End of Reebok?

What happened to Reebok? 

Year 2005, Adidas acquires Reebok in $3.5 billion. And in year 2021, the same Adidas sells the same Reebok to Authentic Brands Group in $2.7 billion. Such a brand whose name was on the bat of our Indian cricket team. Such a brand from which we used to have craze, today, no one cares about that. But how did this happen?

(Pic-popularity of re..) 

Today, we don't even think of the brand Reebok which was famous worldwide. Maybe Reebok was not compete with other shoes brands. That's why it failed. But, there is nothing like this. And you will be surprised that once, Reebok had surpassed Nike. Nike, which is that biggest  sportswear brand in the world. And not just that, there was a time when Reebok has 50% share market of Indian market. But still, the Reebok which used to dominate sportswear equipment market today, it has disappeared. And this thing puts two questions in front of us.

No. 1 - Was Reebok just a bubble? Or did something happen with Reebok which most of the people don't know?

 No. 2 - did Reebok fail because of its own mistakes? Or was it ditched?

Back-Story

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Reebok was started in 1895, and such a starting which completely changes the sports industry, with the world's bigges invention in running sports industry. The spike shoes. 

This story starts in 1895, when a person named Joseph William Foster invented spike shoes in Bolton, England. And by 1924, the same spike shoes got popularity in England athletes. This happened because 1924 Olympic champion Harold Abrahams, won gold medal in 100m race wearing those shoes. By 1950s, two grandsons on founder Williams, Jeff and Joe decided, that we will take this invention to the whole world. But for that, they needed a big opportunity. For which they reached 'the land of opportunities, America' Before promoting their company in America, first of all, Foster Bothers changed their company name. And from then, it was named Reebok.

Way to success

But till now, company just got its name. success was yet to come. And for the next 10 years, while finding the American distributor for their shoes, year 1979, finally the time came, when an American businessman Paul Fireman gave distribution rights to them. Reebok got its name, got American distributor and got market like America. The only thing that was yet to come was success.

(Pic-women catering market) 

And finally that time came, 1980s. At that time, no one was catering female market. Even Adidas and Nike were focused on male centric sports equipments. And after two years, something happens that changed the fate of Reebok forever. 1982, American ladies went crazy for aerobics. But the problem was, there was no one to make equipments. Even till that time, no one ever thought of making equipments for ladies. While brands like Adidas and Nike were focusing on make equipments and ignoring women, whereas on the other hand, Reebok came up with free style. Such aerobic shoes which were made keeping females in mind. And those shoes were sold so much, that they went out of stock in a few weeks. Where Reebok was just started in American market, after the launch of freestyle, whole American got to know about Reebok. And when something gets famous in America, it doesn't take so long to get famous in whole world. And with the trend of aerobics, the brand which was not able to find distributorship in America, by 1983, it made a sales worth $12.8 millions. 

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(Pic-celebrity and reeb.) 

This success was so big, that in 1984, Paul Fireman bought the whole company from Foster brothers. The Freestyle, these shoes by Reebok were so hit, that American actress Cybill Shepherd worn the same shoes in Emmy awards. Which meant, Reebok was famous among celebrities also. And then comes 1988, the year when Reebok surpassed Nike. And it became the world's no. 1 brand. I know, what you are thinking. When everything was going so perfect, Reebok was dominating the market, then what happened with the company, that we don't even think about this company.

Declining time

Well, here is the answer. 1980s went very good for Reebok. But with the starting of 1990s, things started to change. And Reebok did such mistakes, due to which it has ended. 

No. 1 - Brand Identity.

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Till now, Reebok was no. 1 brand because of its aerobic shoes. But by 1990s, this trend started to end, and to recreate their success, rather than focusing on brand building, they decided to catch the trend. They couldn't make their real identity. All they were doing was catching up the trends. People weren't able to understand, whether Reebok is a sports brand, a fitness brand or a casual wear brand. So you see, everyone was confused with their image.

No. 2 - they started copying the competition. 

In 1990s, basketball started becoming popular. And in basketball, shoes are most important. As a result of which, Nike signed a deal with Michael Jordan, to launch Air Jordans. And this one thing benefited Nike a lot. And due to which, Nike signed a deal with Shaquille O'Neal, to launch an exclusive brand. But it failed terribly. They still didn't get the success. And Reebok launched Reebok Pumb in competition of Air Jordan 1. But they failed to turn it into success. And Reebok lost its no. 1 position in the market.

 Infact by 1955, Nike acquired no. 1 position and Fila acquired no. 2 position. And Reebok started making various kinds of shoes to follow trend. 

No. 3 - 'No brand focus'.

In 1992, Reebok made its entry into casual-wear form sports. But just after 2 years, in 1994, Reebok announced, 'from now we will make just sportswear'. But next year, in 1995, Reebok started making shoes for kids.In short, Reebok was all over the place. 

