Nike ‘just did it’ by entering the metaverse and making $185 million

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The Company

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Nike, Inc. is the world’s leading brand in sports business and the largest athletic apparel company with a market capitalization of over $160 billion and annual revenues of over $30 billion making it the most valuable sports business brand globally. It was listed in Time’s “100 Most Influential Companies” for 2021 and employs 79,000 people with office locations in over 45 countries and over 1000 retail stores in 170 countries.

The iconic ‘swoosh’ logo is one of the most recognisable in the world.

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Business Challenge

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Nike achieved its success by staying one step ahead of its numerous competitors, including both established such as Adidas and fast-growing newcomers such as On Running.
As ever, the need: to retain market share in the fiercely competitive sports apparel landscape; grow existing revenue streams; create/discover new revenue streams
How to stay ahead of the curve and competitors by using emerging metaverse technologies to create new products and experiences while also enabling new direct-to-community/customer (D2C) opportunities
Adidas, their main competitor entered the metaverse with a partnership with the $3 billion bluechip metaverse brand Bored Ape Yacht Club (BAYC) and their Otherside metaverse.

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Their business is hands-on at all stages of the product-to-market cycle: design, development, manufacturing, marketing and sales. A focus on innovation and design thinking embracing available technologies at all stages of this cycle has enabled Nike to not only pioneer innovations in these fields but also cement itself as the industry leader.

Despite the overtly fitness and sports focus, Nike actually defines an athlete as anyone “with a body” which makes everyone a potential customer. Furthermore, a design-thinking process with the mentality of putting themselves “in the shoes” of their customers has enabled them to consistently lead the market in catering to the demands of their customer base.

The efficiency with which Nike manages its supply chain and production has also been key to its success. In fact, Nike outsources 100% of its manufacturing to independent suppliers and third parties and has mitigated the usual risks of such a strategy by expertly diversifying between over 100 factories in 12 countries. This resulted in no more than 9% of their production being accounted for by one factory.

However supply chain issues caused by the pandemic, such as the closures of factories and retail outlets, and employee and container shortages, negatively impacted sales and stunted growth, despite consumer demand “that has never been higher” (Matthew Friend, Nike CFO).

Some factories were closed for months, and to make matters worse delivery times to major markets sometimes doubled, such as 80 days for shipment of items from Asia to North America (a combined delay of half a year for the world’s most well-run sports business).

Furthermore, increasing consumer consciousness relating to sustainable innovation, reducing environmental footprint, and a demand for more diversity and inclusion in sports in the sports business presents another significant challenge that Nike has to face.

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With these challenges, how was Nike going to grow its business in a way that maintained its strong customer focus? By focusing on communities facilitated by immersive phygital and mixed-reality experiences.

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Metaverse Activation: The New Phygital Age

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Screenshot of Nike’s trademark applications in October 2021 indicating plans for a metaverse activation

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Nike has consistently been a leader in digital transformation and in November 2021 launched NIKELAND to “turn sport and play into a lifestyle” with a design inspired by the original Nike headquarters using the Roblox platform, a platform that has a predominantly preteen and teen user base.

The immersive experience entices a new generation of consumers to meet, socialize, play games, and enjoy appearances by celebrities such as LeBron James during “NBA All-Star Week”.

Players could compete in events such as 1v1, 2v2 and 3v3 basketball and slam dunk contests and pimp up their avatars by earning prizes through the completion of in-game tasks and by purchasing exclusive digital products from the NIKELAND showroom that could be used throughout the Roblox platform.

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This effectively converted the NIKELAND players into brand ambassadors for the Nike brand, tapping into Roblox’s 40 million daily active users.

Players could show off their collectibles in their own customizable space called a ‘yard’ in NIKELAND, while guides on how to acquire all the free Nike branded items in the experience popped up all over Youtube and gaming blogs.

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“Nike created this bespoke world with the backdrop of its world headquarters and inside Roblox’s immersive 3D space, building on its goal to turn sport and play into a lifestyle” (Nike press release for NIKELAND)

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The accessibility of immersive digital experiences takes on even more importance in times of pandemics, temporary retail location closures worldwide and an increasing work-and-learn-from-anywhere culture.

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The NIKELAND metaverse, gaming and immersive brand experience proved to be a huge success with over 20 million visitors to date.

Picture: gameplay in NIKELAND (source: Nike, Inc.)

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Above are examples of branded digital items that could be earned or bought in NIKELAND. For example, the Nike Shoebox Costume could be attained by eating a piece of cake in-game; the Nike Basketball Head could be earned by collecting 14,000 experience points through playing the basketball games in NIKELAND.

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The acquisition of RTFKT Studios signalled serious intent to become a metaverse-native brand and went one step further than competitor Adidas with their partnership with Yuga Labs’ $3 billion dollar metaverse brand Bored Ape Yacht Club (BAYC).

“This purchase is another step forward in Nike’s digital transformation, allowing us to serve athletes and artists at the crossroads of sport, creativity, gaming, and culture … and enhance Nike’s digital reach and capabilities” (John Donahoe, CEO Nike)

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Pictures: Takashi Murakami and CloneX Avatars

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“We have been working in secret with our Idol, Takashi Murakami, as a special collaborator, bringing his iconic designs to the Avatars” (RTFKT Studios)

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This effectively brought full production capabilities of metaverse-wear to Nike, leveraging RTFKT’s incredible success in pioneering innovative metaverse-ready digital wearables and their community of over a quarter million fans on social media.

