceived that Adidas is consistently trailing behind and attempting to mimic Nike's innovative approach. The recent termination of Adidas's partnership with Kanye West has further dented its current and future revenues, and as a result, the gap with Nike continues to grow. A lot of people love those Yeezys.

Secondly, the Nike logo’s recognizability is another crucial aspect. Known as one of the most significant logos in history, it is synonymous with quality. While Adidas also has a widely recognized logo, it does not compare to the impact of the Nike Swoosh. Nike's numerous global advertising campaigns have further solidified its already dominant brand. Forbes supports this notion, ranking Nike as the 13th most valuable brand in the world, while Adidas lags behind at 51st.

So there’s no debate here: Nike takes most of the cake home from whatever angle you look at things. But there are some struggles and challenges to overcome. Behind every story of tremendous success, of course, lie a few struggles, controversies, and scandals that are often overlooked. Both Nike and Adidas, as global sportswear giants, have faced their fair share of challenges.

Starting with Nike: Sweatshop labor. Nike has been accused of exploiting workers in developing countries by providing low wages and poor working conditions. The company has faced numerous allegations of using sweatshop labor since the 1990s. Public pressure led Nike to improve its labor practices, and they've since implemented various policies and initiatives to address these concerns.

On a similar note: child labor. Nike also faced scrutiny in the late 1990s when it was revealed that some of its soccer balls were being produced using child labor in countries like Pakistan. The company took steps to address the issue, including partnering with UNICEF and local NGOs to improve working conditions and eliminate child labor from its supply chain. And probably the most famous one: the Colin Kaepernick ad campaign. In 2018, Nike launched an ad campaign featuring Colin Kaepernick, a former NFL player who started kneeling during the national anthem in protest of racial injustice. The campaign led to significant controversy, with some people praising Nike for supporting Kaepernick’s activism and others boycotting the brand due to their personal disagreement with his protesting method.

Now on to Adidas: the stories are not that different. Exploitative labor practices—similar to Nike, Adidas has also faced allegations of using sweatshop labor in its factories. In 2011, a documentary by the BBC highlighted poor working conditions and low wages in Indonesian factories producing Adidas products. In response, Adidas has taken steps to improve working conditions and increase transparency in its supply chain.

The 2014 World Cup: during the 2014 FIFA World Cup, Adidas faced criticism for its role in the mistreatment of workers producing merchandise for the event in Brazil. An investigation revealed that workers were subjected to long hours, low pay, and poor working conditions. Adidas responded by pledging to improve oversight and working conditions, but sadly, those usually come after the damage is already done.

Lastly, environmental concerns: Adidas has also faced criticism for its environmental impact, particularly related to its use of plastic in products and packaging. To mitigate its environmental impact, Adidas has launched various sustainability initiatives, such as using recycled plastic in its products and committing to reducing its overall environmental footprint. By the way, this issue was also a problem for Nike for quite a while.

Both companies have made efforts to address these controversies and scandals by implementing new policies, partnering with external organizations, and increasing transparency in their supply chains. However, as global corporations, they continue to face scrutiny and must constantly work to maintain ethical and sustainable practices. The bigger you are, the harder people will hit you, and honestly, that's a good thing, because we need ethical examples of doing business. Most of these problems still linger today in many companies around the globe.

So after all of this, what are some key lessons that we can take away from these two companies? Because look, all of this information means nothing if we don't use it to teach ourselves something valuable. So here they are, in no particular order:

1. Embrace your passion: Phil Knight's love for running inspired him to develop superior athletic shoes, laying the groundwork for Nike. ADI Dassler's dedication to crafting performance-enhancing sports shoes stemmed from his expertise as a cobbler. Aspiring entrepreneurs should always identify and pursue their passions, using them as a driving force to overcome obstacles and setbacks. It’s all for nothing if you don’t do what you love.

