Under Armour: Too Big for its Shirt?

    It's amazing how many of the world's most successful entrepreneurs quickly forget what made them famous.

    The latest example is Kevin Plank, CEO of Under Armour.

    What made Under Armour famous? It wasn't a Super Bowl ad. It wasn't a massive marketing campaign. It wasn't ego or hype. What made Under Armour famous was "performance apparel" a new category Kevin created and carefully nurtured. 

 

    As an ex-Maryland football player, Kevin Plank was sick of wearing sweat-soaked cotton T-shirts. So he visited New York City’s garment district and found a polyester-Lycra blend that didn’t trap moisture.

    His next step was to create undergarments made with this high-tech blend that could wick sweat through the fabric to the surface instead of absorbing it. He theorized that if athletes could be dry and cool they would be able to perform better. This is the core concept of Under Armour and the idea that made Kevin Plank and his company famous.           

    Under Armour started slowly with a narrow focus.

        One product = shirt

        One market = football

        One target = athletes

    After 12 years, that strategy built the Under Armour brand into the $725 million business it is today.

    But, hey, nobody wants to keep doing the same thing over and over again. Entrepreneurs are naturally restless and thrive on challenges. Which is why they often get themselves into trouble after an initial success.

    What keeps a brand and company successful over the long haul is sticking to what made them famous in the first place. But too often that is not what companies end up doing.

    Like a successful athlete, a successful brand can feel invincible. Pumped up by delusions that no matter what they do or what they try, they will be successful. Ego takes over for marketing sense. Feeling invincible led Michael Jordan into baseball and Under Armour into running shoes.

    The key to remember is that Under Armour isn't just a great brand; Under Armour pioneered and dominates a great category. Its power comes from the category it owns in the mind, not the brand name it puts on the package.

    "Under Armour" are the words that represent that category in the mind. So putting the Under Armour brand name on another category is not going to guarantee success, especially if that category has little to do with performance clothing. Unfortunately, Kevin has learned this the hard way as many do.

    Under Armour owns performance apparel. It started with football and shirts. Then slowly expanded into all types of performance apparel for men, women, children and sports of all types. This kind of slow expansion over time is fine. It dug Under Armour deeper into its performance-wear focus.

     What got Under Armour into trouble is veering too far from its focus. Kevin's first big move came in 2006 when Under Armour started to sell American-football cleats. This is a small market ($250 million in the U.S.) so the big athletic-shoe players (Nike and Adidas) more or less ignored the threat. His next moves took Under Armour into the baseball and softball cleats market where the company managed to capture a small share.

    Then in 2008 Under Armour really started to get cocky and entered the big leagues of footwear with the launch of its Prototype trainer. Unlike its slow and stealthy moves into cleats, Under Armour made a big and flashy move in non-cleated shoes with a $25 million campaign that broke with a Super Bowl ad declaring "The Future is Ours!" a full three months before the shoes were even in retail stores.

    The arrogant and garish launch infuriated Nike which promptly launched its own SPARQ trainer (for Speed, Power, Agility, Reaction and Quickness.)

    Nike was not going to let Under Armour be the future of footwear. You beat a leader like Nike by being slow and sneaky, not shouting to the world we are going to beat you. Especially if you don't have the product or brand to do it. Under Armour is an apparel brand. Nike is a footwear brand. Each might sell other stuff too, but the brands are rooted in these categories and can't grow too far from them. Look at the numbers:

Under Armour
    $752 million in sales
        Mens apparel = 53%
        All apparel = 80%
        Footwear  = 12%

Nike
    $19.2 billion in sales
    Footwear = 54%
    Apparel = 27%
    Equipment - 6%

    That is why it makes no sense for Under Armour to go toe-to-to with Nike in non-cleated athletic shoes. Here is a company with no credibility in athletic shoes attacking one of the world’s most iconic and dominant brand for athletic footwear. Furthermore, Under Armour was doing so with no clear-cut product advantage and with a name that defined a totally different strategy.

    Not surprisingly the financial results from the expansions have not very encouraging. Even though athletic shoes are an enormous market, Under Armour sold only $85 million worth of footwear in 2008 and much of that was under aggressive markdowns. 

    In addition, Under Armour’s year by year results show a definite downward trend.

2006 . . . Sales were up 53 percent from the previous year.
Net profit margin: 9.1 percent.

2007 . . . Sales were up 41 percent from the previous year.
Net profit margin: 8.7 percent.

2008 . . . Sales were up 20 percent from the previous year.
Net profit margin: 5.3 percent.

    Sales growth is slowing, profit margins are declining and the stock has been pummeled. You might think these factors would have deflated some egos and shocked management into realizing their strategic errors, but apparently not.

    This year, the company launched its first line of running shoes.

    Will history repeat itself? I think so.

Comments

[Josh Levine]

Great point. UA is one of many brands who start out with a great idea and end up diluting it in the name of growth.

The commenters who say, "yeah, but I like the shoes" are clearly missing the point. It doesn't matter whether they make good shoes. What counts today is what position you can own, not all the other positions you can play.

When we counsel clients on marketing strategy, it's always about what they can do well that competitors either won't or can't pull off. It's never about growth for its own sake.

