For Nike, Rory's win not about clubs

The Yellow Scoreboard (1:39)

Gene Wojciechowski examines the unique and historic yellow scoreboards at the Open Championship. (1:39)

There are many obvious reasons why Nike is the No. 1 shoe and apparel company in the world.

They make products that people want. They are good at hyping those products by signing some of the best athletes in the world and they control the supply chain so that retailers and consumers want to come back for more.

What's not as obvious is how Nike conquers niche markets and decides what it needs to care about. There's no greater example than in golf.

Last year, when Nike signed Rory McIlroy for a reported $20 million a year contract, critics slammed the company for Rory's lackluster performance with its clubs.

On Sunday, after he won the Open Championship, Nike lauded the 25-year-old, noting the 14 clubs in his bag, including the Nike Covert 2.0 Tour Driver and the Nike Method 006 putter. The company also noted his use of the Nike RZN Black Ball.

The dirty little secret is that while Nike plays in the club and ball game to achieve necessary overall credibility in the space, it doesn't really matter if the company ever becomes the market leader.

In fact, as of today, Nike is No. 7 in the club market and No. 4 in ball share.


Because Nike's restricted inventory model that it practices doesn't allow it to compete with the likes of TaylorMade and Titleist.

If Nike's greatest fear is winding up in a mass retailer at a discounted price, it can't do what the rest of the industry has been doing in terms of volume.

Luckily for Nike, those two areas have been the most affected by the downturn in golf participation combined with the economy resulting in people buying fewer clubs and taking more to the refurbished ball trade.

The areas that Nike chooses to win are apparel, where they are No. 1 and golf shoes, where they are now No. 2.

While most of the industry aims to sell a shirt with a suggested retail price of $50 for $30, retailers sell most Nike golf shirts with a suggested retail price of $85 at $85.

Retailers can sell their shoes at north of $200 without seeing a consumer blink.

And here's the biggest idea that virtually no one ever talks about: Nike is the only major company firmly positioned in the golf world that will do OK as long as people are watching golf.

The company never talks about it, as the stories they tell are always about the performance materials and biophysics of their latest and greatest, but most people who wear their basketball shoes don't play basketball in them.

Consumers will buy Nike apparel if they see it on guys like Tiger and Rory and that doesn't necessarily mean they'll wear it to play golf. It's the same thing with golf shoes, as Nike and others have adjusted to non-spike street style wear that was popularized by Ecco and Fred Couples a few years ago.

Yes, in the future it's very likely that even golf shoes will be bought by people who don't even play golf.

When McIlroy won the Open Championship, retailers got the phone calls and internet orders they were expecting. Matt Corey, chief marketing officer of the PGA Superstore, which has 18 stores across the country, said sales of the innovation polo with the pocket that Rory wears jumped.

Dennis Boudreau of DiscountGolfWorld, one of the largest online only golf retailers, said he couldn't recall the last time he sold as many hats as he did with Nike's Flex-Fit mesh hat this weekend. It's the one that McIlroy wears.

"If Rory continues to win, what Nike paid him will turn out to be a bargain," Boudreau said. "Clubs and balls could come along, but what's good for Nike is that people might buy nice pants and a shirt they see on Rory and never play in it."