50 years in, Nike’s new digital studio defends its title as the king of kicks

The last time anyone considered Nike a startup, founder Phil Knight was selling Japanese shoes out of his car at track meets. In the 50 years since, Knight’s enterprising footwear company has morphed into the largest sneaker maker in the world, selling shoes out of stores bigger than football fields. But, after decades of uninterrupted preeminence in the space, Nike’s North American sales have declined recently while Adidas, its main competitor, sees its own product soaring via the feet of Kanye West and his Yeezy Boost line.

Despite the dip, Nike still raked in a gaudy $34 billion in revenue in 2017 – a staggering number for any business. But to ensure its continued dominance, Knight’s shoe empire had to adapt. To do that, the 54-year old company went back to its startup roots with the formation of what it calls s23NYC – otherwise known as Nike’s first digital experience studio. Formed after Nike acquired Richard Branson’s Virgin Mega in August of 2016, the new venture infused the monolithic brand with a bit of startup energy.

“One of the things we wanted to make sure upfront is that we stayed scrappy, like a startup, because you can move a lot quicker that way,” Ron Faris, s23NYC’s general manager, told Digital Trends during a recent studio visit. “The way we’re organized is we work with a lot more autonomy because we’re not in Beaverton.”

Since joining Nike, s23NYC has been in charge of Nike’s reservation app, SNKRS. Released in 2015, the app allows consumers to reserve sneakers, participate in raffles, and explore the stories behind Nike’s kicks. SNKRS even employs geo-fencing, which restricts users outside a designated location from purchasing certain sneakers.

In essence, the app is Nike’s attempt to nab a bit of mobile devices’ share of all e-commerce sales – a figure which skyrocketed from less than 2 percent in 2010 to nearly 25 percent in ’17.

“It took a good three to six months to get our footing in a company this big,” Faris admitted. “The studio started with only 12 employees but has more than tripled its staff in order to work on these dope experiences for the Kyrie [Irving]’s of the world; or the Kevin Durant’s of the world; the Kendrick [Lamar]’s of the world.”

S23NYC isn’t just modifying how Nike sells its shoes — it’s also rethinking who Nike sells its shoes to.

Sneaker game moderators

Located in the Chelsea neighborhood of New York City, the studio’s love for ideation is written on its walls — literally. Confidential strategy plans are scribbled on walls like graffiti as if a meeting of the minds sprouted spontaneously and needed to be documented right then and there. There are meeting areas with floors made of basketball court hardwood and employees have individual lockers adorned with some of the rarest sneakers in Nike’s illustrious collection. As rational as it is radical, Faris said the first thing s23NYC did upon joining Nike was to completely rethink how the brand perceived its customers.

“Our first mandate when we came in was take the SNKRS app, create a sense of community into it, and build more features to make it more enticing to the sneaker community,” he added. “Before we had it, I would say it was a more traditional shopping experience — it was a digital store. But, I think it was fairly unplugged from the street. Our first features were about treating these kids more like the gamers they are than shoppers.”

The comparison is spot on. Sneakerheads forgo days of sleep to wait on line for a pair of Nike Off-White Jordan 1’s the same way hardcore gamers would distractedly walk into traffic to get a Pikachu in Pokemon Go — and both view such irrational behavior as validity of their status in each respective community. To gamify the sneaker experience, s23NYC launched a new feature in May called SNKRS Stash. The app digitally “buries” a pair of sneakers in an unknown location, known as Stash Spots, sending users on an Easter egg hunt across the city.

It does this by presenting users with three 360-degree photos which show parts of the secret location. Once someone thinks they’ve found it, they tap the I’m Here button to have their GPS location verified by the app. If they’re truly there, they’ll be able to purchase the shoes on the spot. Faris describes SNKRS Stash as Nike’s “Pokemon Go” — and the shoe definitely fits.

When s23NYC decided to digitally bury pairs of the limited edition PSNY x Air Jordan 12 around NYC last summer, a serene day at Washington Square Park turned into a stampede of zealous scavengers looking for the wheat-colored kicks. Even with an avalanche of people, there were no reported injuries or police intervention, two issues which have plagued Nike shoe releases in the past.

In less than a year, s23NYC was able to turn one of NYC’s busiest parks into a digital Nike store  — and mitigate one of Nike’s biggest problems. And it used augmented reality to do it.

