by Steve Stoute
In fact, until Nike started to come on strong in the mid-seventies, Adidas and Puma together accounted for 60 percent of the U.S. sneaker market share—with Adidas controlling most of that. But by the early nineties, Adidas had fallen to less than 3 percent of the American sneaker business, in spite of the nice but brief spike they were given from the Run-DMC relationship. Puma managed to stay alive on the global scene but dwindled almost to nonexistence in the U.S., although it maintained its elite status as the maker of a superior soccer shoe; ultimately, Puma’s survival was only possible when it was taken over later by a French company that had also bought Gucci.
This is all to say that in 1980 when Paul Fireman was just getting started, Reebok ought to have been the longest of long shots for even getting on the map. Nike already ruled the roost. When outdoor jogging had suddenly become an American pastime and Adidas didn’t see it as something that could last, Nike had ridden that wave almost solo from the midseventies, when they were doing $14 million a year, to the start of the eighties, when the company went public and was taking in a reported $270 million a year as the top-selling sneaker in the U.S.
Then a funny thing happened. Just when Adidas was figuring out how to climb back to the top from second place and compete with Nike’s ever-increasing market share, jogging got cold for a minute as skating started to heat up, and, in 1982, as if out of nowhere, an indoor aerobics craze seized the nation. Nike, then immersed in the development and marketing of a sneaker called the Air Force 1—a piece of artwork if you ask any serious footwear scholar—opted not to concern itself with aerobics. Adidas also made no move to take advantage of the aerobics boom and thus missed their chance to capture a rich, emerging group of newly activated sneaker consumers: women. Well, guess what? As Reebok’s luck would have it, they had a woman’s shoe—white leather oxford style, low-tops, with the brand name in baby-blue lettering and a regal stamp on the side of the shoe showing Britain’s Union Jack. Introduced in 1982 as an aerobics sneaker, it was fashionably dubbed the Freestyle.
At almost sixty dollars a pair the price would have seemed excessive even by most of its high-end competitors’ standards. Yes, that was a lot for a sneaker—at least from the point of view of those companies mainly targeting male consumers. But for women ready to get their groove on at the gym, in a social and experiential context, the cost only elevated aspiration and status. Very smart. And before long the Sneaker Wars became a battle of innovations and higher costs.
Recently, while catching up with Paul Fireman, I recalled the Freestyle moment in footwear history and asked him to give me a sense of the economic impact. During his first few years with Reebok, he had actually gone into more debt and had initially lost money. “What people today don’t realize about the footwear business,” Paul explained, “and what they don’t realize about what Nike did, what Reebok did, and originally what Adidas did, is how much was spent on design, development, and research. We spent a ton.” Losing money in the short run, however, gave them an incubation period that would pay the greatest dividends. Paul described the early years as a time when coming up with new product required working three years out. “And what you’re looking to create, you don’t know. You just needed to get people stimulated to look for new possibilities, create new possibilities, to have conversations for new possibilities.”
Such was the thinking that put Reebok on a path to becoming the number-one-selling sneaker brand of the 1980s. Sure enough, by 1983, women and aerobics catapulted the company into annual sales of $13 million, and by the following year, Paul Fireman and his partners, Pentland Industries, bought Reebok from J. W. Foster & Sons for $2 million. In 1985 that investment was richly rewarded with the $64 million he collected when the company went public. Two years later Reebok was reporting annual revenues of $1.4 billion—beating Nike out on almost every measure.
Many factors were important in that success story. Certainly one of them had to do with a vital aspect of hip-hop culture’s love for discovery—for being the first on the block to show up in new kicks that nobody’s seen yet and that come with a luxury price tag. To keep the power of that coolness going, as we saw when Reebok wouldn’t sell to Modell’s until they upgraded their image, takes an incredible level of discipline. Paul Fireman put it this way: “What happens with urban kids in the world is that they are fundamentally creating fashion. They start the trends or they enforce the trends.” Either way, he pointed out, “They’re more provocative, more daring, more willing to stand for something. And I think that’s an important factor in how fashion goes. Now the problem in urban trends is that if you’re not careful, you can allow the urban trend to eat you up alive, because they want to move on quickly.”
