Could an upstart sneaker brand ever become the next Nike?

The rapid ascent of sneaker market disruptors On and Hoka shows no signs of slowing down.

The two brands make sales of about $2 billion per year — a way off the $12.6 billion Nike reported in Q4 2023, but significant in the context of Nike’s slowing growth and its struggle to bring new generations of consumers on board.

The brands, both around 15 years old, have seen their popularity soar recently among niche sporting communities, thanks to their strategy of targeting niche sporting communities and delivering a USP missing in that market. For Hoka, that was comfort. The shoe’s oversized soles have been designed so that trail runners, who are traversing rugged footpaths, can put on the miles without too much pain. In the most recent quarter, parent company Deckers reported that Hoka had pulled in a record $545 million, up 30% year-on-year. Swiss brand On, meanwhile, has become the shoe of choice among California tech workers and suburban parents, according to the Washington Post, who say they are more comfortable — and cooler looking — than their old Allbirds.

Their rise coincides with rising interest in ever more niche outdoor activities, from running clubs to birdwatching, mountain biking and trail running.

Nike walked so the upstarts could trailrun

A number of brands have now spotted an opportunity to grab market share from specific sporting communities that may feel underserved by the likes of Nike and Adidas, whose behemoth status makes them too generalist for the rising cohort of ‘casual athletes’.

Brands like Hettas, Saysh and Ida Sports are targeting women runners, with sneakers designed to respond to their specific performance needs. Norda Run, Satisfy and Atreyu are targeting trail runners, who are seen as an increasingly lucrative segment of the running market. On, meanwhile, has expanded into tennis to grow its market share, having secured a partnership with Roger Federer. A plethora of other brands are developing USPs around sustainable materials and the recyclability of their shoes.

“There is white space and opportunity, particularly when you get focused on who your customer is and what the needs of that particular group are,” says Lindsay Housman, the founder of Hettas. “That’s where you’re seeing brands enter.”

The sneaker market is a tough nut to crack, though. Footwear is expensive to make compared to other apparel categories, given the variety of materials that go into one item. Before even getting to that stage though, brands will have to fork out to create the molds and ‘lasts’ needed to actually make the shoe. This can set brands back by up to $100,000 per SKU, before a single sale is made, says Chloe Songer, the co-founder of circular sneaker brand Thousand Fell. “That’s why there aren’t thousands of athletic footwear brands like there are clothing brands,” she says. “You have a couple of breakout brands that either came from other companies or who have had to raise significant amounts of capital because footwear, particularly performance footwear, requires so much capex to get started.”

Indeed, for sneaker brands focused on sporting niches, R&D spending may be necessary. Housman began working on Hettas in 2019, but it wasn’t until November 2023 that the shoes were launched. During that period, Hettas was not just working on its designs but also funding research at the Simon Fraser University biomechanics laboratory in Canada.

Sneaker brands have raised millions to get their products off the ground, and are pursuing subscription and wholesale strategies in order to boost their bottom lines.

New brands, new growth goals

Beating Nike at its own game won’t be easy though, given its 27% share of the world’s sneaker market. There is also another question for brands: even if they could beat Nike, would they want to?

“I don’t think most brands at the moment would actually aspire to be Nike,” says Calvin Innes, creative director of the media agency Jung von Matt NERD. “The shift has [been] towards niche, innovation and technology, and appealing to smaller markets.”

Like other product categories, the sneaker market is likely to become more fragmented over time as consumers gain exposure to new brands through social media and in the communities they participate in. Sneaker brands coming up today may also be wary of the challenges that come with becoming a behemoth — Hoka has built a name for itself by convincing customers that it’s the expert on all things comfort and running. But if it were to become ten times the size it is now, and expand into as many new product categories? The risk is customers could no longer be convinced.

It’s a growth stage On is navigating right now, as it expands into tennis, training and fashion. So long as it can maintain the quality of its products and keep introducing innovations like its LightSpray technology, used to create ultralight uppers, it should keep customers excited for some time. “They’re in a position where they have genuine innovation and they look very unique,” says Innes. “You know if you see a pair of On sneakers that it’s On, similar to how you see the Nike swoosh.”

Still, there is plenty of room for innovation, as well as opportunities to create products for underserved customers in the sneaker market today. “The bigger brands are covering such a large market share that taking that specific consumer approach is harder,” says Housman. “New brands have the opportunity to do something different.”