NIKE’S NEXT LAP

Fast Company - - Contents - By Jonathan Rin­gen

By fo­cus­ing on di­rect-to-con­sumer chan­nels, in­clud­ing its sneak­er­head app, Snkrs, Nike is reach­ing a new gen­er­a­tion of dig­i­tal con­sumers.

On a re­cent Fri­day morn­ing, a select group of Nike’s big­gest fans got an alert. A new, lim­it­ededi­tion ver­sion of the brand’s Cortez run­ning shoe—an old-school ny­lon sneaker orig­i­nally re­leased in 1972—was about to drop. The re­lease was hap­pen­ing dur­ing the NBA All-star Week­end in Los Angeles, and the shoes—red, white, and black, with the words DON’T TRIP em­bla­zoned across the laces—were made in part­ner­ship with rap­per Ken­drick La­mar, a lo­cal leg­end.

Cus­tomers re­ceived the no­ti­fi­ca­tion through an app called Snkrs, which Nike has been re­fin­ing over

the past year as a way of con­nect­ing su­per­fans with de­sir­able pairs of, you know, sneak­ers. It is dis­tinct from the reg­u­lar Nike app, where you go to get a pair of per­for­mance shoes. Snkrs sticks to the kinds of lim­ited-edi­tion runs—in­ter­est­ing col­or­ways, un­usual styles, part­ner­ships with per­form­ing artists or fash­ion de­sign­ers such as Riccardo Tisci—that are so pop­u­lar they of­ten end up be­ing resold, con­cert-tick­et­style, on the sec­ondary mar­ket.

Fans who col­lect rare sneak­ers (and streetwear by culty brands like Supreme) are known as hy­pe­beasts, and they are ac­cus­tomed to wait­ing in end­less, scrum­like lines at highend bou­tiques with no guar­an­tee of even get­ting a pair by the time they reach the front. Nike was try­ing some­thing dif­fer­ent for its $100 Cortez Kenny II, nick­named “Kung Fu Ken­nys” af­ter La­mar’s al­ter ego. (An ear­lier ver­sion, the Cortez Kenny I, sold out in Jan­uary and al­ready goes for more than $400 a pair on the open mar­ket.) Nike used ge­ofenc­ing to ping only L.a.-based Snkrs users about the re­lease. Fans who wanted a pair re­served them on the app and were di­rected to an ad­dress in down­town L.A. the fol­low­ing day. When they ar­rived, they found them­selves in­side the com­pany’s highly In­sta­grammable All-star head­quar­ters, which were swarmed through­out the week­end with stars such as Kobe Bryant, Bella Ha­did, and Spike Lee. La­mar was on hand for a live Q&A. Some of the most en­gaged Snkrs users re­ceived wrist­bands for his VIP per­for­mance that night.

For Nike, the ex­pe­ri­ence was about much more than sell­ing lim­ited-edi­tion sneak­ers. It was an ex­per­i­ment that could one day be ap­plied through­out the com­pany. Un­til last year, Nike pri­mar­ily saw it­self as a whole­saler cre­at­ing prod­uct for re­tail part­ners at var­i­ous lev­els: hy­pe­beast bou­tiques at the high end, chains like Foot Locker in the mid­dle, and dis­count out­lets like DSW at the bot­tom. But af­ter decades of out­pac­ing its sneaker ri­vals, the once in­domitable ath­letic-wear com­pany has been los­ing ground—and buzz—to No. 2 Adi­das. In the U.S., Adi­das’s mar­ket share surged from 6.8% in 2016 to 10.3% last year, ac­cord­ing to the NPD Group. Dur­ing the same pe­riod, Nike’s share dropped from 34.5% to 32.9%. Mean­while, the shoe­maker’s long­time brick-and-mor­tar part­ners have floun­dered as the re­tail land­scape changes. “We re­al­ized that the mar­ket was mov­ing fast, and con­sumers were mov­ing fast,” says Adam Sussman, who be­came Nike’s first chief dig­i­tal of­fi­cer in 2016. “Mo­bile was be­com­ing the main way that peo­ple were con­nect­ing with brands and shop­ping.”

