How Nike won with NFTs
TLDR:
Since December 2021, Nike has earned $185M dollars in NFT sales revenue and generated $1.3B in NFT sales volume.
Nike led the pack in brands that launched NFTs as they made 8x more in revenue than the brand having the second greatest revenue (D&G at ~$23M).
The factors that helped Nike do so well outside of Web3 are:
Nike’s global reach, spanning across 170 countries.
Nike’s heavy focus on marketing to individuals between the ages of 15 - 40.
Acquiring RTFK, an organization valued at $33M.
Having experience executing riskier product marketing campaigns for nearly 40 years.
Nike x RTFKT will be shipping out physical assets tied to their assets in 2023, which will feature 4 different types of sneakers linked to their respective NFT’s with an RFC tag.
The initial NFT boom from 2021 to 2022 has brought a lot of new artists, collections and communities to the forefront that very few saw coming. Crypto-native organizations such as Yuga Labs (the company that produced the Bored Ape Yacht Collection) were able to raise millions of dollars through their NFT collections. A lot of established brands such as Nike, Tiffany, Dolce and Gabbana, also took the plunge into the NFT space and were able to make millions of dollars in the hype. Now that the initial boom cycle of NFTs is over (for now at least), we looked back at the performance of these brands and Nike came out as a clear winner in terms of revenue and sales. They were able to generate nearly $200M from primary and secondary sales, 8x the closest competing brand, Dolce and Gabbana which made ~$23M.
The fact that Nike is able to derive half of their proceeds from secondary sale volume alone is impressive in itself, as most other collections rely very heavily on primary sale revenue. Nike was able to make ~$20M on the secondary sale royalties from one ERC 1155 collection alone, generating almost $16M of that in April 2022.
Using data powered by Covalent, we were able to take a deep dive into Nike NFT collections which were managed by their subsidiary, RTFKT. We saw all of the blockchain data relating to their minting, distribution, and sales (both primary and secondary) and compiled a report that looks at the specific NFT collections, their performance, strategies used, market impact and next steps for Nike. We highly recommend you read it as it has some very interesting insights on the revenue generated from primary and secondary sales, the types of buyers who engaged with the NFT collections, the type of creators brought on to make them and a complete timeline of the NFT drops. Seeing the cumulative revenue across 2022, the growth almost seems exponential over time before the bear market of 2022 began. The NFTs surpassed a billion dollars in transaction volume in early Q2 of 2022, and generated another ~$300M before the year ended. The report does dive deeper into the strategies and mechanisms that Nike uses to keep the desirability of the NFTs high in a market where others have struggled to do the same.
We tried to understand why Nike was able to come into this very new space and have such great performance relative to other brands that have also made entries into Web3. The on-chain data tells a story of creating and maintaining engagement, but there is another story that exists off-chain about how Nike was strategically and culturally aligned to succeed in Web3. Nike had some strategic and intangible qualities that gave it an edge to succeed. The company’s global reach, foothold with younger demographics, willingness to combine their expertise with the influence of others and their risk tolerance when it comes to executing marketing campaigns were factors that played a role in their Web3 success. It is helpful to take a closer look at these factors and how they relate to the launch of their NFT collections.
Nike’s Global Reach
Currently, Nike sells their products in 170 different countries and is one of the most recognizable and prominent brands across the globe. It is one of those brands that many different people from all over the world can relate to and have encountered at some point. In this regard, Nike has something in common with Web3. As blockchain technology exists beyond borders, it attracts participants from all around the world who are seeking to engage, build and trade with other participants in the blockchain ecosystem. They gather themselves around shared interests and form communities around them. As the diversity increases, so does knowledge sharing and perspective, but it can get harder for any single participant to automatically relate to other participants beyond Web3 interests.
When Nike launched their NFT collections, that became an additional avenue for relatability, community and shared experiences that can cut beyond the geographical boundaries of the participants in these ecosystems. People participating in NFT ecosystems from Eastern Europe who like Nike can easily connect with other NFT collectors in North America who are also fans of Nike. They all understand the value behind the brand which makes possible community engagement and a large market for secondary sales. It is a familiarity that cuts across crypto native and newbies as well. Most people would be able to better rationalize Nike NFT’s selling for large amounts of money better than they would a collection like CyptoPunks. The groundwork Nike has done across the world of building brand recognition translates into a very valuable aspect of reliability for diverse communities. That is especially true when it comes to a community as diverse and as geographically spread out as NFT holders.
