Nike’s six-month-old sneaker subscription service was never intended for kids at all.
It wouldn’t be that much of a stretch to describe Nike Adventure Club, the three-tiered membership program that launched in August and sends regular shipments of children’s shoes to beleaguered parents, as a happy accident. And much as many a startup casts about to find the right market fit, the Oregon-based sportswear leader quickly realized that the problem it was trying to attack with subscriptions wasn’t the one that needing solving—at least not quite yet.
As it sharpened its channel strategy with what it calls Consumer Direct Offense, Nike executed a calculated transition in the decade that just came to a close, spawning a need to “increase our voice and connection to the consumers directly,” Dave Cobban, who serves as general manager (GM) of Nike Adventure Club, said at PSFK’s Future of Retail 2020 Conference last week at Manhattan’s SVA Theatre.
Serving athletes and consumers directly meant looking into runners’ and sports aficionados’ pain points, and the idea of closed-loop processes and sustainable innovation soon came into focus, dovetailing with sustainability’s emergence as a top-of-mind topic among discerning and eco-aware spenders.
Renowned for innovating game-changing materials and building forward-leaning footwear, Nike found itself in new and unfamiliar territory when facing the potential to incubate an untested—and thus unproven—business model, Cobban said. Eventually, the minds inside Nike’s Advanced Innovation team “piloted the idea of creating a burner brand” riffing on lean innovation startup practices—coupled with the newfound interest in closed-loop—that would pair a license to do a lot of really cool things with the liberty to fail early and often, he added.
And thus Easykicks, the short-lived predecessor to Adventure Club, was born, predicated on the idea of funneling new shoes to runners who churn through sneakers at a 300-mile clip on average. Because if anyone would need access to new shoes on a regular basis, it would be those taking their feet to the pavement day in and day out, Nike surmised.
From EasyKicks to Adventure Club
But over scores of interviews to gauge reception to the new subscription concept and pricing, what Nike kept hearing was “this would be great for our kids.”
“That was resonating for me, too,” said Cobban, himself a father who subscribes to the notion that “kids grow fast and wreck shoes.” Acquiring footwear when children shed sizes at a breakneck pace takes a toll on parents’ time and checkbooks, he added, describing the “trauma” of dragging kids to the mall on a shoe-shopping expedition.
With a new target audience in its sights, Nike set about seeing if the concept was feasible. The early days of EasyKicks, Cobban said, were decidedly “hammy.” Even with a small warehouse storing shoes earmarked for subscription, when an order rolled in, the GM “would actually run to Dick’s Sporting Goods” and purchase full-price Nikes because doing so was far easier than navigating the athletic giant’s merchandising and inventory processes, he added.
It was far from ideal, but “it proved the case,” Cobban said.
EasyKicks generated a wealth of insights on pricing and retention in its two-year incubation that led to Adventure Club’s subscription plan trio. Consumers can pick from $20-, $30- or $50-a-month plans to get new shoes quarterly, bi-monthly and or every 30 days, respectively. Kicks, as Nike calls them, are offered in sizes 4C through 7Y, serving what Cobban refers to as the “sweet spot”: kids ages 2 through 9 years of age. Tweens, with their newfound sense of agency, tend to age out of the shoes-on-delivery program, he said, though some girls with smaller feet have been found to continue with their subscription.
And twice a year the company takes back used shoes, mending and donating usable items or recycling worn-out kicks for parts through Nike Grind.
“This recycling element—bringing a shoe back at the end of life—is a critical part of the retention story,” Cobban said, adding that rescuing footwear from the landfill has become a feel-good add-on benefit for subscribers who really just want “to stop having to go to mall.”
Though Nike openly trades on hype, exclusivity and the cache of cranking out products commanding eye-watering prices on the resale market, the average Adventure Club subscriber, Cobban said, skews from the sneaker-savvy shoppers on which the brand built its name and fame. She’s more likely to be a working, middle-income mom with two or three kids in tow who, more than anything, wants some “peace of mind,” he added.
Adventure Club offers more than just the sneakers with which Nike can be synonymous. With Converse in its portfolio, Nike Inc. is equipped to serve up a wide swath of silhouettes through the subscription offering, from rain boots and winter-ready styles to summer-friendly sandals and sweet Mary Janes, Corban said of the company’s “enormous suite that allows us to offer a one-stop shop.”
Why subscriptions work
Nike’s entree into the subscription market comes as recurring revenue is increasingly on retail’s mind. “Relationship commerce enables brands and retailers to form a closer connection with customers that leads to repeat purchasing,” said Greg Alvo, CEO of Ordergroove, a retail tech startup that helps brands launch their own subscription programs.
Programs that drive recurring revenue help companies boost profitability (65 percent) and reap greater revenues (59 percent), according to a survey of 203 retailers operating a store online that Ordergroove commissioned, and NAPCO Research fielded, in Q4. The results—published in the “Retail 2020: Recurring Revenue Delivers Results” study timed to New York’s NRF Big Show last week—also found that these programs help businesses retain their customers (49 percent). And perhaps even more compelling, the average company offering a subscription generates 41 percent of its revenue from the service.
“By delivering frictionless and convenient recurring revenue experiences,” Alvo said, “today’s leading merchants reap benefits on many fronts.”
Putting revenue on repeat is all well and good, but Cobban is quick to note that “subscriptions are a totally different business,” citing numerous discussions with Nike’s finance team to hash out the mechanics of when and how investments in customer acquisition eventually get paid back.
Subscriptions upend a more traditional business model by repaying those initial expenditures over a longer span of time, a major factor in why digital natives like Rent the Runway require “massive amounts of venture capital” funding, Cobban said. “You need a lot of money and capacity up front to make those businesses work for you,” he added.
Rather than making a shameless play for revenue, companies looking to branch into the subscription sector should have an airtight thesis on the pain point they’re addressing, Cobban noted, describing Nike as “restless in our desire to either solve a problem or meet a need.”
And Adventure Club members are telling the performance titan exactly what they want. Some subscribers are interested in receiving socks with their shoe shipments, according to Cobban, who describes the program’s audience as more of a community where members actively exchange tips and solutions.
Six months in, Nike has uncovered some interesting trends about how customers engage with the subscription service. No surprise, more than half of program participants opt for the most affordable plan, as Cobban said 55 percent sign up at the $20 level. But many who pick the least-frequent option quickly upgrade because their kids want—or need—additional styles, he added.
Others sign up one child and soon add the rest of their brood once siblings see how much fun the personalized unboxing experience can be. Perhaps the most remarkable insight? Nike’s discovered that subscribers with particularly dainty feet are using the service to get shoes for themselves, and the company has observed some “mommy and me” shoe buying behavior.
Adventure Club might be solving a real problem for time-strapped moms, but the program also serves as a shrewd way for Nike to foster brand loyalty from a very young age. All the more imperative, according to Ordergroove, when “your competition online is a click away.”