How Hoka and On gave Nike a run for its money

Jennifer Lopez has been spotted in Hoka, known for its innovative French designs, while Reese Witherspoon has been seen sporting On Running, the Swiss sportswear sensation.

According to the 2024 US Footwear and Apparel Brand Heat Index, these emerging brands have become particularly popular among Gen Z women. They have also started to challenge iconic shoe companies such as Nike. On Running continues to lead in women’s athletic footwear after surpassing Nike last year, while Hoka trails closely behind them.

While these newcomers continue to gain ground, Nike’s market dominance has started to fade. The sneaker giant’s web traffic was on par with Brooks Running in March of this year when, just two years prior, it reigned supreme, as indicated by findings from data intelligence platform Similarweb.

In April, Nike laid off 740 corporate employees after its plans to scale back retail partnerships and pivot to direct-to-consumer sales failed. The brand has reported a 2% decline in year-over-year sales, with a notable 8% drop in direct-to-consumer revenue. Its stock price has fallen 13% this year.

We reached out to marketers to uncover why these challengers are hitting their stride – and how legacy brands can bounce back.

The competitors running ahead

Since stepping on to the scene in 2009, Hoka has gained widespread appeal among fashion-forward celebs and dedicated runners alike. In April, the brand achieved a remarkable 59% year-over-year growth, surpassing both Brooks Running and Asics, according to Similarweb.

Marketers attribute this success to a combination of distinctive product design, strategic collaborations and impactful marketing campaigns.

The first factor is its distinctive product, explains Ali Azimi, co-founder of Drip by Drip, a non-profit dedicated to solving water issues in the fashion industry, and co-founder of 3D clothing design software Cheyyn. As he puts it: “Hoka’s success is mainly due to its cushioned shoe design, which appeals to everyone, from elite athletes to casual runners.”

Dr Cristel Russell, a marketing professor from Pepperdine Graziadio Business School, adds that Hoka’s commitment to function resonated with consumers who started focusing on personal comfort at the onset of Covid.

“During and after the pandemic, people prioritized comfort over style in all their attire selections, especially in their footwear,” says Russell. “Having worn no shoes or comfortable house shoes for a few years, consumers realized that footwear comfort was more important than style.”

Hoka’s brand collabs played another crucial role in its rise. Partnerships with Paris-based performance brand Satisfy, high-end retailer Moncler and active apparel brand Outdoor Voices helped Hoka enter the lifestyle market and quickly gain worldwide distribution.

The final component of the brand’s success, in Azimi’s view, is its compelling marketing campaigns. Today, Hoka launched a new creative campaign in partnership with Anomaly titled ‘We Are All Born To Fly.’ The film hearkens back to the brand’s origins in the French Alps and celebrates the freedom of a good run in nature.

On Running, established around the same time as Hoka in 2010, has cultivated a strong following among celebrities like Zendaya, who enthusiastically endorses the brand. “I’m always wearing them on set, or when I’m traveling, rehearsing or running around with my dog,” she says.

On Running recently worked with the megastar on a cinematic commercial titled ‘Dream Together,’ directed by choreographer C Prinz and produced by Smuggler.

Starting off the 2024 fiscal year strong, On reported record net sales of over $500m thanks to its robust direct-to-consumer sales and enhanced inventory management.

Similarly to Hoka, On has distinguished itself through impactful brand collaborations, such as its capsule collection with Spanish luxury fashion house Loewe.

On’s products also offer something completely unique in the market: CloudTec, which absorbs impact, reduces strain and adapts to each runner’s unique style, promising a sensation akin to running on clouds, as detailed on its website. The second element is the SpeedBoard, a rigid plate in the midsole of each shoe. Its unique designs “have boosted its appeal with younger, fashion-conscious consumers,” adds Azimi.

In contrast to these brands, Nike has been playing it safe. Product innovation began to stall during the pandemic and the brand chose to lean hard on its bestsellers – the Air Max 90, the Air Jordan 1 and the Air Max 95 – for fear of introducing something wild and untested.

By failing to bring new products to market, the brand began to lose customers to Hoka and On. “We know Nike is not performing at our potential,” Nike CEO John Donahoe said earlier this year. “While our consumer direct acceleration strategy has driven growth and direct connections with consumers, it’s been clear that we need to make some important adjustments.”

Exploring parallel strategies

The marketing strategies of Hoka and On are quite similar and they seem to be working quite well for them so far. This can be because younger brands can leverage flexibility and experimentation in ways that traditional brands often cannot, according to marketers.

“Hoka and On have come to understand that there are riches in the niches. At heritage brands, there’s a constant push-pull to dominate the market at both ends – from the performance end and the lifestyle end,” explains Nikita Walia, chief executive of Blank Strategy, a strategy-first creative company. “Plus, they face the pressures of wider distribution. Niche brands enjoy tighter distribution and cater to fewer partners.”

These niche brands are not only appealing to fashion-forward consumers but also to those who champion sustainability. Hoka’s initiatives with recycled paper have already saved over 800,000 trees and the brand boasts ambitious targets to significantly reduce water and energy use by 2030.

On, on the other hand, has developed what it calls CleanCloud technology, which uses upcycled carbon emissions to create high-performance materials. The company is also pioneering a circular consumption system through its Cyclon program, which offers a fully recyclable shoe lifecycle.

“Today’s consumers don’t just wear a brand; they must believe in it. Hoka understands this,” says Sunny Bonnel, co-founder and chief executive of branding firm Motto. “Sustainability is the new currency of brand loyalty. Companies like On aren’t just making shoes recyclable; they’re crafting the roadmap for the future of responsible consumerism.”

How can Nike compete?

To remain agile against these challengers, most marketers believe Nike must recalibrate its strategies.

“The secret sauce for today’s innovative brands is that they are nimble, they’re quick and they listen – qualities that some heritage brands trade off as they scale,” says Bonnell. “Nike should consider ramping up its innovation engine, not just in product design but in customer experience and sustainability practices.”

As Azimi emphasizes, staying attuned to market trends and swiftly innovating to meet evolving consumer demands will be crucial for Nike to reclaim its competitive edge. With that information, the team can then “create emotional campaigns that will help connect their products with the people who will benefit from them most.”