My question to Paul, relevant no matter what the decade or the brand battle, was, “How do you stay new? Because if you’re not new, you’re dead.”
What Reebok learned, not only from watching its competitors but by observing the early battles between clothing designers like Hilfiger and Polo, was, as Paul put it, that you have to avoid going through the system too fast and burning out. When Tommy Hilfiger was the contender going up against the überbrand Polo, “all of a sudden Hilfiger got adopted and pulled by urban culture. If they are pulling you, you’re in great shape. But you must resist that pull. The current wants to pull you, but you are fighting the other way.”
Translated into the cautionary tale drawn from the grand love affair between hip-hop and Tommy Hilfiger, that suggests that when you go so far, so fast, so big without pulling it the other way, you’re always in danger of killing the golden goose: aspiration. But in Tommy’s case the complication in this mix was the baseless rumor that started in 1996 and that had gone viral overnight suggesting he had gone on The Oprah Winfrey Show and had said, in effect, that he wished people of color wouldn’t wear his clothing line. Beyond a shadow of a doubt it was not true—as Oprah would emphatically insist a decade later, it was “a big fat lie that never happened.” Though Tommy had denied it—and in spite of the fact that he had never gone on the show and that there was no evidence, ever, that he had made the offending statement, and in spite of an extensive PR effort to combat the rumor—it lingered. Why? Partly because his response wasn’t big enough, fast enough, or far-reaching enough. But I think it was mostly because of the closeness of the relationship between the Hilfiger brand and the culture that was there from the start, such that even a baseless rumor felt like marital infidelity. Even when you’ve been told it didn’t happen, you can’t get the offending image out of your head. Interestingly enough, it wasn’t only people of color who backed off the brand. When urban kids pulled back, their white suburban peers followed. The company then lost more generations of mainstream consumers whose mind-set was sophisticated, politically correct, and usually brand-savvy. The street, more and more, was Main Street.
Knowing Tommy as a person and an entrepreneur, I can attest that he would never say or even think anything along those lines. What’s more, I watched him rise above the fray with a lot of grace. Things didn’t turn out too badly either when he sold his company in 2006 for $1.6 billion or when it was sold again in 2010 for about twice that much. The purchase by Phillips–Van Heusen put Tommy Hilfiger under the same roof as one of the brand’s former rivals, Calvin Klein. Strange bedfellows? No longer. The power and pitfalls of the tanning effect could be seen at many of those turns.
What Paul Fireman was learning with Reebok in the mid-eighties was how to stay engaged with urban consumers—showing the love but without being too available. He commented to me, “Nobody wants it when they can have everything. When it goes too far, people want to get rid of it. Now, it may sell a lot of volume but it’s no longer driving the show and that’s what you don’t want to be in. You don’t want to be common.” Whether the consumer is urban or suburban, he went on to say, “the fear is that you let the early adopters become multiplied too fast and they take over. You lose your whole purpose for being.” In Paul’s estimation, the brand that understood
how to be in the current without letting it move them through the system too quickly was Nike.
In other words, other factors in Reebok’s 1980s success were lessons learned from how competitors were managing to thrive. To stay on the side of newness, the brand then followed the demure, simple styling of their original aerobics Freestyle with a high-top version that included the signature two Velcro ankle straps and also came in hot, flashy colors like pink, orange, and cobalt blue. These sneakers weren’t just must-haves for the gym but gave girls and young women their funky uniform for school, work, parties, hanging out, and completing fashion statements.
One of the many distinctions of the Reebok sneakers was that they were made with very expensive leather that was considered to be ladies’ handbag leather or glove leather. As such it was thinner and softer than most athletic footwear and tended to wrinkle—like an elephant. Well, somebody in the company saw the wrinkling as a problem to solve and recommended the use of a thicker and smoother leather that cost less too. Made sense. But as soon as sneakers without the wrinkles started hitting the stores, sales began to slip. And Paul, being the smart entrepreneur that he is, insisted that he didn’t care what it cost—they had to use handbag leather again. Companies miss these lessons all the time when they’re so concerned about making money on the margins and trying to cut costs that they don’t see the enchantment that consumers have with the product. In the case of Reebok, handbag leather, wrinkles and all, was a detail that authenticated the brand.
