Apparel Companies Step Into NFT Market With Sneaker Collections

NFTs Offer Sneaker Sellers New Revenue Streams

Apparel brands Adidas (ADDYY), Under Armour (UAA), and Nike (NKE) are among the latest companies to explore blockchain technology as a way to engage with customers and increase product offerings. All three are issuing NFTs (non-fungible tokens) in combination with the sale of physical sneakers. For those new to the term, NFTs refer to art, videos, and other digital assets that are completely unique — unlike barrels of oil or bushels of wheat, for example.

Nike recently acquired RTFKT (pronounced “artifact”) in an attempt to further leverage the NFT market. RTFKT creates NFTs of collectibles like sneakers, allowing Nike to collect royalties on both original sales as well as the lucrative resale market. Under Armour and Adidas also both launched NFT collections last month, which rapidly sold out.

Targeting New Revenues and Demographics Through NFTs and the Metaverse

Analysts note practical reasons why apparel companies like NFTs, in that they’re difficult to counterfeit, won’t hit supply-chain snags, and cost less to store than physical shoes. The resale market and ability to generate royalties are significant factors as well. NFTs also see plenty of skepticism overall, but there’s evidence younger people are already embracing the technology.

Relatedly, so-called “sneakerheads” who collect shoes are typically younger and already dipping their toes into the digital asset market. CivicScience survey results indicate 14% of respondents aged 18-24 report a previous NFT purchase. Zooming out, some analysts say this trend could pave the way for apparel companies to sell digital wearables like clothing and shoes to dress up avatars within the metaverse.

Shiny New Metaverse and NFTs Not Without Risks

Across a wide range of industries, investments and resources are targeting the metaverse. NFTs and their role in the digital realm offer clear advantages for apparel companies, but analysts do note risks. For one, sneakerhead budgets don’t just magically expand because they’re buying digital assets, and “real-world” sales could dip as digital revenue grows.

Other risks noted by industry watchers include wildly varying fees associated with energy-intensive blockchain technology, unknown tax liabilities, and the harsh nature of digital critics. There’s also no guarantee that companies dominating the traditional sneaker market, like Nike, will win within the metaverse. While clear potential exists for sneaker companies to forge stronger customer connections and grow revenues using NFTs, the digital expansion doesn’t come without risks.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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