When Puma AG Rudolf Dassler Sport PMMAF announced a comeback attempt in basketball earlier this year, it turned heads in the industry.
Why is the brand that has had a really strong run in sportswear over the past few years entering a struggling performance basketball footwear market? A market that it had left in an unspectacular fashion nearly 20 years ago, after parting ways with the Sacramento Kings' Vince Carter?
The brand's basketball legacy includes being the first company to give an NBA star their own signature shoe: The Puma Clyde, named for basketball legend Walt "Clyde" Frazier.
Ahead of the upcoming NBA draft, Puma doubled down on its commitment to basketball, signing projected No. 1 and 2 picks DeAndre Ayton and Marvin Bagley III. Puma also signed Zhaire Smith, a potential lottery pick.
Puma then dropped the real hammer, announcing Jay-Z as the creative director of its relaunched basketball segment.
After signing with the German sportswear brand, Bagley said: “I chose Puma because I wanted to be different. I saw an opportunity where I could come in and build from the jump and work to get to a certain level.”
Basketball Footwear Headwinds Persist
With Nike Inc NKE and the Jordan brand far and away the dominant leader in basketball shoes, the potential exists for a new player to steal market share — but the market is stagnant, NPD Group's Matt Powell told Benzinga.
Puma’s push into basketball is more about giving the brand a stake in the performance footwear market if it comes back into fashion, Powell said.
“It comes down to the product. The product has to be really compelling. If they can make it interesting, maybe they can crack the code, but the headwinds are pretty strong right now."
A North American Play
Puma's basketball effort is not about sales, but rather entering the footwear conversation in North America, said sports attorney Darren Heitner.
The move is reminiscent of how Adidas AG (ADR) ADDYY, another German footwear brand, put an increased focus on the world’s biggest sneaker market that ultimately paid dividends.
“Enhanced relevance in the U.S. — that’s absolutely a major goal for Puma. As an international brand they are competitive, but when you think about shoe and apparel brands ... Puma is never making its way in and they are trying to change the dialogue," he said.
Even if the new spending isn't justified by sales this year, Puma may still recoup the costs indirectly, Heitner said.
The Bagley deal is worth $2.1 million per year over five years, Heitner said, adding that the money is a blip on the radar for the multibillion-dollar apparel company.
“If you can gather a few blue chip players and even one of them turns out to be the likes of a Steph Curry, LeBron James or Kevin Durant, man, that would be a bargain."
Heitner said the brand will likely learn from missteps made by Under Armour Inc UAA in entering the basketball footwear market.
A Shrewd Marketing Move
Oliver Maroney, NBA writer for DimeUproxx, told Benzinga Puma’s announcements leading up to the draft represent some of the best basketball marketing moves in the last five years.
“It has been orchestrated really well. It has become the storyline of the draft and has captured everyone’s attention, even if it is only for a little while,” Maroney said.
Puma must still make an extremely compelling product so it doesn't suffer the wrath that Under Armour received after several poor releases, he said.
“Puma has a clean slate, but the product has to be perfect. If they are going to drop a shoe, they need to drop an extremely good-looking basketball shoe."
Puma entering basketball not only helps the game, but helps the players' brands as well because of the opportunity to become the face of a brand rather being in a superstar's shadow, Maroney said.
“It is helping the players' brands even more than they know because they are the face of Puma basketball — now, you can’t say that for Nike or Adidas."
Photo courtesy of Puma.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.
All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.
Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.
Rate collection and criteria: Click here for more information on rate collection and criteria.