In re­sponse, Nike CEO Mark Parker an­nounced a plan last sum­mer to over­haul the way the com­pany reaches cus­tomers: Though it still works with some 30,000 re­tail­ers world­wide, Nike be­gan fo­cus­ing its ef­forts on just 40 of them, in­clud­ing Foot Locker and Nord­strom. (It also be­gan work­ing with Ama­zon.) Even more im­por­tant, it pri­or­i­tized sell­ing di­rectly to cus­tomers through its own chan­nels, which in­clude phys­i­cal shops and, in­creas­ingly, dig­i­tal store­fronts such as Nike.com, the Nike app, and Snkrs. Parker dubbed the ef­fort Nike Di­rect. “When a brand wants to fully con­trol how a con­sumer per­ceives it,” says NPD ad­viser Matt Pow­ell, the lead­ing au­thor­ity on the sneaker busi­ness, “the best way to do that is to be­come its own re­tailer.”

Parker has de­scribed the moves as “a mas­sive trans­for­ma­tion,” stream­lin­ing the com­pany’s process from de­sign to man­u­fac­tur­ing and re­fin­ing its sales ex­pe­ri­ence us­ing the data it has on more than 100 mil­lion “mem­bers” (Nike par­lance for any­one who uses its train­ing apps or makes a pur­chase through dig­i­tal chan­nels). He tapped Sussman, along with Heidi O’neill, pres­i­dent of the new Nike Di­rect divi­sion, to over­see the ef­forts. Sussman is fo­cused on us­ing Nike’s own chan­nels to of­fer richer and more per­son­al­ized shop­ping ex­pe­ri­ences—and to de­liver them on a vast scale. To that end, he’s been rolling out a slew of ex­per­i­ments across all of the com­pany’s dig­i­tal prop­er­ties, which also in­clude the Nike Run Club and Nike Train­ing Club apps.

But these days, the com­pany’s bold­est—and per­haps most im­pact­ful—ex­pe­ri­ences are play­ing out on Snkrs. Though lim­ited-edi­tion drops aren’t an es­pe­cially big part of Nike’s busi­ness (ac­cord­ing to NPD’S Pow­ell, they make up less than 5% of the en­tire sneaker in­dus­try), sneak­er­heads are highly cov­eted cus­tomers—and their en­thu­si­asm has a halo ef­fect. (Adi­das’s re­la­tion­ships with the likes of Kanye West and Raf Si­mons, for ex­am­ple, have dra­mat­i­cally changed per­cep­tions of its brand.) What’s more, by tap­ping into its most ob­sessed cus­tomers, Nike is gain­ing in­sights on how to de­velop and ac­ti­vate a com­mu­nity, ideas that it can use in the sneaker wars to come.

Home for the Snkrs squad is a gritty Man­hat­tan of­fice space known as S23nyc—named for its street ad­dress and Michael Jor­dan’s num­ber. While the teams re­spon­si­ble for Nike’s other dig­i­tal prop­er­ties are lo­cated at the com­pany’s Beaver­ton, Ore­gon, head­quar­ters, Snkrs’s graf­fiti-filled out­post op­er­ates more like a startup. Un­til it was ac­quired by Nike in 2016, it was a startup, al­beit one backed by Richard Bran­son, called Vir­gin Mega.

Vir­gin Mega’s founder, Ron Faris, helped de­velop the Vir­gin mu­sic fes­ti­val while work­ing in mar­ket­ing for the com­pany a decade ago. He was fas­ci­nated by how ex­cited kids got as they waited to get into the fes­ti­val, and it oc­curred to him that there are both good and bad kinds of lines. That in­sight led him to launch Vir­gin Mega and cre­ate dig­i­tal tools de­signed to gam­ify the ex­pe­ri­ence of shop­ping for high-de­mand goods, in­clud­ing a vir­tual queue where fans could com­pete to get closer to the front and in­ter­act in other ways.

When Nike bought Vir­gin Mega, it tasked Faris, an af­fa­ble Brook­lyn dad who fa­vors flan­nel shirts and old-school Jor­dan sneak­ers, with turn­ing Nike’s then-new Snkrs app

“THE MAR­KET WAS MOV­ING FAST, AND CON­SUMERS WERE MOV­ING FAST. MO­BILE WAS BE­COM­ING THE MAIN WAY THAT PEO­PLE WERE CON­NECT­ING WITH BRANDS,” SAYS NIKE’S ADAM SUSSMAN.

into a test bed for the com­pany’s dig­i­tal ef­forts. “The idea,” says Sussman, “is that we’ll build for one prod­uct and re­use what we’ve built across the en­tire [Nike] port­fo­lio.”

