How Nike Got Street Cred The $11 billion company overcame its corporate image to win over the fiercely independent skateboarding market.
By Jordan Robertson

(Business 2.0) – When Ted Monney opened a new skateboard shop in Hollywood five months ago, he decided to stock it with a surprising line of skate shoes: Nikes. More than a few of his customers chided him about carrying a corporate brand alongside sneakers from small companies like DVS, Emerica, and IPath Footwear, but Monney had the last laugh--Nikes began flying off the shelves faster than any other shoe he sold. "Call me a sellout or whatever," Monney says. "I really don't care."

Nike's famous swoosh logo isn't one you'd expect to find in a skate shop, as skateboarders are a pretty antiestablishment bunch. And in fact, Nike failed miserably in its first attempt to tackle the market seven years ago, when poorly designed shoes and a glitzy, mass-market ad campaign resulted in a line that was pulled after just one year. But thanks to the painful lessons it learned from that earlier effort, the $11 billion company has found that when it comes to marketing its three-year-old Nike Skateboarding brand, the trick is to not behave like an $11 billion company. Its market-share numbers are purposefully paltry--less than 5 percent of the $1 billion skate-shoe business--because, for now, Nike is focused not on volume but on cachet. Limited-edition versions of Nike's Dunk Low Pro SB have become sought-after collectibles and are currently the fastest-selling skate shoes in the country. As a result, even the most independent-minded skate shops want to carry Nikes for one simple reason: "The shoes have huge margins," Monney says.

Such margins, of course, can only be fueled by customer demand, which is why Nike has gone out of its way to earn the respect of skaters by selling exclusively to independent shops, advertising nowhere but in skateboard magazines, and offering sponsorships to influential pro riders. The strategy has helped Nike score enormous "street cred"--that delicate balance of being cool without trying too hard. It also serves as a lesson for any company looking to corner a fickle youth market, be it skateboarders, preteen girls, or hip 20-somethings (see "The Delicate Craft of Cool," page 46).

"I remember when skateboarders hated big companies--particularly Nike," says Keith Hufnagel, who owns a San Francisco sneaker shop that sells Nike skate shoes. "Now, every time I go skating, I always see a kid wearing Nikes. They're definitely doing it right this time."

Too Cool for School

Nike's first foray into skateboarding certainly helped the company understand how not to launch a skate line: alienating skaters by marketing to the general public and failing to deliver a well-designed product. A flashy ad campaign--created by Goodby Silverstein & Partners of "Got Milk?" fame--included national TV spots on ESPN and MTV, as well as print runs in Rolling Stone and Sports Illustrated. The ads featured tennis players, golfers, and joggers being harassed by police, accompanied by the tagline "What if all athletes were treated like skateboarders?"

The spots won acclaim in the ad industry, but many skaters resented Nike's mass marketing and felt the ads were trying too hard to win them over. And even those who liked the ads didn't extend their affection to the shoes, which skaters thought were ugly.

"They did almost everything wrong--ads that many skaters found cheesy, product that wasn't focused on the market," says Fran Richards, former publisher of TransWorld Skateboarding and now a sports-marketing consultant. "But they've stepped back and learned their lesson."

Just Redo It

Nike's reeducation began in 2000, when Sandy Bodecker, 51, now the head of Nike Skateboarding, became interested in relaunching the brand as part of a push into action sports. Bodecker's first step was to concede his own lack of knowledge and seek out respected members of the skating community for advice. One of his primary targets was Robbie Jeffers, the well-connected manager of the Stüssy skateboarding team in Southern California. Though Jeffers, 34, was skeptical, Bodecker "really sold me on the idea that Nike was going to be in this for the long haul," he says.

Jeffers and Nike agreed on three essential points: Nike needed to commit to the project for at least five years, include skaters in the design process, and reissue the Dunk--a basketball shoe released in 1985 that had gained a cult following among skaters. Satisfied, Bodecker hired Jeffers to manage a Nike-sponsored team of professional skateboarders. Jeffers, in turn, recruited four pros to ride for the team and give design input. (Today, Jeffers has assumed more of a sales and marketing role.)

Richard Mulder, a 26-year-old pro skater from Santa Ana, Calif., was one of the first riders to sign up, shaking off concerns about promoting a big corporation after Bodecker met with him personally. "They approached us from a place of humility," Mulder says. "They didn't pretend to know it all."

Mulder and the other riders reinforced Jeffers's hunch about the Dunk, overwhelmingly encouraging Nike to revive it before releasing any new sneakers. The riders were flown regularly to Nike's offices in Beaverton, Ore., to opine on proposed models, and Nike sent them shipments of test shoes, encouraging brutal honesty. The skaters rejected two designs after noting their aesthetic shortcomings. (In skater-speak, they looked "busted.")

Dare to Be Dull

The skaters' backing helped nike persuade more than 200 stores nationwide--all independently run--to carry its five new shoe models. The biggest blockbuster did indeed turn out to be the Dunk, which was redesigned to include a number of special skate features, such as a thin, cushioned insole that allows for better board-feel. Nike has also taken to releasing a few hundred pairs in limited-edition color schemes, which consistently sell out within hours of arrival at shops and allow store owners to sell them to collectors for as much as five times the suggested retail price of $65.

This sort of success has, naturally, helped Nike get more of its products on shelves. The shoes' reputation for durability--an important selling point in action sports--keeps buyers coming back. Of the $100 Zoom Air E-Cue, the most expensive model, Monney says, "They're bulletproof. They're very durable shoes."

Meanwhile, Nike has also scored with ads that ring true to the core audience, says Mitch Kummetz, a senior analyst at investment firm D.A. Davidson who follows footwear and action sports. Its print campaign is decidedly unoriginal, using the same formula employed by virtually all of its rivals: an action shot of a recognizable athlete combined with a product shot. In dumping the highbrow humor used in the first go-round, Nike has avoided the look of an outsider trying to muscle its way into the market.

Appearances aside, don't be surprised to see Nike flexing those $11 billion muscles soon. Though analysts estimate the company's skate-shoe business at less than 1 percent of its overall revenue, Nike has plans to add 100 stores and several high-profile riders to its team in the not-distant future. It's also expanding its reach beyond the Nike brand, acquiring surf and skate veteran Hurley. Analysts and skaters alike say Nike could become one of the industry's top brands if it continues hitting home runs with its shoe designs, pinpointing trends like retro sneakers, and listening to the opinions that matter most: those of the pro skaters it pays to espouse them. "The riders are very important to the process," Bodecker says. "Without them going out and being ambassadors for the brand, we're not living up to our end of the bargain."