Save Shaquille O’Neal from Blowing Money on Buying Reebok

Journalist:
June 21, 2019

By CCN Markets: Shaquille O’Neal has proven himself to be a savvy businessman following his retirement from the NBA. Having already made a bundle in restaurants, gyms, his own branded products, and licensing deals, now he’s reportedly looking to make a big splash in a dead name – Reebok.

The former NBA superstar O’Neal has a soft spot for the old shoemaker, having made a licensing deal with Reebok more than 25 years ago. Now, he says, Adidas has abandoned the brand and he wants to rescue it.

It’s a terrible idea for three primary reasons.

Reason No. 1: Competition Kills in the Shoe World

The first reason Shaquille O’Neal should not buy Reebok is that competition in shoes is as tough as it comes. We all know about juggernaut Nike, which owns about a third of the global market share in athletic footwear.

While Adidas is No. 2, its Reebok subsidiary only generates 13 percent of total footwear revenue; sales were down 3 percent year-over-year.

Shaquille O’Neal would have to bring Reebok under his own umbrella and compete with New Balance, ASICS, PUMA, Skechers, Fila, Bata, and Under Armour – just to name a few.

Reason No. 2: Consumers Are Fickle

The second reason Shaquille O’Neal should not buy Reebok is that retail buyers are notoriously fickle. Plucking just about any earnings report out of any clothing or shoe retailer will likely deliver a statement about how ‘tastes are changing and we didn’t anticipate this.’

That’s why so many stores close.

Consumer tastes can swing without warning. The stock market is littered with charts of clothing retailers whose stocks skyrocketed and then crashed when tastes changed.

When it comes to athletic shoes, what’s cool today may be obsolete tomorrow.

Reason No. 3: Shoes Are Commodities

The third reason Shaquille O’Neal should not buy Reebok is that athletic shoes are effectively commodities. The only distinguishing features involve technological innovations, which can be quickly replicated.

That means tons of money must be poured into marketing. Shaquille O’Neal and partner Authentic Brands Group may have a lot of money, but they have to compete with Nike’s $36 billion in annual revenue, $2.7 billion in annual free cash flow, and roughly $5 billion annual marketing budget.

Keep your money, Shaq. There are better deals to be had.

This article was edited by Gerelyn Terzo.

Last modified (UTC): June 25, 2019 10:10

Lawrence Meyers @captsmedley

Lawrence Meyers has published over 2,500 articles on finance and policy at outlets including Breitbart.com, Investorplace, WyattResearch, LearnBonds, Lifezette.com, TownHall.com, U.S. News & World Report, and The New York Observer. He hails from New York City in the USA.