At the same time, Nike had to re­pair its re­la­tion­ship with sneak­er­heads. The com­pany, fans say, had been rolling out an ex­cess of pu­ta­tively “ex­clu­sive” prod­uct, tar­nish­ing the de­sir­abil­ity of even top lines like Jor­dans. “They alien­ated a lot of cus­tomers by re­leas­ing [too many pairs of] shoes that had tra­di­tion­ally been lim­ited, to a point where those shoes were sit­ting on shelves,” says Yu-ming Wu, founder of the an­nual rare-shoe expo Sneak­er­con. Adi­das’s Kanye West–de­signed Yeezy shoes, mean­while, were all the more ir­re­sistible for their elu­sive­ness. Faris needed to make Nike’s lim­ited-edi­tion runs feel more rare—while mak­ing the shop­ping ex­pe­ri­ence for them more sat­is­fy­ing.

In slightly more than a year, S23NYC has de­vel­oped a suite of tools that al­low for a wide va­ri­ety of Snkrs ex­pe­ri­ences—and gather data about Nike’s most pas­sion­ate fans. Faris and his team have rolled out Poké­mon Go–in­spired shoe re­leases, called Sneaker Stashes, in which users in a cer­tain city are given hints to meet at spe­cific lo­ca­tions. When they get near the spot, the shoe is “un­locked” on their app. With Shock Drops, a pair of shoes—for ex­am­ple, the Jor­dans that Justin Tim­ber­lake wore dur­ing his re­cent Su­per Bowl half­time per­for­mance—ap­pear in the app and can be re­served at dif­fer­ent ven­dors, in­clud­ing Nike’s own store­fronts.

The Snkrs team’s most au­da­cious ex­per­i­ment took place last sum­mer, around the re­lease of a shoe un­like any in Nike’s his­tory. When the brand paired up with Mo­mo­fuku chef–owner David Chang to make a sig­na­ture ver­sion of the clas­sic Dunk sneaker, no­body knew whether there would be much cross­over be­tween sneak­er­heads and foodie cul­ture. To get a pair, fans had to snap a photo of a Mo­mo­fuku menu us­ing the Snkrs app—which un­locked an aug­ment­e­dreal­ity mo­ment where the shoe ap­peared to be float­ing above the menu.

Not only did the shoe sell out, but it con­verted Chang fans into Nike ones. Faris’s team fol­lowed the Chang shop­pers on the Snkrs app for four weeks af­ter the shoe’s re­lease. “They en­tered 30% more drops and spent twice as much money as nor­mal con­sumers,” Faris says. “We won food­ies into the sneaker-cul­ture tribe.”

Be­yond the cool fac­tor that these ini­tia­tives cul­ti­vate, there are the APIS, which can be plugged into other Nike apps. Faris en­vi­sions be­ing able to al­low run­ners who use the Nike Run Club app, for in­stance, to un­lock a lim­ited-edi­tion per­for­mance shoe by com­plet­ing cer­tain tasks. Nike’s dig­i­tal ecosys­tem isn’t yet stitched to­gether as closely as it needs

“THE IDEA IS THAT WE’LL BUILD FOR ONE PROD­UCT AND RE­USE WHAT WE’VE BUILT ACROSS THE EN­TIRE [NIKE] PORT­FO­LIO,” SUSSMAN SAYS.

to be to pull this off. But Sussman says it is get­ting there. “It’s great to have dif­fer­ent prod­uct teams ded­i­cated to each of these ex­pe­ri­ences,” he says of Nike’s var­i­ous apps, “be­cause they all come up with such dif­fer­ent ideas.”

