The biggest names in consumer goods use technology to advance products and amass loads of loyal customers. This type of innovation not only improves a products quality and functionality, but also makes production faster and less labor-intensive. Here's a look at two companies that are using product technology to improve profit margins and widen their competitive moats.
Get your kicks
Developing products that solve problems faced by athletes and sports enthusiasts worldwide has made Nike
In 2006, Nike brought further innovation to the shoe industry by joining forces with Apple
Nike's collaboration with Apple was, well, a runaway success. The company's latest breakthrough is a shoe that has the fit and feel of a sock, a concept that plays on its lightweight Nike Free product, which is currently the top-selling running shoe in the country.
This comes at a time when lightweight running products are in high demand. The minimalistic footwear category accounted for 30% of the $6.5 billion in U.S. shoe sales last year, and that number should only continue to grow.
Nike's Flyknit sneaker should reinforce the company's strong position in the category, which is why I'm giving the stock a three-year outperform rating on my profile in Motley Fool CAPS. Unlike lightweight shoes made by competitors, Nike's Flyknit shoe is woven together by a specially engineered knitting machine outfitted with software that tells it how to alter a shoe's technical functions such as stability. Another advantage of the new product is that management expects the automated weaving process to cut costs associated with labor – thereby further boosting profit margins.
A step ahead of the competition
Rival sportswear company Under Armour
Another sporting-goods company using technology to advance its products is Columbia Sportswear
Columbia's patented Insect Blocker apparel is another revolutionary product offering, which uses specially treated fabric to provide protection against bugs. Odorless and invisible bug repellant is closely integrated into the material and retains its effectiveness through 70 washes. Other product innovations from Columbia include its sun protection line, which is recognized by the Skin Cancer Foundation for its unique UV-absorbing technology.
Columbia's products deliver a new level of performance technology, making it hard for competitors to keep up. While Nike is technically a competitor, Columbia has more of an outdoor focus, so they're not really fighting for the same customers. Nevertheless, both stocks deserve an outperform CAPScall rating for their ability to continually bring product innovation to market.
A winning bet?
These companies are innovators, not imitators. They push technical limits, empower consumers, and engineer quality products. However, I don't think Under Armour is a good play right now as an investment. For a better investment opportunity, I invite you to view this special free report from The Motley Fool, which reveals "This Year's Smartest Stock Pick."
The Motley Fool owns shares of Under Armour and Apple. Motley Fool newsletter services have recommended buying shares of Nike, Under Armour, and Apple; creating a diagonal call position in Nike; and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
Why Nike, Inc. Stock Jumped 23% Last Year
Shares of the Swoosh rose on optimism for its turnaround plan, even as results got worse as the year went on.
Better Buy: NIKE, Inc. (NKE) vs. Adidas (ADDYY)
Can the 800-pound gorilla of the athletic footwear market counter its hungriest challenger?
3 Dividend Stocks That Cut Bigger Checks Than Johnson & Johnson
If you're looking for a bigger dividend, here are a few ideas.