2. Prioritize innovation: With technologies like Nike's air cushioning and Adidas’ boost foam, both companies have made groundbreaking advancements that transform the athletic footwear industry. Every ambitious entrepreneur should nurture an innovative culture, encouraging employees to think outside the box and challenge established norms. Standing out is the best marketing.

3. Harness the power of branding: Both Nike's swoosh and Adidas' three stripes have become universally recognized symbols that encapsulate their respective brand identities. Always strive to work toward creating a distinct brand identity that connects with the target market and sets them apart from competitors. This involves crafting a captivating brand narrative and investing in unforgettable marketing initiatives.

4. Cultivate adaptability and resilience: Nike and Adidas have demonstrated their ability to evolve and adapt to shifting market landscapes, consumer preferences, and external challenges. Entrepreneurs, no matter how experienced, should remain agile and be prepared to strategically adapt when necessary, learning from setbacks and seizing new opportunities. "Improvise, adapt, and overcome," or you will fall behind your competition.

5. Leverage strategic partnerships and collaborations: Nike's association with top athletes like Michael Jordan and LeBron James, and Adidas's collaborations with celebrities such as Kanye West and Pharrell Williams have generated significant excitement and broadened their brand appeal. Every business should seek synergistic partnerships that can elevate its brand and unlock new avenues for growth.

6. Commit to social and environmental responsibility: Nike's Move to Zero campaign and Adidas's pledge to use recycled plastic materials exemplify their efforts to address environmental concerns. Business owners should place sustainability and ethical practices at the forefront of their operations, as this can contribute to long-term success and enhance brand perception among eco-conscious consumers.

7. Foster employee empowerment: Promoting a sense of autonomy and encouraging employees to experiment and make decisions can lead to a more motivated, inventive, and engaged workforce. Entrepreneurs should invest in the growth of their employees and create an atmosphere that supports personal and professional development.

8. Balance global expansion and localization: Nike and Adidas have achieved success in global markets by tailoring their products and marketing approaches to local tastes. As you scale, the aim should always be to strike a balance between global strategies and localized tactics to ensure their offerings remain relevant and attractive in various markets.

9. Maintain a customer-centric approach: By consistently keeping customers’ needs and feedback at the center of their decision-making, Nike and Adidas have been able to create products that resonate with their target audience. Always establish open communication channels with customers and utilize insights to inform product development and marketing efforts.

10. Foster a culture of continuous learning: Phil Knight and ADI Dassler both displayed a commitment to ongoing improvement in their products and processes, adopting a growth mindset. Entrepreneurs should promote a culture of perpetual learning and refinement, staying informed about industry trends and embracing novel technologies and concepts to maintain a competitive advantage.

So to wrap all of this up, who takes the trophy at home in the end? Well, the short answer, of course, from every single perspective, is Nike. Both Nike and Adidas are well-known for their leadership in the market, but customers generally have a more favorable view of Nike. Financially, the comparison is not even, as Nike generates significantly more revenue, maintains a higher and steadier profit margin, and carries considerably less debt.

So given all of these factors, in response to the popular question of which brand is better, well, Nike takes the lead by a considerable margin. Nike's market share is simply gigantic compared to its competitors. The widening gap over the past decade seems unlikely to close anytime soon, particularly after Adidas lost the Yeezy line, which could be worth hundreds of millions of dollars. Currently, Adidas faces multiple challenges while Nike continues to excel without faltering. But Adidas's story provides valuable lessons as well, and at the end of the day, that's what this video was all about.

So there you have it, Ayluxer! This was the first company clash on our YouTube channel with Nike and Adidas as competitors. We hope you enjoyed this video as much as we did making it. Now we're curious to ask: what is your favorite sneakers brand? Drop your answer in the comments below! We're always curious to hear your thoughts. And with all of that being said, it's time to wrap up this video. If you found the information valuable, don’t forget to return the favor by tipping us with a like and a share. And as always, thanks for watching, Aylux.

So if you'd like to learn some more, check out this video next. Foreign.