Sussman, who joined the com­pany in 2014 as head of global strat­egy, cred­its his back­ground in video-game pub­lish­ing—with stints at Take-two In­ter­ac­tive, Elec­tronic Arts, and Dis­ney—as key to his cur­rent role. “I learned how to drive con­sumer con­nec­tions and lever­age new tech­nolo­gies for the sake of bet­ter en­ter­tain­ing or serv­ing the cus­tomer,” he says. He points to a new pro­gram for the main Nike app that, though still in beta, shows how far he’d like to take things. Nike 1:1 is an ex­per­i­ment in some­thing called con­ver­sa­tional com­merce, where con­sumers with very spe­cific in­ter­ests are paired with an ex­pert who can help them achieve their goals, any­thing from find­ing a trendy pair of shoes (via a stylist) to train­ing for a 5K (with a com­pet­i­tive run­ner). “Our ex­perts will be able to get you the right gear,” says Michelle Goad, who runs the pro­gram. “But then there is all this added value. They’ll fol­low up with train­ing plans and guided runs and in­vite you to mee­tups. Keep you on point, so you don’t quit.”

The com­pany is also us­ing data to iden­tify un­der­served de­mo­graphic groups and ad­dress them in new ways. One co­hort Nike has re­cently be­gun tar­get­ing is fe­male sneak­er­heads. Dur­ing All-star Week­end, the com­pany de­buted sev­eral lines of lim­ited-edi­tion women’s shoes, in­clud­ing rein­vented ver­sions of clas­sic Jor­dan mod­els, which sold out im­me­di­ately. A week later, the com­pany an­nounced Nike Un­laced, a re­tail ex­pe­ri­ence for fe­male sneaker fans that launched on­line at the end of March and will roll out to phys­i­cal stores this fall. Mem­bers of the plat­form will get same-day de­liv­ery on street-style col­lab­o­ra­tions and the chance to make one-on-one ap­point­ments with guest stylists. “There’s the style-ob­sessed fe­male, and then there are women in the sneaker-fan com­mu­nity,” Sussman says. “We’ve found op­por­tu­ni­ties to serve both.”

Nike’s re­tail re­ori­en­ta­tion is show­ing re­sults: The com­pany’s di­rect-to-con­sumer sales grew 16% last year—com­pared with 6% for the en­tire Nike brand. The com­pany is now think­ing about fur­ther steps. Be­cause once you start learn­ing what your cus­tomers want, why not feed that in­for­ma­tion into the very be­gin­ning of the Nike process—the cre­ation of the shoe it­self? For its lat­est project, S23NYC iden­ti­fied spe­cific neigh­bor­hoods in sev­eral cities around the world where Snkrs data shows an un­usual amount of de­mand. It re­cently sent re­searchers into those ar­eas. “They’ll come back with videos, photo gal­leries, in­ter­views,” Faris says. “They’ll re­ally get a sense of that world—and will brief our footwear de­sign­ers.”

These re­gional shoes—which the com­pany plans to mar­ket to res­i­dents of each area, along with peo­ple else­where who share affini­ties with them—will start ap­pear­ing in late sum­mer. The de­sign process will be com­pressed, in ways that even­tu­ally the en­tire com­pany might be able to take ad­van­tage of. “Be­cause we can sell di­rectly, we don’t have to get re­tail­ers to buy into our ideas,” Faris says. “Usu­ally, there are months spent work­ing with the dif­fer­ent re­tail­ers on how we want to tar­get [cus­tomers]. All of that stuff? It goes away when you are build­ing a one-on-one re­la­tion­ship with the con­sumer.”

Nike’s part­ner­ship with Ken­drick La­mar has yielded lim­it­ededi­tion shoes and new op­por­tu­ni­ties to con­nect with fans.

Nike has an in­creas­ingly wide range of col­lab­o­ra­tors for its Snkrs-wor­thy shoes. Clock­wise from top left: The Air Jor­dan II Just Don, cre­ated with Chicago streetwear de­signer Don Craw­ley; Ken­drick La­mar’s Cortez Kenny II; chef David Chang’s SB Dunk High Pro Mo­mo­fuku; the Air Jor­dan III JTH, Justin Tim­ber­lake’s Su­per Bowl sneak­ers; the Air Max 1 Atmos, cre­ated with cult Ja­panese re­tailer Atmos; and the Ten Off-white x Nike Blazer, from de­signer Vir­gil Abloh.

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