Sneaker supply chain issues disrupt another NBA season
Portland Trail Blazers guard Damian Lilliard, others, shift release of signature shoes
As if he were hosting The ESPYS, Drake was firing off jokes for a crowd gathered at Nike’s sprawling corporate campus in Beaverton, Oregon, for JDI Day, Nike’s employee-only “Just Do It” event.
“Nike, of course, is synonymous with so many incredible athletes,” the rapper-turned-host told the thousands gathered this September evening. “But in this family, it’s all about the next generation of elite talent …That is why I am honored to have the privilege of unveiling the two newest signature shoes, for Devin Booker and Ja Morant – ”
As he lifted off a white cloth from the two display podiums – both were empty.
“Supply chain issues,” Drake deadpanned to a collective groan.
He was joking, of course — the confirmed 23rd and 24th Nike signature basketball shoes won’t be unveiled and released until summer 2023 for the Ja 1 and 2024 for the DBook 1 — only he wasn’t.
Most shoe brands operate on a timeline where designs are drafted as far as 18 to 24 months before a sneaker’s release, marketing plans are locked in anywhere from 6 to 12 months out, and manufacturing windows make up the remaining six months of the calendar.
Due to factory closures and shipping delays caused by the coronavirus pandemic, the last 18 months have been characterized by an unpredictable product pipeline with ripple effects affecting all aspects of retail.
“You could say that in general, it’s been hard in our industry to get the right stuff to the right place at the right time,” Under Armour’s then-CEO Patrik Frisk put it bluntly in the spring.
A year ago, Nike was facing a conundrum of compounding issues. Seasons began to stack up after the company issued statements during earnings calls and privately to retailers during the fall of 2021 that it would be canceling orders placed for the spring and summer 2022 quarters.
With factories closed in Vietnam over a 10-week period, 130 million units went unproduced for Nike in that span. (The company subsequently shifted production to China and manufactured up 30 million units.) For Adidas, nearly 100 million items went unproduced in Southeast Asia during the second half of 2021, according to chief financial officer Harm Ohlmeyer.
Now heading into the 2022 holiday season, the situation has shifted dramatically. While retailers had largely reopened for in-person customers to start the year, their shelves and stockrooms in early 2022 remained relatively bare. Toward the middle of this year, delayed orders from late 2021 began arriving alongside hurry-up fulfillments of fall and holiday 2022 orders.
“As a result, we face a new degree of complexity,” Nike CFO Matthew Friend said on an earnings call with analysts Sept. 29.
“We effectively have a few seasons landing in the marketplace at the same time,” added Nike CEO John Donahoe.
Essentially, assortments from the spring, summer, and fall collections of 2022 are arriving to retailers at the same time as the holiday 2022 deliveries. Nike said its inventories rose 65% in North America and 44% globally. While footwear is often seasonally interchangeable, apparel merchandising doesn’t work that way. Friend called the late-arriving apparel “seasonably late product,” which forced Nike to begin discounting its apparel.
Friend framed it as “managing through volatility.”
When the shipping delays created a domino effect, and ultimately affected several seasons at once, brands began to look at alternative logistics solutions for the near term and the long haul.
Shipping timelines for standard 40-foot containers increased from the usual 40 days to as long as 80 days from Shanghai to the Los Angeles port while costs escalated dramatically.
To get products to consumers in time for the 2021 Christmas season, for example, Beanie Babies’ parent company Ty Inc. chartered private cargo flights from Asia to the U.S. at $1.5 million per flight.
Rather than the pricey charter option, most shoe brands opted for “air freight” shipping, placing priority pairs on commercial planes at a cost still eight to 10 times more than traditional water shipping across the Pacific, according to a brand source.
The cost of sending shipping containers also spiked nearly tenfold in extreme cases, from a pre-pandemic price of $1,500 per container to well over $10,000 per container at worst. Drewry Supply Chain Advisors, a research firm, compiles transport pricing data in its World Container Index, providing an overview of the strain.
Specifically, a container from Shanghai to Los Angeles is estimated to cost $3,283, while a route from Shanghai to New York costs around $7,278. The worst of the factory closures, product delays and port closures are potentially behind us, with Drewry noting that container shipping costs decreased by 10% each recent week, marking 31 consecutive weekly decreases and an overall drop of 61% compared with prices from last year.
Under Armour reported flat revenue over last year for the first quarter of its 2023 fiscal calendar. The company said that smaller margins harmed gross profit, which was “driven primarily by elevated freight expenses related to COVID-19 supply chain impacts.” Under Armour said its margins dropped from 49.6% to 46.7% — no small gap.
Some brands are looking at shifting production to manage unpredictable shipping expenses. For instance, earlier this year, New Balance opened its fifth U.S.-based manufacturing facility, an 80,000-square-foot space an hour north of its Boston headquarters, aiming to add 750,000 pairs of production.
Brands are also shifting release dates to make the best of the ongoing delays.
Portland Trail Blazers star Damian Lillard played in only 29 games during his 10th pro campaign last season. He last appeared Dec. 31, 2021, with a lingering abdominal strain requiring surgery in January that would eventually sideline him for the remainder of the season.
Due to the factory and shipping delays, only two colorways of his Dame 8 sneaker were released at retail during the 2021-22 season. Those delays would’ve stalled the eventual Dame 9 launch, likely well into his return campaign.
So, the six-time All-Star, his Goodwin Sports representation, and Adidas met last spring in Portland to shift strategy. They would use the delayed Dame 8 inventory and position it as his signature sneaker of the upcoming season rather than continue to be at the mercy of shipping and production delays.
Next to receiving a signature sneaker, one of the biggest achievements as an endorser is for a player to be featured on the cover of SLAM Magazine’s annual print issue of KICKS that leads into every new season. When Lillard appeared on the 25th issue of KICKS a few weeks ago, the white and gold shoe he held up stood out. It was the Dame 8, which Adidas officially unveiled on Dec. 15, 2021.
Extending the calendar for his eighth model also allowed Lillard to add more storytelling for the upcoming season.
“I just literally came up with this idea,” he told SLAM early in the summer, alluding to that spring meeting. “It’s called ‘Damn Gina.’ I had a bunch of ’90s-themed ideas and it’s called ‘Damn Gina’ because I was a huge fan of the show Martin. I was born in the ’90s and I’ve always done a shoe that was a nod to my mom.”
In years past, the “Gina” theme took on a light mint shade, his mother’s favorite color. This season, the tribute to his mother will layer triangles and squiggles seen in the title typeface from the show.
Adidas’ late 2022 retail plan includes summer inventory and additional colorways. These releases include Lillard’s Dame 8 sneaker in at least a dozen colorways, which will coincide with his return to the floor for the Blazers.
For now, brands are optimistic that the current NBA season will be the last to be affected by the calendar that has been delayed by the pandemic for nearly three years.
Friend said that the company hopes that inventory levels and production timelines can “stabilize” during 2023.
If that’s the case, Morant and Booker might unveil their eventual signature sneakers on time and schedule.