Is Nike’s Flyknit the Swoosh of the Future?

Appeared in Bloomberg BusinessWeek print edition

March 15, 2012

Footwear designers have long sought to satisfy a request from athletes: make shoes as comfortable as socks. Nike (NKE) in the 1980s tried with a flimsy mesh sneaker called the Sock Racer. The shoe offered comfort but wasn’t durable. Subsequent efforts ran into similar problems. Now the world’s largest sporting-goods company thinks it’s discovered the Holy Grail—a 5.6-ounce running shoe called the Flyknit, made from synthetic yarn ingeniously woven together by a knitting machine. But Nike executives are excited about more than a possible blockbuster product. They say the manufacturing advance that makes the Flyknit possible is the real find.

The computer-controlled weaving technology, which knits the entire upper part of the shoe in a single piece that’s then attached to the sole, promises to cut labor costs and production time while also increasing profit margins and opportunities for personalization. It may even bring some shoe manufacturing jobs back to the U.S. In traditional shoemaking, machines cut scores of pieces that workers must then assemble. By reducing or removing that step, the most labor-intensive part of the process is eliminated—along with the main reason for making shoes in Asia’s cheaper labor markets. “This is a complete game-changer,” says Charlie Denson, president of the Nike brand. The process cuts costs so much “that eventually we could make these shoes anywhere in the world.”

Flyknit, which will cost $150 and hits U.S. stores in July, is the latest product aimed at the minimalist running movement, whose devotees advocate lightweight shoes to reduce injuries. Lightweight shoes accounted for 30 percent of the $6.5 billion U.S. running shoe market last year and were responsible for all of its 14 percent growth, according to researcher SportsOneSource. Running is Nike’s biggest category, generating $2.8 billion in annual global sales, about 50 percent more than basketball and soccer.

The designers soon decided that to create a shoe that replicates a sock, they had to mimic how a sock is made. Nike hired a team of computer programmers and engineers to take a machine used to knit sweaters and socks and reengineer it to weave the upper part of a sneaker. Spools of colored polyester yarn are fed into the 15-foot-long machine, which weaves together the top of the shoe and creates a “second skin” with tiny synthetic cables knitted into the weave around the midfoot for support. (The tongue is still a separate piece.)

In a process Nike calls “micro-level precision engineering,” proprietary software instructs the machine to minutely alter a shoe’s stability and aesthetics. If the toe needs more stretch, the design can be digitally altered instantly to add Lycra-infused thread. For added strength in the heel, the software uses multiple layers of yarn of varying thickness. Nike plans to patent the process.

Because the upper is made in one piece, the Flyknit has 35 fewer pieces to assemble than the popular Air Pegasus+ 28 runner. That makes production quicker with less labor and larger profit margins, Parker says, though the company won’t give precise figures for either. The Flyknit process also fits into Nike’s sustainability push because the amount of material wasted manufacturing each pair weighs only as much as a sheet of paper, or about one-100th of a pound. Nike says the Flyknit produces 66 percent less waste than the Air Pegasus+ 28.

“If you think about shoemaking, it largely hasn’t changed for decades,” says Parker. “There is no more cutting and stitching with this. The most labor-intensive part of the footwear manufacturing process is gone from the picture.”

Nike makes 96 percent of its shoes in Vietnam, China, and Indonesia, where labor costs are low. The downside is the time it takes for shoes to reach markets such as the U.S., says SportsOneSource analyst Matt Powell. “One of the critical issues our industry hasn’t figured out is how to get products to market more quickly,” he says. “The biggest time in the life cycle of getting a shoe to the U.S. is the time it spends on a boat coming from Asia. If you could eliminate that, that’s a huge chunk out of the time line.”

Consultants say actually manufacturing athletic shoes in the U.S. would still be more expensive than Asia, but the cost difference could be made up by spending less on shipping and being faster at filling demand or jumping on a hot trend in Nike’s largest market.

Nike typically expands innovations across its lines. Flywire, which uses synthetic cables to increase support, was released in 2008 and is now used in 60 percent of Nike’s footwear. And Air is included in some dress shoes at subsidiary Cole Haan. Nike has similar plans for Flyknit.

The flexibility created by more automated shoemaking could also lead to a day when a person can visit a Nike store and have their foot scanned for a customized fit. The customer would be able to design the shoe by color and style down to a single thread. That’s far more customization than allowed by NIKEiD, the company’s Web-ordering product that lets consumers pick specific colors and fabrics. Says Denson: “Because this is so revolutionary, and so comfortable, this one is going to hit from a revenue standpoint much quicker. What this gives us the ability to do is almost unlimited.”