Puma’s Strategy: 4 Keys to its Success
There’s Nike, then Adidas and coming in third place in terms of revenue is Puma. But if there is anything you should remember it’s to never ignore the underdog. In 2022 Puma generated its strongest results in company history with sales up 24% to reach €8.5 billion. This performance has not gone unnoticed. Adidas, which has struggled after cutting ties with Kanye West, poached Puma’s CEO Bjorn Gulden. Gulden now has the formidable task of turning Adidas around. If you are curious about why Puma is doing so well then consider these four elements of its strategy.
1. Get back to basics. Puma decided about six years ago it had to do a better job with its shoes in the performance category. “We decided this is an area we want to be present in as a brand, we want to up our game,” said Erin Longin, general manager of Puma’s running and training business unit. “We made the decision as a team that we have to get serious about the running space. We’ve always offered running products, but we haven’t really focused on how to win as a brand in performance running.”
To turn things around Puma went directly to the end user to ensure it really understood their needs. “One, we started to connect directly with runners and the running community to understand what people are looking for,” said Longin. “And the second thing was the technology approach. We scrapped everything we had. We were like, ‘let’s assume what we have is not good enough today and let’s start from scratch.'”
Then after a lot of research, development and testing Puma dropped five new performance running shoes in March of 2021. These shoes all featured a new foam technology called Nitro. As Puma writes on its website, these shoes are “extremely lightweight and responsive, to help you use less energy and run comfortably so you can reach your goals.” The shoes were a success with Puma’s footwear sales increasing by 625% during March of 2021.
Although Puma is focused on performance it has not lost its flair for fashion. Puma’s “ running products are both technical and trend-right, and the quality of its basketball product has allowed it to grow its market share,” said Matt Powell, NDP’s VP and senior industry advisor for sports.
Puma also sees footwear as a more stable business than apparel. “There’s a lot of apparel on the market…and I think that’s going to be more competitive,” said Bjorn Gulden the former CEO of Puma. “I personally think we will see more discounting in apparel than footwear, and probably more [discounting] in America than Europe.” With the popularity of lululemon and athleisure in general it’s hard to standout in an already competitive clothing market.
2. Focus on women. Puma hasn’t historically focused as much on the women’s side of its business but with more women running it sees an opportunity. “We want to be women’s-led. More women are running than ever before and starting to dominate the category,” Longin said. “We will still have men in our marketing, we still want men to buy our product, we will build great running product for men, but the women’s angle is something we have the chance to write. We’re starting from scratch so we can test with women.” “And female athletes have been underrepresented in the category, so we’ll sign both genders, but really focusing on supporting and elevating women athletes.”
To this end Puma made a running shoe that is designed specifically for women called The Run XX Nitro which dropped in 2022. “Given the differences between men and women, we also wanted to make a shoe specifically aimed towards the female runner,” said Laura Healey, manager of footwear innovation at Puma. “We created a specific Nitro foam density in the midsole that’s slightly firmer than what you’ll find in our other performance shoes to provide that cushion and support.” The Run XX Nitro is designed to be more comfortable for females on long runs.
Lululemon is also trying to get in on the action with the launch of its first women’s running shoe in 2022. Nike has already sued Lululemon for patent infringement on those shoes showing just how lucrative this market segment is.
3. Leverage key partnerships. Puma has long used collaborations to keep itself at the forefront of popular culture. It was the first athletics brand to do a tie up with a fashion house with its partnership Jil Sander in 1998. Since then Puma has become known for its partnerships with celebrities and athletes alike. One its key partnerships was with Rihanna who was Puma’s creative director from 2014 to 2017.
Many credit Rihanna’s influence on Puma as key to revitalizing the brand. In 2015 Rihanna’s Fenty Creeper sold out three hours after launch and then went on to win sneaker of the year. “Rihanna single-handedly turned PUMA's business around,” says Powell. Puma has also worked with big name celebrities and fashion houses including Dua Lipa and Balmain.
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4. Focus on wholesale. A few years ago Nike started to reduce its focus on wholesale accounts and instead shifted its focus to its direct to consumer business. As part of this move Nike stopped distributing its merchandise to many well known retailers including Zappos, Dillard’s and DSW.
Nike also reduced the amount of its product sold at Foot Looker which created a $1 billion opening for other brands to fill. Puma seized this opportunity by increasing the amount of its product sold at Foot Locker. “Puma’s long-standing relationship with Foot Locker has played an instrumental role in our ability to drive innovation and push the boundaries of sports, fashion, and technology globally,” said Puma’s North America president Bob Philion. “Our enhanced partnership [with Foot Locker] not only provides us with additional opportunities for collaboration and growth, but it will enable us to provide even greater experiences and inclusion for our evolving customer base around the world.”
Unlike Nike which generates about 60% of its business from wholesale, wholesale accounts generate about 80% of Puma’s sales. Analysts estimate wholesale channels can be more profitable than direct to consumer channels. “With big brands struggling at retail, due to discontinued retail and other factors, shelf space and open to buy has opened up for smaller brands,” said Powell. “Brands that seized this opportunity will likely be able to hold onto this increased market share.”