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products vs lifestyles

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Today’s episode and memo is about Reebok. The company rose to power in the 80s, aligned it self with hip-hop culture, had exclusive deals with all the sports leagues, but Reebok had a less-than-stellar fall from grace.

I broke it all down with Zack O’Malley Greenburg. This was our first pod we recorded in person!

You can listen to the episode here or read our highlights below.

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selling a product vs selling a lifestyle

From 1983 to 1989, Reebok’s annual sales grew from $12.8 million to $1.82 billion. Thanks to shoes like the Freestyle and The Dunk, Reebok overtook Nike in sales and planted its flag in the sneaker wars.

The Boston-based company focused on selling sneakers and did its job well. Joe Foster, Reebok’s founder, never had dreams of taking over the world. He wanted to “tackle the athletics market and break into the U.S.” Paul Fireman, Reebok’s CEO from 1979 to 2006, had a similar perspective. Here’s what he shared in a 2021 interview with Retail Dive:

The company’s vision was grounded. Reebok’s goal was to sell a product, and optimize how it sold that product. Meanwhile, Nike had a much bigger goal: sell a lifestyle.

From Michael Jordan to Serena Williams to Tiger Woods, Nike was known for celebrating its stars. The company increased its total addressable market by convincing the everyday person that they were athletes too. Nike is world-class at brand and marketing, they just happen to sell athletic apparel.

It’s like the great Seth Godin quote:

Reebok isn’t quite Hyatt in this scenario, but Reebok’s hotel would have had several makeovers over the years.

That 1980s Reebok hotel would look like a Jazzercise class. The 90s Reebok hotel would look like a scene out of a movie starring Shaquille O’Neal. The early 2000s Reebok hotel may look like the set of BET’s 106 & Park. And by the mid 2010s, the Reebok hotel lobby would look like a CrossFit gym.

Despite the brief moments where Reebok surpassed Nike, the Reebok executives knew it was short-lived. Nike was playing a different game.

You can listen to the full episode here or read below for more highlights.

Reebok’s wins in the early 2000s

In 2001, Reebok’s two flagship athletes and NBA MVPs, Allen Iverson and Shaq, faced off in the NBA Finals. They were full-time basketball players and part-time rappers. Shaq’s Reebok shoes had a strong following, but big men rarely sell as many shoes as a flashy guard like Iverson could.

AI embodied Reebok’s crossover between sports and hip-hop. His Sixers uniform was the third-most popular jersey at the NBA Store from 1998 to 2008 (behind Michael Jordan and Kobe Bryant). He was on the cover of the first few NBA 2K video games. Reebok even sold Allen Iverson football jerseys due to the popularity of his high school highlight clips.

Iverson’s Reebok A5s flew off the shelves with an iconic commercial with Jadakiss. Reebok and AI leaned into hip-hop, agreed to a lifetime deal, and ran it back with the A6.

In 2002, Reebok tried to sign LeBron James but lost the bid to Nike. With budget to spend and eager plans to grow, Reebok turned to artists to sell shoes instead.

Reebok’s current CEO Todd Krinsky talked about this in a 2018 interview with Digital Trends:

Reebok soon had the two biggest hip-hop stars in the world, Jay-Z and 50 Cent, with their own sneakers, the S. Dots and G-Units, respectively. The shoes came out the gate hot, boosted Reebok’s U.S. footwear sales by 17%, but the momentum couldn’t last.

Once the shoes took off, Reebok flooded the market. Here’s a quote from sneaker analyst Matt Powell in Retail Dive:

It was another sign of how differently Reebok and Nike operated. By this point, Reebok was already in talks with Adidas on its future. Being acquired by a competitor was an informal “concession” for Reebok in the sneaker wars, but the outcome was even more unfortunate.

a failed acquisition and struggles along the way

In 2006, Adidas acquired Reebok for $3.8 billion. Adidas had the global footprint, but wanted to expand in North America where Reebok was stronger. The intended vision was for both brands to thrive, but the cultural clash was hard to ignore.

Adidas has an engineering-inspired, process-oriented approach to business. It was the complete opposite of Reebok’s upstart mentality.

At the time of the acquisition, Steve Stoute, who worked on several brand collaborations, said this to The New York Times:

Adidas did treat the brands separately, but they did that by gutting Reebok for all of its cultural cache and transferring that to Adidas. Reebok went from being synonymous with hip-hop to being synonymous with CrossFit.

Sure, CrossFit was an emerging opportunity in the early 2010s that made sense for Adidas to pursue in some form. But to do that, Adidas stripped Reebok of what made the brand unique.

Let’s imagine that Apple acquired A24 for its great content and cultural cache. But then Apple folded the A24 ‘brand’ into Apple TV, then pivoted A24’s component parts to focus on anime and compete with Crunchyroll. That’s what happened to Reebok.

Despite some partnership attempts with hip-hop in 2010s with Kendrick Lamar, Rick Ross, Future, and Cardi B, it wasn’t enough to bring Reebok back to its glory days.

Listen to the rest of the episode for more on:

• Reebok’s sale to ABG
• How Shaq now owns part of Reebok through ABG
• Jay Z’s Rucker Park team that inspired his S Dot sneakers
• Missed opportunities for Reebok

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money moves

• The music industry is now worth (at least) $41.5 billion​
• Reflections on the Open AI keynote​
• My recent interviews on NPR Marketplace and Billboard​
• Download The Trapital Report here​
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