The affection that female consumers had for the Freestyle ran so deep that the shoe earned its own local colloquialism. In New York girls called them the “5411s.” Wonder why? Nope, it wasn’t the model number on the box. That was exactly what a pair of Freestyles cost when you added tax: $54.11. Reebok 5411s were code for being in the know in the best sense of the word. And meanwhile, as that phenomenon was building an army of female consumers, Reebok also made significant inroads into marketing to male consumers—thanks to new technologies.
Paul tells a great story about something that happened at Reebok headquarters in Brockton one day when he found a pair of boots in the wastebasket. This was a situation when after all the conversation that had been going on about looking for new possibilities, he realized that sometimes your company isn’t going to invent it but that someone else will. And in those cases, Paul stressed, “you have to see the product, recognize it, and then transform it into something that can work.”
The pair of boots had been jerry-rigged—as Paul Fireman put it—by an older gentleman, a World War II veteran turned inventor, so that the insoles provided added cushioning in the form of two “humps.” Apparently someone in the office had opened the mail and had no idea what to do, so they had chosen to dump the prototype for the “Pump” technology into the dustbin of history. Instead, Paul rescued the boots and met with the man, who described his invention as “energy air” that was not so much for high-performance sports but for good old-fashioned walking. In another twist of good timing, during the late 1980s one of the fastest-growing footwear categories was walking shoes. So Paul made a deal with the man to take the technology into a product that promptly sold seven million pairs a year.
That was only a glimmer of things to come. Similar technology, as it was, further developed for high-performance athletic sneakers—allowed you to apply pressure to a basketball-shaped pump on the shoe and customize how much air cushioning you had. The Pump was spectacular, as was its sequel, the Double Pump, which offered one of Reebok’s most memorable slogans: “Life is short. Play hard.”
The Pump really was a phenomenon. Not only was the design hot and the concept fresh but it impacted the game of basketball—as witnessed during a famous televised dunk contest in 1991 when an unlikely contender, the Boston Celtics’ Dee Brown, a kid from Jacksonville, Florida, wore his Reebok Pumps to the contest. When it came time for Dee’s turn, he backed all the way up, and before he took off, he kneeled down and started pumping the shoes. And this blatant endorsement of Pump technology that was going to improve his dunking sent him flying into the air with a no-look dunk—that enabled him to come from nowhere and win the contest—and simultaneously put the shoe on absolute fire.
After that, Dee Brown used to joke that there were only two basketball players in the NBA with legendary sneakers—him and Michael Jordan.
True. During this period, Nike had definitely not been idle. And Reebok wasn’t the only sneaker getting help from rarified air. One of the ironies in this whole saga is that in 1982 when the Freestyle was all anyone talked about, Nike’s stunning original Air Force 1s had been overshadowed and overlooked by almost everyone—with the exception of a loyal urban following who felt personally dispirited when it was dropped and never stopped hoping for its return. The reason for dropping the Air Force 1 was to make way for bigger and better—the Air Jordan. The press suggested that not everyone at team Nike was sure that the sneaker would sell. When the five-year $2.5 million endorsement deal was made to bring in Michael Jordan—then a rookie first-round draft pick by the Chicago Bulls out of the University of North Carolina—there were out-clauses for the brand in the event that the Air Jordan failed to lift off. In the black and red team colors of the Bulls uniform, the sneaker sold an unbelievable $130 million in its second year on the market, transcending anything ever achieved by a mere athletic shoe before. The Air Jordan had magic in it. Perhaps it was a reflection of the brand that had been named for the Greek goddess of victory or that the sneaker embodied the energy of the Nike swoosh logo drawn to represent her wing. It also stood for the entrepreneurial genius of the brand’s creator, Phil Knight, and the gravity-defying ability of an athlete destined to become one of basketball’s greatest players of all time.
