Aug 26, 2022
How Nike Just Did It
Outrunning Adidas in the metaverse.
The battle between Coke and Pepsi is referred to as the “cola wars.” McDonalds and Burger King fight the “burger wars.” For Nike and Adidas, the sneaker wars continue to rage on. Tens of thousands of pages have been written about it; it is the stuff of legend for sneakerheads and marketers alike, with trillions of dollars at stake when the “swoosh” squares off against “the three stripes”.
One strategic coup came when Adidas poached Kanye West. From 2009 through 2013, in the golden days before the backlash against his anti-semitism and fall from grace, the Yeezy imprint released three sneaker styles in collaboration with Nike. When sales exploded, Ye asked Nike for royalties. They said Nay, and Adidas swooped in with a historic offer that gave Ye 100% ownership of Yeezy and made Adidas the exclusive producer, marketer, and distributor for his shoes. As a sweetener, he was offered a 15% royalty, plus a yearly marketing fee. Before trashing his empire with a barrage of anti-semitic rants, the Yeezy brand was worth over $3 billion and netted him nearly $200 million.
In industry speak, Nike is sometimes slandered as as a “starf*cker” brand. Put more politely, the brand is known for building strong partnerships with celebrity athletes. In 2021, the Jordan brand generated the XXXXL sum of $4.711 billion, or 13.17% of Nike’s wholesale revenue. Products such as the FuelBand, a $150 electronic bracelet that measures body movement throughout the day, have contributed to Nike becoming a leader in digitalization.
Adidas has fewer high-profile athletic partnerships, instead calling on bold thinkers from the world of music such as Pharrell Williams, Liam Gallagher, and, until very recently, Kanye. With less stateside caché, Adidas has focused on building high-performance products for the average-performance athlete. It was back in 2017 that the brand started by German Adi Dassler began to really step on Nike’s toes, outgrowing Nike in the United States and China.
!! Sneaker Wars Rabbit Hole Alert !!
The sneaker wars are fought with many battles. Two German brothers named Rudolf and Adolf (let’s just call him Adi) started making kicks together before falling out, with one storming off to start Puma and the other creating Adidas. It’s a story filled with brotherly hatred that you can read more about on Wikipedia.
Bringing it on in the Metaverse
Battles have been won and lost. But now, the sneaker wars will be waged on a new battlefield. First blood has already been drawn in the metaverse, and it is set to flow.
With Web3 knocking on every CMO’s door, brands are diving headfirst into NFTs, DeFi, and the metaverse, with retail brands concentrating heavily on the latter. Let’s look at the Web3 scoreboard for Nike vs Adidas. Nike has scooped up $185 million from NFT sales — almost ten times more than Adidas. Big ole Phil Knight’s brand amassed a further $1.3 billion in transaction volume from secondary trading of its NFTs. Compare this to Adidas’ paltry $175.6 million. It is billions versus millions. Nike FTW. Makes you wonder, just how did they just do it?
Both brands are running the long race [mind the athletic puns] to engage you in the metaverse, but Nike took an acquisitional shortcut into Web 3 while Adidas chose to focus directly on its Web3 community by owning land in the metaverse and creating a collaborative NFT collection.
So, what’s the secret sauce behind the meta-swoosh? The answer is RTFKT Studios. Yes, like the word, “Artifact.” Founded in January 2020, RTFKT’s explosive success with virtual footwear and clothing soon turned Nike’s head. Last year, the studio announced its intention to branch out into the fledgling “avatar” space and a salivating Nike pounced, buying RTFKT for a tad over $1 billion.
NFT Kicks Before IRL Kicks
Ever since, Nike has been closing what was once a large gap between the physical and digital space by turning virtual goods into real-world items. In 2021, RTFKT launched the Nike Air Force 1 “Space Drip” project, which gave 18 NFT artists — including art director Ben Mauro and — erm — Paris Hilton — the chance to design custom pairs of Air Force 1s. The upcoming physical counterparts will mirror these original digital designs and will be exclusively available to those who purchased the virtual shoes. This is a big deal, and Nike seems to have cracked something here. It means that before you can own a completely one-of-a-kind pair of shoes, you start by buying the one-of-a-kind NFT sneaker.
“Traditionally, sneaker collaborations are very hard to get off and are reserved only for the most admired and notable creatives,” said RTFKT Co-Founder Steven Vasiliev Zaptiyo. “By removing barriers and democratizing footwear manufacturing, the next wave of artists will bring new creativity and vision to the space.”
In September this year, 12,211 pairs of Digital Airforce 1 NFTs were sold, the equivalent of 4,640 ETH or $7,982,222 USD. Days before, RTFKT announced the first season of its Clone X forging system. Moving beyond mere sneakers, the drop enables users to acquire physical merchandise — think hoodies, jackets, t-shirts, hats, and socks, based on the specific DNA of Clone X NFTs that they hold. The number of items each holder can order will depend on the number of tokens they have.
Adding another layer of interconnectivity, merch items are fitted with near-field communication (NFC) tags, making them truly “phygital.” This opens up the opportunity for token-gating the merch down the line by providing exclusive event access to wearers.
“With this drop, we aim to continue to inspire the next generation of what a phygital future can be,” said RTFKT Co-Founder Benoit Pagotto. “Unlocking new looks via your Avatar and blurring the lines between your digital and physical identity is just the beginning. Clone X Forging is another step towards accelerating that future and letting our community be at the forefront of innovation.”
Adidas made their big BAYC play in December 2021, but, as they say in sports and sportswear, the scoreboard never lies. Adidas will have to up their game or at least try and scoop up the second-hottest, acronym-named NFT studio. Who knows, not us.
When the dust settles, which brand will become the blueprint for Web3 sports brand success? While the marketers are waiting for the perfectly wrapped-up case study, chances are neither of these brands are giving up the NFT race any time soon. Spectators are gathering for every new battle, hoping for insanely cool drops, phygital crossovers, and whatever madness these two giants can weaponize in their seemingly eternal battle.
But it seems that whatever happens, it will be good for the development and implementation of retail into Web3, and the fact that both have invested so heavily in it is great news for proponents of the new internet. May the best sneaker prevail!
