Nike`s Metaverse Foray: Exploiting a Revenue Opportunity or Riding a Fad?
| Case Code: MKTG468 Case Length: 17 Pages Period: - Pub Date: 2024 Teaching Note: Available |
Price: Rs.400 Organization : Nike, Inc. Industry :Retailing Countries : United States Themes: Digital Marketing Brand Strategy, E-Business Strategy,Technology in Marketing |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Nike’s Foray Into Technology And The Digital Space
Nike had a strong reputation for innovation and was quick to adapt to technological advancements. Industry observers believed that the company had set the standard for innovation in the footwear and apparel industries. Its digital journey was characterized by strategic investments and innovative initiatives..
Venturing into the Metaverse
In the late 2010s – with its known zeal for being in the forefront of emerging technology trends –Nike began taking steps into the emerging metaverse space. Analysts observed that not only was the metaverse space growing fast, but that the interoperability of the metaverse elements such as gaming, shopping, social media, entertainment, digital currencies had the capability of generating novel business opportunities for a brand..
Launch of Digital Collections
In 2019, Nike created special sneakers called CryptoKicks that worked with blockchain technology (See Exhibit IV). Nike figured out a way to connect digital assets to real shoes with the special sneakers. With blockchain, Nike could verify the authenticity of the shoes and keep a track of who owned the shoes. When someone bought a pair of CryptoKicks, they also got some digital asset linked to the shoes’ unique ID. If they sold the shoes later, they could transfer ownership using a special app, like a digital wallet. Also, if someone at Nike had been playing a game called CryptoKitties, they could mix their digital shoes with another pair to make a totally new design..
Entering into Partnerships
Over the years, Nike’s ‘exclusive sneaker releases’ – limited quantities of special footwear made available for a short time – had become well-known for generating a lot of excitement around the brand, with people lining up to buy them. Furthermore, due to their desirability and exclusiveness, the ‘exclusive sneaker releases’ had managed to even raise the resale value of the items..
Making Acquisitions
In December 2021, Nike acquired RTFKT (read as “artifact”) – a prominent brand known for crafting digital sneakers and next-generation collectibles – that combined elements of culture and gaming. The specialized team of RTFKT was stated to utilize the advancements in game engines, NFTs, blockchain authentication, and AR to develop unique virtual products and experiences. Donahoe said, “We’re acquiring a very talented team of creators with an authentic and connected brand. Our plan is to invest in the RTFKT brand, serve and grow their innovative and creative community and extend Nike’s digital footprint and capabilities.”..
Filing Patents
Since 2019, Nike had the patent for its blockchain-based sneakers – CryptoKicks. Later, it began filing various patents for “downloadable virtual goods, computer programs featuring footwear, clothing, headwear, and eyewear, bags … for use online and in online virtual worlds.”..
The Perils of Being in the Metaverse
Between December 2021 and February 2022, Nike’s revenues increased 5% year-on-year, mainly due to solid direct sales. However, as supply bottlenecks plagued the company, its revenues in the next quarter fell. In addition, the company faced a multitude of problems that negatively impacting its stock price such as factory closures in China that were squeezing supply, large unsold inventory in the US, and falling European currency exchange rates..
What is nike’s future in the metaverse?
Studies conducted by US-based multinational strategy and management consulting firm McKinsey indicated that the metaverse could potentially generate up to US$ 5 trillion in value by the year 2030. Christina Wootton, Vice President of partnerships at Roblox, said, “This represents a massive opportunity for brands, who will get in early and will get in early and will be able to build persistent presence... on a truly global scale.” North America was the biggest metaverse market followed by Asia and Europe. Most analysts accepted that the metaverse though in the exploratory stage presented a direct avenue to the most prized demographic – Gen Z. Research from Newzoo mentioned that the average age of metaverse users was 27..
Exhibits
Exhibit I: About Metaverse
Exhibit II Nike’s Product Line
Exhibit III: Key Financials of Nike Inc.
Exhibit IV: Blockchain -- As part of Nike’s CryptoKicks Vision
Exhibit V: Patents Filed by Nike
Exhibit VI: Nike Digital’s Revenues
Exhibit VII: NFT revenues of Brands as of 2023 (Amount in US$)
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