On top of that, Air Jordans were a cultural departure from the classic NBA uniform look, just as Michael himself was unlike the gold-standard heroes in the mold of Larry Bird and Magic Johnson. Jordan was frequently threatened with being fined for wearing his Nikes on the court because they weren’t regulation. As Adam Silver, now the NBA’s deputy commissioner, recently reminded me, the rule at the time was that sneakers had to be all one color. The fact that Jordan risked the fine and wore the sneakers anyway—bucking the system—made Air Jordans all the more desirable by mirroring the authentic, unapologetic attitude of the youth generation. This reveals an often overlooked yet pivotal role that Michael Jordan played in tanning. Not only did he have a great-looking sneaker—with a beautiful, new-to-market silhouette—but he embodied hip-hop culture’s antiestablishment attitude at the same time that he was a baller who played out of the stratosphere.
Magic Johnson and Larry Bird were undoubtedly adored as athletes. But they didn’t convey the same cultural codes as Jordan did, codes that were starting to resonate—the use of one-on-one moves, for example, or wearing a gold chain during dunk contests. Basketball fans who wished they could play like Magic or Bird but didn’t have the height found aspiration through Jordan that came from sharing his against-the-grain attitude. With these attributes, he captured the values of the hip-hop cultural creed at a critical moment when a generation was redefining how it saw and experienced the world. If kids were wearing no shoelaces or fat laces, Jordan was in sync with them—by refusing to have his Air Jordans fit the definition of an acceptable NBA sneaker.
And so, by 1990, in spite of Reebok’s sponsorship and licensing traction with the NFL and other major league men’s sports teams, Nike was back in the lead as the top-selling brand across the boards. In some ways, the Sneaker Wars now resembled a battle of the sexes—with Reebok doing at least 50 percent of their business with women, while males overwhelmingly favored Nike in most categories, none more so than basketball.
Paul Fireman and Phil Knight had never made any pretense of being fond of each other. My impression was that Paul loved going up against the behemoth that was Nike, even if it meant not always winning. Paul’s motto was “Nobody holds all the cards at any given time, and that’s what
makes the game so much fun.” Phil Knight didn’t appear to see anything fun about the competition or any reason to have to like his rival. Nike was out not just to win but to crush all contenders for the throne. Phil’s guiding philosophies included the saying that it’s important to “play by the rules but be ferocious,” and “It’s okay to be Goliath but always act like David.”
From the underdog’s standpoint, Reebok probably figured that the reverse was just as true. In the role of David in the brand matchup they managed to sign a literal Goliath by the name of Shaquille O’Neal to an endorsement deal that really heated up the Sneaker Wars. Shaq’s newness in the NBA—and even the looming question of whether he was ready to go up against the big boys or not—was smartly woven into a “Don’t Fake the Funk” commercial campaign. Besides being funny, irreverent, and always comfortable in his off-the-court persona, Shaq gave Reebok credibility in its bid to become more of a hard-core athletic sneaker and in connecting to a younger generation of males. With a language and attitude that was hip-hop-infused, he brought some added cool to the mix in 1993 when his first rap album, Shaq Diesel, went platinum, and a year later the follow-up album went gold. Despite Reebok’s success with Shaquille, Nike still kept its top-dog status—but with only a little breathing room. A 1995 Fortune magazine feature about the Sneaker Wars reported, “The company regained the revenue lead from Reebok in 1990, $2.24 billion vs. $2.16 billion.” In 1994 Nike’s earnings were $299 million on $3.79 billion while Reebok’s numbers were $254 million on $3.28 billion in revenues. Fortune noted, “Together the two companies sell more than half the athletic footwear in the U.S. and they control over 40% of the global market. Only Adidas, with about 10% of global sales, remains a significant competitor.” Other indicators had suggested that Nike was overextended and that sales were actually slumping—enough so there was a significant restructuring warranted.