The sportswear industry has long been dominated by giants like Nike and Adidas, whose logos are as iconic as their products. Together, they once claimed over 60% of the market share among the top 15 sportswear brands. But times are changing. By 2023, their combined share had dropped to 51%. Rising stars like On, Hoka, and Anta are rewriting the rules, gaining market share with innovative designs, fresh strategies, and consumer-focused approaches.

The Unusual Origins of On

In 2010, Swiss triathlete Olivier Bernhard created a prototype for running shoes by attaching pieces of garden hose to his trainers, seeking better cushioning. What started as an experiment turned into a global sensation. Along with two friends, Bernhard founded On, and the brand quickly gained traction.

Fast forward to 2023, On recorded a staggering $2 billion in sales, with its revenue growing by 32% year-over-year in the third quarter. Today, the company is valued at $17 billion and has solidified its place among the rising challengers in the sportswear world.

How Trainers Took Over the World

Sneakers, or trainers as they’re called in Britain, are the heart of the sportswear industry. Footwear accounts for 68% of Nike’s sales and 58% of Adidas’s. They are the key products where brands differentiate themselves, offering a mix of performance, design, and innovation.

From 2018 to 2023, branded sports footwear sales surged by nearly 50%, far outpacing the broader sportswear market, which grew less than 20%. The pandemic fueled a running boom as gym closures pushed people outdoors. Post-pandemic, running remains popular, with record participation in marathons like those in New York and London, each attracting about 55,000 runners. Running shoes have also become a staple of casual fashion, increasingly spotted in offices and social gatherings.

The Rise of the Challengers

The growing demand for trainers has opened the door for smaller, innovative brands to carve out their niches. Factors like low entry barriers and social media marketing have enabled these challengers to thrive:

• Innovative Design:
  • Hoka, known for its oversized soles, has gained a cult following for its maximalist approach to running shoes.
  • On’s cutting-edge marathon shoes, made with thermoplastic fiber and assembled by robotic arms, exemplify how technology can drive performance and brand differentiation.
  • Chinese brands like Anta and Li-Ning have introduced high-performance yet affordable shoes, tapping into the growing domestic market.
• Affordable Sponsorships:
  Running, unlike football or basketball, is less lucrative for sponsors. This creates opportunities for smaller brands to collaborate with athletes and events without spending millions.
• Social Media Marketing:
  Platforms like Instagram and TikTok allow smaller brands to showcase their unique offerings and connect directly with consumers. Creative campaigns and influencer partnerships have leveled the playing field.

Nike and Adidas: Losing Their Footing?

Despite their dominance, Nike and Adidas have struggled to keep pace with the challengers for several reasons:

1. Lagging Innovation:
   Analysts have noted a slowdown in Nike’s R&D, while Adidas has over-relied on fashion-focused trainers like the Samba. This strategy backfired when the shoe was linked with high-profile figures like Rishi Sunak, sparking a public backlash.
2. Distribution Missteps:
   Both brands shifted focus toward direct-to-consumer (DTC) sales via their own stores and websites, sidelining traditional retailers. While DTC now accounts for 44% of Nike’s sales, the move alienated retailers, who filled shelf space with competitors’ products.
3. Cultural Disconnects:
   Adidas faced challenges after ending its partnership with Kanye West, which cost them billions in Yeezy-related sales. Meanwhile, Nike’s brand image took hits due to public dissatisfaction with product quality and availability.

What Makes the Challengers Shine

1. Consumer-Centric Approaches:
   Brands like On Prioritize are where consumers shop, whether through retailers, online platforms, or pop-ups. On’s co-CEO Martin Hoffman emphasized the importance of availability in building customer loyalty.
2. R&D Investments:
   Smaller brands are leading with innovation, offering designs tailored to both performance and aesthetics. This resonates with runners and casual wearers alike.
3. Expansion into Fashion:
   Many challengers are diversifying into high-margin fashion lines. On’s collaboration with Spanish luxury brand Loewe and its advertising campaigns featuring actress Zendaya exemplify this strategy.

The Role of Chinese Brands

In China, local players like Anta and Li-Ning are gaining traction by blending traditional craftsmanship with modern performance technology. Their products are increasingly competitive globally, challenging Western giants in their home markets.

Lessons from the Rise of Challengers

1. Agility Wins:
   Smaller brands can adapt faster, responding to trends and consumer demands with an agility that larger corporations struggle to match.
2. The Power of Community:
   Running clubs, marathons, and social media communities have amplified the influence of smaller brands, creating grassroots movements that Nike and Adidas cannot replicate.
3. Sustainability Matters:
   Many up-and-coming brands are embracing sustainability, using eco-friendly materials and transparent production processes. This appeals to the growing segment of environmentally conscious consumers.

Nike and Adidas Fight Back

The two giants are not standing still:

• Product Innovation:
  Nike has introduced new designs, such as the updated Pegasus model, to win back runners. Adidas is clearing out its Yeezy stock and focusing on new collaborations and performance lines.
• Retail Partnerships:
  Both brands are mending fences with retailers to regain lost shelf space and visibility.
• Leadership Overhauls:
  Nike recently appointed a new CEO with a mandate to revamp its strategy, signaling a commitment to reclaiming market share.

What Lies Ahead

The competition between legacy brands and challengers is far from over. While Nike and Adidas benefit from decades of brand equity, their challengers bring innovation, agility, and consumer focus to the table.

The rise of these smaller brands demonstrates a shifting landscape where creativity, authenticity, and adaptability matter more than size. As running shoes continue to dominate both performance and casual markets, the battle for consumer loyalty is only heating up.

For Nike and Adidas, this is no longer a sprint—it’s a marathon. And as the challengers have proven, they’re ready to go the distance.