Josh

[Ben]

Of course by pushing into the athletic footwear industry Under Armour is bound to create brand confusion. Are they an athletic apparel brand or are they an athletic shoe brand? Can the same brand dominate both catergories? No. Whatever Under Armour does in terms of marketing and PR they will never be anything more than a niche shoe brand. If Under Armour continues to pursue this course of action they will inevitably erode their standing in a category they basically created because people will be confused as to the meaning of the brand. This will leave them wide open to a companies taking market share from them, if it hasn't happened already. Is pursuing, at best, a niche market in athletic shoes worth throwing away your athletics performance brand? I say no. BTW, fantastic column Laura!

[Frank]

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[Mike]

Well, you obviously love Nike over Under Armour, that's apparent. Why do you care if Under Armour competes with Nike in the footwear market? Why should Nike and Addidas get all the love? Of course UA isn't going to come out of the gate and swipe Nike off its feet. Nike is #1 in footwear, we all know that. But, UA is certainly gaining some ground. Their running shoes are fantastic, super light weight, and comfortable. Why the hate? I would imagine that any new company that starts small starts with only one product or a few products and then grows there with success. Why would Under Armour stop at just a tight moisture wicking t-shirt for football players? If I'm Kevin Plank, I'm striving to build the worlds best sports performance brand too and that means the best tight shirts, the best footwear, the best cleats, and anything else I could think of. Heck, I'll build womens underwear if I could create a new market out of it! Did Thomas Edison get the light bulb right the first time? No. Did Henry Ford stop at the Model T? No, but give Kevin Plank some time to continue innovating! There's not many out there with his kind of drive and passion for his brand. My advice..... try the shoes instead of just hating on the success when you probably don't own any Under Armour apparel anyway!

[Mary]

It seems that you have done plenty of research to support your OPPINION. Unfortunately, you failed to be fair in your assesment. Try the shoes. Understand that athletes are not just football players and if you are out to serve all athletes, than you cannot stop with a tight t-shirt. What is wrong with competition? It will make both UA and Nike better at what they do. Under Armour could go the easy route- but what's the business in that? It will not be easy for Under Armour, but give them credit for their guts (not cocky). By the way, Nike makes pretty great apparel. Imagine if they had stopped at a racing shoe for runners!

[Tracey]

I'm curious if you've actually tried the shoes? Personally, I love them! They are the most comfortable shoes I've ever worn. As a woman with a larger foot, Nike shoes never fit right and were extremely uncomfortable. I've tried other brands as well with similar problems. I now have 3 pairs of the UA Prototype shoes and hope they don't stop making them. My husband was a Nike fan for years and recently tried the UA...he has also converted! My step mother also has a difficult time finding shoes to fit, and usually orders them custom-made. I encouraged her to try the UA. She was amazed at how comfortable they are. The shoes are designed to be flexible and hug your feet. They also keep your feet dry and are stylish at the same time. More and more people are wearing the UA performance wear for every day casual clothing...do they want to have Nike shoes to wear with them? Not likely. While I don't think UA will ever take Nike's majority maket-share, I do think they will manage to carve out a niche market.

[hubertus von lobenstein]

Dear Laura, as much as I enjoy to read your blog, this time I have to disagree. Success for me is not a question of "distance" to the original brand idea, but a question of product superiority. If the athlete performance brand Under Armour would have been able to produce the best performance athlete sportsshoe, they would have had a chance to win against Nike. But if the most awesome thing about your product is an awesome Super Bowl ad, then you are bound to fail. Apple is the best example. The music industry and the mobile telephone industry are reasonably distant from the computer business.Nonetheless in both cases Apple disrupted the industry not by ads but with great products and awesome product design....

[Momekh]

Hello and peace, all the way from Pakistan. :)

Interesting insights. Your blog has the right stuff for independent thought on branding, and this will probably keep me coming back regularly. I can and will use your advice within my company, and possibly cover it on my blog (on entrepreneurship).
God bless and good luck,
M.

[Erik]

Don't forget the Under Armour performance mouthwear......

http://marketplace.dentalproductsreport.com/community/displayAd.asp?id=6692

[Evie]

I love your blog. Your stories/examples have become precious advice for my company. Thanks so much for the great insights.

[Eric Werner]

Great examples. They also have recently signed Mixed Martial Arts (MMA) Welterweight Champion Georges St-Pierre to an endorsement deal which brings up an interesting question:

Clearly they can't hope to own another distant category such as footwear. However to a great extent for martial artists Under Armour is the training apparel of choice. I just wanted to know whether there are concerns associated with a brand moving across segments of a category that it already owns.

It would seem that if it owns the performance undergarment category in one sport, moving to an additional sport for which they are underexposed might add market share. The follow up question then would be whether or not it might be safe to extend to a more distant category such as footwear in that case.

For example, if Under Armour did in fact completely own the position of Mixed Martial Arts apparel would it in that case be possible to provide Mixed Martial Arts footwear without damaging the brand?

[Mat]

Just one of the best blogs on the web.

[Erik]

Under Armour has no business selling shoes. It is similar to recent news of LendingTree getting into insurance and degree lead generation...

http://marketinglawsdaily.com/blog/2009/11/03/before-the-jet

If there are true gaps in the market and Under Armour is determined to grow they should create new categories with new brands.

Good insight Laura.