NBA stars battle to be sneaker king

By Stephanie Kang, The Wall Street Journal

Some of the fiercest competition in the National Basketball Association this season is happening off the court. A crowd of expensive signature shoes linked to pro players is challenging the market for high-performance, high-profile sneakers.

The shootout features some of the biggest names in basketball. Nike Inc. has new shoes from the Cleveland Cavaliers' LeBron James, the Denver Nuggets' Carmelo Anthony, the Los Angeles Lakers' Kobe Bryant and (from its Converse unit) the Miami Heat's Dwyane Wade. That's in addition to a new model from the all-time champion of basketball shoes, Michael Jordan. Germany's Adidas-Salomon AG is countering with shoes from Houston Rockets star Tracy McGrady and the Minnesota Timberwolves' Kevin Garnett. Reebok International Ltd. is in the game with star guard Allen Iverson of the Philadelphia 76ers.

That's an All-Star Game's worth of talent angling for the title of sneaker king that has long belonged to Mr. Jordan. With high prices -- Mr. Jordan's new Air Jordan, to be launched in February, XXI, will retail for $175, and many others sell for $125 -- most of the shoes come with a style or technology gimmick and are often backed by big ad campaigns.

Mr. McGrady's $125 shoe, for example, comes with small pieces of wood from an actual basketball court embedded in the heel and outsole (to symbolize Mr. McGrady's desire to "put a piece of the court" into his shoes, according to the company). Reebok's $125 Allen Iverson shoe, the Answer IX, uses a revamped version of the company's Pump technology to fill up chambers throughout the shoe with air as the player moves. Nike's Zoom LeBron III, which sells for about $125, boasts twice as much cushioning as most Nike shoes.

But while sales of so-called marquee footwear have been strong, there are indications that the public's interest may be waning, especially at the highest prices. For the 12 months ending Nov. 30, sales of basketball sneakers for men were down 4 percent from the year-earlier period, according to NPD Group, a market-research firm based in Port Washington, New York.

Customer satisfaction with athletic shoes is at a four-year low, according to the American Customer Satisfaction Index. The culprit is price, says Claes G. Fornell, a business professor at the University of Michigan, which compiled the data. He noted that men's athletic shoes are priced about 5 percent higher, and women's almost 10 percent higher, than a year ago. Customers are "as pleased with the product as before, but they're not pleased with what they're getting for their money," Prof. Fornell says.

One of the strongest sellers of the new sneaker entries has been the least expensive: Converse's "Wade" shoe, which has a comparatively low price of $90. It is benefiting from interest in Mr. Wade, currently among the top 10 scorers in the NBA.

There's also evidence that the teen consumers who drive athletic-footwear sales may be turning to cheaper and more fashion-forward styles from European companies like Puma AG. Germany-based Puma makes running and soccer shoes for athletes, but it has also focused on fashionable casual sneakers that have little to do with high-profile athletes or enhancing performance. Recently, Puma said that footwear accounted for much of the company's 63 percent jump in U.S. sales in its fiscal third quarter.

Eighteen-year-old Edgar Gonzalez typically sticks to Nike Air Force 1 or Air Jordan sneakers, but lately he has also been checking out styles from companies like Puma. "The style is coming up," he said one recent evening, walking out of the Foot Locker store at a mall in Culver City, Calif., with a pair of black Puma Men's Elite sneakers which he had just purchased for about $65.

Nike said last month that world futures orders, an indicator of growth based on estimates of product orders, ticked up 2.5 percent for the five months ending in April. That was a smaller rise than the 9.1 percent increase in the year-earlier period and lower than analysts had expected. Nike has long dominated the high-end basketball-shoe business, with more than 95 percent of such sales in the U.S. last year, said John Shanley, an athletic-footwear analyst at Susquehanna International Group, a research firm.

Still, many of the new shoes seem to be off to a strong start. At Finish Line Inc., a sport-shoe retailer in Indianapolis, Mike Watson, divisional merchandise manager of footwear, says every signature shoe has been selling well this season, despite the crowded field. Nike says Mr. James's third signature shoe, for example, is selling well in U.S. shops, as well as in China, where 3,000 specially made pairs sold out in a few hours in November. The Nike Zoom Kobe I won't be available in stores until Feb. 11, but the day after Christmas, several hundred fans waited outside a Los Angeles boutique called Undefeated, which gave away 16 pairs of the shoes.

The stiff competition could be tough for manufacturers, since signature footwear has some of the fattest margins in the business, strongly affecting profits for companies like Nike and Adidas. Shoe manufacturers spend big to sign athlete endorsers and to create products and advertising campaigns for them, because of the belief that star power helps sell products. To succeed, each shoe entrant must capture an elusive mix of design cool, new sneaker technology and praiseworthy advertising that will get fans talking. Another challenge: The signature player needs to have a good season.

While most sneaker shoppers are more likely to run up and down the supermarket aisle than the basketball court in their high-performance shoes, many buyers of high-end sneakers want the latest technology. At $100 or more, consumers can buy sport shoes that are laced with technologies that provide better fit, more cushioning, last longer and often include materials like suede or metal that don't make it into lower-end models, says Ernest Kim, an influential writer, who tests and reviews basketball shoes for Sole Collector magazine. For example, a synthetic leather strap across the upper of the T-MAC 5, endorsed by Houston Rockets player Tracy McGrady, allows players to adjust the shoe's fit.

Other elements simply add style. Metal eyelets instead of plastic in the Zoom LeBron and a synthetic suede-like upper in the Jordan Melo 5.5 are small details that help drive up the production cost.

Customers have balked at price increases before. Nike's Air Jordan franchise is the best-selling shoe brand of all time, but when the company tried to sell a $200 shoe in 2002 that came in a flimsy metal case with a CD-ROM, sales tanked. Still, Adidas this year will launch a basketball shoe with a computer chip imbedded in the midsole, playing off technology they've already launched in a running shoe. San Antonio Spurs' center Tim Duncan will wear the show in the All-Star Game next month. The price: $250.