Everyone and everything is a Nike store

Unveiled in June of 2017, SNKRS’s AR camera feature debuted alongside Nike’s SB Dunk High Pro “Momofuku” sneakers, a collaboration between Nike and world-renowned chef David Chang. The only way people could purchase these rare kicks was by placing the AR camera in front of either a picture of David Chang’s Fuku East Village menu or a Nike ad. This would then bring up a 3D rendering of the shoe, enabling users to buy them. Thanks to s23NYC, all Nike needed were smartphones and physical pieces of paper to create a digital store.

“You can take over subway walls and take the advertising for that and turn them into stores,” Faris explained. “We could take a brand like Kith that wants to be in another country, and say ‘yo, we can build a digital pop-up for you that requires no money except the cost of a poster.”

To influential sneakerheads like Jeff Staple — founder of the streetwear design studio Staple Design — the internet and e-commerce have stripped sneaker culture of the hand-to-hand interactions that once defined it. For them, Nike’s digital scavenger hunts are a step in the right direction.

“You sell 100,000 shoes? Great. But if all 100,000 kids who bought them are sitting at home clicking a button, there’s no culture there. Only commerce,” Staple told Digital Trends. “So, the key to success for the future of Nike and the future of sneaker culture is to be able to seamlessly blend real-world charm with digital world convenience.”

Spend a nickel, save a dime

Nike’s foray into AR also has a chance to save it a lot of money. If it can reach scale, it could very well be a paradigm shift in retail marketing. On average, Nike spent more than $3.2 billion in advertisements and promotions between 2014 and 2017. The cost for the digital marketing of those Momofuku sneakers, however? Zero.

“Half of the images we have were covered by the press, or influencers, and then they put the image up and we sold it through the articles,” Faris added.

Though the Momofuku’s were only available by using the AR camera on Chang’s menu or Nike’s ads, it also extended to anyone who simply scanned prior photos of those with the AR camera. When Faris explained the implications of this, his eyes lit up like a sneakerhead first in line, knowing their prize is within reach.

“Imagine this: Influencers drop [an AR-enabled ad] on their Instagram story and now they’re the only retailer of that shoe,” Faris remarked. “Instagram is spending millions of dollars figuring out a way to put a buy button on the site and we just hacked around it with a camera that we can use in our app.”

By using AR, s23NYC was able to do something Nike never has — and it’s done it by leveraging the cult-like following Nike amassed over the years.

A tribe called Nike

Sneakerheads aren’t just gamers to s23NYC — they’re also cults. Not the kool-aid sipping type, though. These are the kind you’d find on Instagram who bases their purchases solely on what influencers post to their ‘Gram. Faris calls it the “tribal cult model.” To him, the tribal leaders are the “15-20 percent of the community that is more hardcore and fanatical,” and likely to “‘peacock’ and share knowledge with the other 80 to 85 percent, who are more casual [consumers].”

This sort of trickle down sneakernomics model led to one of s23NYC’s newest features: SNKRS Stash Squad — Nike’s way of “democratizing the culture.” With Stash Squad, people from across America can follow and join anyone hunting for sneakers. Squad members then use the SNKRS AR camera to have a 3D rendering of the city where the search is happening and can see potential hunters to follow, as well as how far they are from the stashed sneakers.

As hunters use their phones to search, people in the squad can kick back on their sofas and watch the frantic search via their smartphone. Once the hunter accesses the sneakers, everyone in the hunter’s squad has access to purchase the sneakers, no matter where they are in the U.S.

Stash Squad is the tribal cult model in action and a Nike-approved version of one of the most common ways people might circumvent SNKRS’s geo-fencing. Often, people who want sneakers only available to those in specific locations would arrange for someone in that area to get the sneakers for them. Now, they just have to be at their phone when a Stash Squad drop happens, and simply jump on the bandwagon.

Though it solves one problem, it creates another. If a few hunters are able to amass a large enough following, they could theoretically snatch all available sneakers, leaving the rest of the growing community shoeless. Because of this, s23NYC remains focused on honing the app’s features before launch, with a few changes capable of safeguarding against monopolization. Faris said the team is still working on the minimum and maximum amounts of followers a hunter can amass. He also considers Stash Squad an “ephemeral social platform” where users only follow hunters during searches, precluding any one person from amassing regular followers.