With this, Reebok did its next mistake. And that was excess production. With the launch of their new shoes, they used to think that it will get success like Freestyle, as a result of which, they used to do mass production of those shoes. Because Paul's attention was on revenue instead of brand building. This is because in 1980s, Reebok had surpassed Nike in terms of revenue. But the problem was, the number of shoes Reebok used to manufacture, there was no such demand in the market. As a result of which, their inventory started piling up, thus increasing their inventory cost. 

Reebok didn't fail because of its product quality. Rather something happened with Reebok which they never dreamed of. And that was 'shift in consumer behaviour'

See, when a customer used to look at Nike products, they used see that as a premium product not a shoe. While on the other hand, when a customer used to look at Reebok shoes, they used see that as a normal shoe not a premium product. And if you go back in olden times, so this is how the marker looked. Shoes of Nike and Reebok were available in the range of 4k-7k rupees. But when you go to buy Nike shoes, their range started from 2700 rupees. Whereas on the other hand, their range started from 900, 1200, 1500 rupees. Due to this, Reebok used to get sales, only those people used to buy Reebok shoes who wanted just a pair of shoes to wear. As a result of which, this is what happened with brand. Loss of perceived value. 

(Pic-brand vs utility company) 

Because Reebok had launched so many shoe lines, they manufactured it in bulk, now they had so much stock that to clear it off, they had to put sales on their shoes. And when they sold their shoes on sales, their perceived value of brands started declining. Discount destroyed their perceived value. Means the value that customers perceive in their minds towards that particular brand. It took years for Reebok to build the brand value they lost it in a pinch of time. Where Nike and Adidas used to show themselves as premium brands, while on the other hand, Reebok became more of a utility based product.

See, the thing stays premium when only a few people could afford to buy that. And that is the reason, within no times, celebrities started moving away from Reebok. Because Reebok had made its shoes so cheap, that now anyone could afford their shoes. And when something like this happens, celebrities don't attach themselves to that. And so that other brands don't repeat that mistake, that's why brands like Gucci and Zara don't sell their stocks at discount, rather they prefer to destroy it. Thus,  'if you don't have a brand identity, you will become just another option for the consumers'. Now the question is, if you are doing a business, then this thing is very common for every person. Then why was every step of Reebok going wrong?Well the reality is, when Reebok got success at that time, there was high demand of shoes. But there were only a few shoes manufacturers. 

(Pic-supply and deman for value generation) 

Brand retain brand value, get some space between demand and supply value.  

Adidas bought Reebok

Paul was not able to tolerate this, that why isn't his company not able to compete with Nike? And because of this desperation, Reebok signed a deal with Adidas. And this deal proved to be very dangerous for Reebok. In 2005, Adidas acquired Reebok for $3.7 billion. Because at that time, Paul Fireman thought, by selling Reebok to Adidas, Reebok will recapture its market and will able to compete with Nike. And this is why, while signing the deal, they said, 'their shoes will be sold in market with their brand name'. And due to this acquisition, Reebok became a subsidiary of Adidas.I know, what you are thinking. That Adidas was ahead of Reebok, then why did they buy Reebok? Well, it is said that 'it was a trap to kill competition'.

Because before this deal, the market share of Reebok was 17%, whereas on the other hand, the market share of Adidas was only 8%. After this acquisition, Reebok as a brand, didn't grow, but Adidas got the market share under its name. Adidas asked Reebok to focus on fitness instead of sports, no sports, no fashion, only fitness. Due to this, Adidas started pushing its shoes in the segment of Reebok instead of pushing Reebok shoes. As a result of which, Adidas got the whole segment of Reebok!

( pic-evil adidas plan) 

Infact, Adidas didn't stop here. In the next year of acquisition, year 2006, Adidas got the deals of Reebok with NBA and NFL under its name. I know, what you are thinking, if the plan of Adidas was so evil, then why didn't Reebok do anything? Well, because Reebok had become a subsidiary of Adidas. And at the end of the day, Reebok had to accept what the Adidas used to say. And because the deal was something like this, the shoes of Reebok will go in the market with the name of Reebok, so Adidas played it very very smartly. They sold Reebok shoes with the name of Reebok. But they changed the segment of Reebok. As a result of which, in 2006, the market share of 17% Reebok had, that declined to 8% by 2018. 

H1 Reebok vanishing

Reebok's condition had become such that in year 2021, Adidas had to sell off the Reebok. And that too at the price point which was much less then the purchase price. In 2005, Adidas purchased Reebok for $3.7 billion, and in year 2021, the same Adidas sold Reebok in $2.7 billion. 

H1 Business Lessons to be learnt from Reebok

And most importantly, what are those powerful business lessons, that we can learn from the failure of Reebok, and implement in our business.

(Pic-all three in one pic) 

No. 1- Never takes impulsive decisions

You, I, most of the us are thinking that if Reebok hadn't sold itself off to Adidas Reebok would not have been in this condition today.  

No. 2 - Focus on your strengths and not on your weaknesses. 

The time when Reebok captured the female market, at the same time, if Reebok kept expanding itself into the female market and not spreading its legs all over the place, Reebok would have been a huge brand even today.

No. 3 - most importantly, always analyze your next move. Reebok never took care of its risk management.