Animated MNLTH NFT:

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Picture: Skins Vial allowing aftermarket customization of compatible virtual sneakers

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At the same time, Nike’s position as the sports business leader, its capabilities in design and manufacturing, as well as its expertise in marketing and sales to a global audience has allowed for compelling phygital and mixed-reality experiences for the communities of both brands.

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Offering physical items that could be claimed by owners of their exclusive digital collectibles with accelerated concept-to-production schedules added immense utility and value for the holders of Nike Genesis Cryptokicks, MNLTH and other eligible collectibles, while also drawing in more members of the existing Nike fanbase such as ‘sneakerheads’ into the metaverse by iteratively driving up the FOMO.

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The merging of fashion, the metaverse and gaming is creating playgrounds where new and innovative brand experiences are being created. These experiences are not only more immersive and immediate, they are also bringing the community closer to brands and vice-versa.

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"The power is going to the people and the community is going to define your value and that's a big mindset shift" (Benoit Pagotto, Co-Founder RTKFT Studios and Snr Director Brand & Partnerships at Nike)

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Nike and RTFKT’s approach of adding value to existing collections, thereby rewarding their customer community by turning their digital assets into a modular set of VIP cards and status symbols is currently leading the direct-to-community initiatives amongst fashion brands with metaverse revenues of $185 million to date.

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Animated Space Pad NFT:

“Space Pods, created by RTFKT, are the start of your home on the Metaverse. Use it to display your favorite artworks or collectibles, share it with your friends, these base pods are the beginning of the future development of the Clone multiverse civilization. Treat with care, make it your home.” (RTFKT Studios)

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PodX NFT.

“This collection is dedicated to RTFKT rooms, experiences, furniture design, made by RTFKT and its collaborators. The Metaverse built, step by step, together.” (RTFKT Studios)

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After the acquisition of digital wearables studio RTFKT, Nike established metaverse-focused positions within its technology innovation lab to design and build out its long-term metaverse vision in a clear signal that it intends to be at the forefront of the emerging class of metaverse-native brands.

Nike clearly views the metaverse as an opportunity to unlock more growth and efficiency for its business.

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Nike Metaverse Activation Timeline

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April 2019, Nike files a patent for “Cryptokicks” digital collectibles
May 2019, Nike’s Jordan brand partners with Fortnite to supply characters with Nike-branded virtual sneakers
October 2021, Nike files trademark patents relating to “virtual environments” and “virtual goods”
November 2021, NIKELAND metaverse is created in Roblox with 7 million visitors in the first month (over 20 million to date).
CloneX metaverse-ready avatar collection in collaboration with acclaimed artist Takashi Murakami is launched, selling out all 20,000 pieces.
Acquisition of leading metaverse apparel and collectibles company RTFKT Studios in December 2021
RTFKT releases Space Pods ‘metaverse home’ collectibles in December 2021
RTFKT releases their “PodX” metaverse collectibles in Feb 2022, which extends the digital real estate of their Space Pod virtual real estate while also promising owners ‘loot’ aka extra utilities, airdrops and other benefits.
Feb 2022 Nike’s first official digital collectible “MNLTH”, co-branded with RTFKT, is airdropped to owners of CloneX and PodX NFT digital collectibles.
Feb 2022 Nike sues StockX for trademark infringement over unofficial digital collectibles being sold containing images of Nike sneakers (case ongoing)
March 2021 “Space Drip” digital sneakers launched, with 18 curated digital artists customizing Nike’s iconic Air Force 1 sneaker. Paris Hilton is enlisted as a special contributing artist, creating a special collectible only attainable via ownership of the complete Space Drip collection
April 2022 Nike and RTFKT engage their community with a series of quests via Twitter and Discord, which upon completion would reveal the contents of the MNLTH collectible.
April 2022 the contents of the MNLTH are revealed, with items contained including virtual Nike Dunk Genesis sneakers as part of their “CryptoKicks” collaboration with RTFKT, a “Skin Vial” collectible which allows the changing of a sneakers appearance according to the traits of the vial, and finally a “MNLTH 2” collectible whose contents were again to-be-revealed.
May 2022, RTFKT CTO confirms a Nike x RTFKT metaverse world is being built and not yet made public
June 2022 - physical sneakers released that are claimable, in a process that RTFKT calls “forging”, by owners of the Nike Dunk Genesis Cryptokicks x RTFKT digital sneakers
July 2022, the Nike x RTFKT digital hoodie launched with forging for an NFC-equipped physical hoodie enabling wear for both digital and physical environments using AR for special effects such as virtual wings.
July 2022, Luxury perfume brand Byredo announces a digital perfume collectible that can be used to claim a limited edition NFC-equipped physical perfume. The NFC chip will give holders of the physical perfume the ability to dress their RTFKT avatars in a wearable digital ‘aura’.
July 2022, phygital concept store Nike Style opened in Seoul as a “remixed expression of sports retail culture that blurs the line between physical and digital” with a content studio for creators and shoppers to create their own content. Next location is set to be Shanghai in Fall 2022.
August 2022, Nike and RTFKT launch an NFT-enabled hoodie that allows purchasers to dress up their CloneX avatars with a digital replica hoodie and future access to token-gated digital and IRL events
As of August 2022, Nike leads the fashion brands venturing into metaverse projects with a revenue of $185 million, which is 300% of their top 5 nearest competitors combined (Dolce; Gabbana, Tiffany, Gucci, Adidas and Lacoste achieved $61 million combined).