Inroads with Younger Demographics
Nike places a key emphasis on younger audiences with their apparel and sports equipment. Although this does seem like the obvious choice for a sports apparel brand, it is worthy to note that Nike has a foothold with each successive generation that comes into the marketplace, making sure their products are never out of style with their key demographics. They keep up with trends, aesthetics and styles that younger consumers are excited about and try to incorporate them into their product lines. This is another area in which Nike and the crypto industry share a similarity, as most crypto users are either Millennials or GenX. Given Nike’s focus on these demographics, they surely would have learned about things such as NFTs that people were thinking about and later used their knowledge of these demographics to give them the NFTs and digital products they like. Nike does a very good job of getting to know their customer, something that they must have done in the case of digital goods as well.
Acquisition of RTFKT
In December 2021, Nike acquired RTFKT, a creator-led brand that had influence and reach in the NFT space. Although the exact terms of the deal were not disclosed, we do know that RTFKT was valued at $33M in May 2021, which means that it is safe to assume that Nike did commit significant financial resources to make the acquisition. This type of acquisition is something that makes Nike different from other brands that entered the NFT market. They understood that it would be difficult as a public corporation to influence NFT communities whose members are self described cypherpunks, NFT DeGen’s and against the current economic and cultural status quo. They paid for RTFKT’s brand recognition within the Web3 space and their expertise in navigating it while providing them resources to think large and out of the box. RTFKT is able to best understand what will generate hype and excitement and Nike has the resources to make their visions a reality and push the envelope. This is a synergistic partnership, exemplified by the fact that in 2023, Nike and RTFK will be tying physical assets to digital NFTs, an unprecedented event in the crypto industry. It would be very hard for Nike alone to make a move like that and have it become successful. Given the numbers, in the report, this acquisition also may have already paid for itself, lending further support to the case that this was a good strategic move made by Nike.
Nike’s Marketing Risk Tolerance
Despite the constant headlines telling everyone about the high prices NFTs were being sold for, it must be recognized that NFTs and the Web3 industry come with risks. NFTs are one of the most volatile assets in terms of price, and they exist in a space that lacks oversight and has a lot of fraud (which cannot always be prosecuted due to jurisdictional boundaries). On top of this, if a brand tries to sell NFTs, they could be met with pushback from their existing customer base who could be crypto skeptics and opposed to Web3. Trying to navigate these risks is something that can throw a wrench in the marketing of NFT collections for any brand.
Historically, Nike has had a higher risk tolerance when it comes to marketing new products or taking a stance on controversial issues. In 1984, the first ever Air Jordan basketball sneaker was banned by the NBA because it did not match their uniform rules but Nike had Michael Jordan wear them anyway. This resulted in controversy at the time, but now the Jordan brand is worth billions of dollars. Nike has also regularly taken a decided stance on controversial issues and leveraged it as a part of their marketing campaigns. Those marketing campaigns have made up for lost revenue from those who don't agree with them by building further brand loyalty with those who do. Although NFT markets are not exactly analogous to the cases above, Nike has experience taking on and capitalizing on similar risks. This makes them culturally and strategically the most likely to not only embrace choppy waters but come out the other side stronger than before. It is difficult to say for sure, but looking at the revenue and traction the NFT collections have generated so far, the case can be made that the risks Nike took have paid off.
Taking these four factors into consideration along with the on-chain data that is analyzed in the report, we are able to paint a clear picture of how Nike was strategically optimized to capitalize on the initial NFT boom. This is a valuable case study for those looking to position themselves in the NFT market for the next market boom cycle. So far we have seen a dominance of consumer goods and retail brands that are coming into the NFT space, but other retailers such as car companies are also rapidly entering the space. Over the coming years, these insights should be refined and developed into a framework for launching digital goods. It will be worth watching Nike and RTFKT in 2023 as they venture to make hybrid digital and physical products a reality. This will help prove potential use cases around NFT such as proof of authenticity, creator earnings on secondary sales, etc. while providing revenue streams without the traditional physical constraints on consumer products.
About Covalent:
Covalent provides the industry-leading Unified API bringing visibility to billions of Web3 data points. Developers and analysts use Covalent to build exciting multi-chain applications like crypto wallets, NFT galleries, and investor dashboard tools utilizing data from 229 + blockchains. Covalent is trusted by a community of 40,000+ developers and powers data for 5,000+ applications, including 0x, Zerion, Rainbow Wallet, Rotki, Bitski, and many others.