S23NYC knows it’s toeing a fine line. Because it doesn’t want to turn sneakerhead tastemakers away with unhelpful features, the studio’s aim is to “build features that fuel their addiction to the game.” It’s quite a lofty goal and one capable of trapping Nike in a catch-22 — one only s23NYC can get them out of.

When bots attack

When you’re servicing addicts, an immutable fact must be taken into account: They’ll try almost anything to get what they want. Faris says usage of the SNKRS app “rivals the sale of a Beyonce concert on Ticketmaster where you get millions of people trying to get something we definitely don’t have millions of product for.”

That insatiable demand led Ticketmaster — and Nike — to experience people turning to unfair means to make bulk purchases before average consumers even had access to tickets. The most popular tool used to carry out this unscrupulous act is bots.

Eager resellers have long used automated bots to cop hundreds of rare sneakers in minutes, despite companies using security measures like CAPTCHA or other bot defenses. But, a two-minute scan through subreddit groups like /r/sneakerbots clearly shows that no defense has made even the slightest dent in this diminishing this strategy.

This is where Nike’s investment in AR goes from being a great tool to sell its sneakers worldwide to serving as the brand’s best remedy to a problem it’s had for nearly 10 years. The main draw of a bot is its ability to select the shoes you want, load your online shopping cart, and complete the purchase within seconds. By making highly coveted sneakers like the Momofuku’s available only via an app and scavenger hunt, s23NYC essentially rendered bots useless for them. According to Faris, they’ve yet to see any both traffic with the AR experience but he’s slow to say the threat of bots is completely dead.

Many of the shoes released via SNKRS don’t utilize the AR camera, however. Because of this, resourceful sneakerheads have routinely found holes in the geo-fence sneaker apps tend to create. Take Adidas’ Confirmed app, for instance. It’s seen people using programs to fake their location since the app launched in February 2015. More than two and a half years later and the problem is so rampant, there are YouTube videos explaining how to use the Apple app creator program Xcode to fake locations on iPhones in order to trick the app.

Faris contends that most bot traffic he’s experienced came via the Nike website and not the SNKRS app but he does admit s23NYC has experienced problems similar to Adidas. People have tried taking advantage “by spoofing their location,” though Nike hopes it can accomplish the impossible by making sneaker releases cheater proof.

For longtime sneakerheads like Bernie Gross — creative director of boutique sneaker shop, Extra Butter — bots are a necessary evil. To him, they’re an integral part of ensuring everyone participates in sneaker culture. The fact Stash Spots only activate in major cities “incentivizes someone to rely on bots even more.”

“Bots are helpful to the thousands of consumers who either don’t have time to camp out on lines or live in middle America suburbia where distribution may be lower,” Gross told Digital Trends.

Because of this, bots may continue to be a problem for Nike until the company puts a Stash Spot in every corner of the world.

Future feats

Through SNKRS, s23NYC owns a wealth of data about Nike consumers — information it may soon leverage into assisting with the creation (and not just selling) of shoes.

“Right now, we’re experimenting with how we can use the behavior data we get from the app and start looking at hyperlocal zip codes,” Faris said. “We look at places with certain pockets of people and what they like, and then we help influence product. That’s where we see it all going.”

The sneaker community is taking a wait-and-see approach on Nike’s innovations, with many predicting the brand to go down the tech rabbit hole in order to keep pace with the sneaker industry. To Jeff Staple, he sees the tech as being so brand new and fast-paced, he equates it to holding onto a “wild horse and just hanging on for dear life.”

“There are now so many ways to ‘drop a shoe,’” he said. “And the data hasn’t been out long enough to determine which is best. So, naturally, Nike wants to try them all.”

One of the newer tech trends s23NYC has plans of leveraging are live social game shows. Similar to an app like HQ Trivia, the studio wants to allow the sneaker community to influence and impact releases in real-time with one another — without the hectic chat feeds.

For now, these are merely ideas being groomed and hardly an official blueprint. Only time will tell how big of an investment Nike will make in s23NYC’s future but it’s hard to deny the impact it’s had on allowing the brand to remain the most forward-thinking footwear brand in the world.

Let’s see if it can keep up the pace.