Nike GM Settles Into Tough U.S. Market

Mike Francis had no illusion that it would be a cakewalk through a tough American economy when he took over as U.S. general manager for Nike Golf at the beginning of December, but he is surprised at how quickly things have changed since then.

“The U.S. market is far more complex than people think it is. That comes from working around the world,” said Francis, who spearheaded the formation of Nike Golf Canada and headed up the company’s European operation before taking his current position.

“This is a very large, very complex marketplace,” he said, using the sheer size, different markets, geographic locations and multiple trade channels that go with the American marketplace as examples.

“Here, you have that many more available golf courses, you have management groups that manage multiple golf courses, you have sporting goods channels, you have multiple off-course people that are very large, so it’s a complex place,” said Francis.

“It’s a tough market here. It is the market in the world that everyone follows. Everyone needs to win in this market to be successful,” he added. “The first nine months (of his tenure) have gone quite well. The economy certainly hasn’t changed at all.

“The thing for me, personally, though is just how much the market changed, even after I got here. Of all the people I’ve talked to, nobody has seen it like this. It makes for having some very unique and tough challenges,” said Francis.

One of the biggest changes, from his perspective, is how the focus among manufacturers has switched to promotions such as free fairway woods with the purchase of a driver or special prices to lure consumers instead of technology stories.

“The whole pricing structure has basically changed in the club market, so that would be my biggest sort of shock that we’ve all had to deal with and now, how long does it last? Hopefully, it won’t be as promotional next spring, but I think it’s going to be another tough spring,” he said.

“Consumer behaviour has changed if you look at not just our industry, any industry. What are people gravitating to — `Hey, let’s go to the lowest common denominator. Let’s go to the best price, best deal.’”

Of course, the combination of a tough economy and overall rounds being down resonates throughout the entire industry. While accounts for many manufacturers have shut their doors this year, talk of consolidation between manufacturers is getting louder.

“There is consolidation happening at retail. Will there be consolidation on our side of the business? I don’t know.

“As you look at the times we’re living in and you see the results of some of our competitors out there, they’re tough. How long do people keep doing this?” said Francis, adding that all he can concern himself with is Nike and he believes the company has managed itself quite well in a challenging atmosphere..

“You can only control what you can control. I can’t control the economy. I can’t control my competitors. I can’t control the marketplace, but we can control everything that we do within it and I think we’ve done a good job managing that,” he said.

“We haven’t taken the big risks and we’ve been very calculated in our approach to the business.”

While expense management and controlled inventories are part of that business management, so are advertising budgets that have been cautiously spent this summer and, according to Francis, are shifting towards digital mediums.

“If you look at it, I think people probably advertised less during this summer than they have in the past because of the promotional world we’re living in,” he said.

“Once people have new product launches come spring or fall, people are going to be talking about brand campaigns and new technologies again.

“That’s the nature of what we need to, but when you’re in the June-July-August mode and everything is `Buy a driver and get a free fairway wood, two dozen balls for X price,’ that’s tough to advertise,” he said, adding that digital media offers an immediacy that is advantageous.

“I think there’s a big swing to digital – here and now – and I think it will continue ,” he said.

“We can advertise 24/7 and we can put up any message on any product, on any promotion, on any deal, on all of our player wins and all the stuff that we’re doing,” said Francis. “We’re out there still telling all those great brand stories and the things that are happening with our players and things with our brand.

“We’re living in a here and now age – what’s in it for me and how fast can I get it? Information is no different. People want information today and, quite frankly, reading about it tomorrow or next week or three days from now sometimes is too late because we’re already on to something else.”

How long the tough American market will last, says Francis, is anybody’s guess, even though there have been recent signs that the overall economy may be starting to improve.

“I’m not sure it’s going to be able to recover that quickly,” he said. “I don’t feel that the industry is going to recover overnight. Some of the changes that have gone on will take a lot longer for the industry to get back to where it once was.

“We’ve seen tons of booms and busts, but I think they’re sort of little peaks and valleys where this is like falling off a cliff.

“This is different than I’ve ever seen in my 22 years doing this and I would imagine if you talk to lots of others who have been in the industry as long as me or longer, I don’t think they’ve ever seen it like this either.”

Francis adds that not only did the golf industry take it on the chin from the economy, so too did a lot of companies that contribute to golf. Corporations, for example, may shy away from golf if they are laying people off.

“I think corporations are terrified,” said Francis. “Here in the U.S., companies that have been involved in golf, it’s very different for them. There’s a microscope on them, especially if they’ve had any (government) bail-out money.”

However, business still needs to be done and golf can be an important part of that, as well as being an important contributor in terms of jobs and taxes, according to Francis.

“No one’s standing up for golf or how good it is for the local economies and a lot of people are employed in the golf industry.”

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