On 13 December 2021, Nike, the largest multinational athletic footwear and apparel brand in the world, stepped deeper into the “virtual” world and agreed to acquire RTFKT, a producer of custom-designed sneakers for videogames at an undisclosed price.
Non-Tech – Nike: Nike (The “Company”) is an athletic footwear and apparel company that designs, develops, and manufactures athletic apparel, footwear, equipment, and accessories. The Company has a presence worldwide, having over 300 factories in over 30 countries. Nike operates under its brand as well as others such as Converse and Jordan.
Tech – RTFKT: RTFKT creates virtual custom-designed sneakers using blockchain authentication and AI to produce digital artefacts that can be sold, traded, or gifted, enabling customers to enjoy wearing their shoes in real life and their online avatars.
On 13 December 2021, Nike (NYS: NKE) has announced the acquisition of RTFKT for an undisclosed amount, a deal that demonstrates the important shift taking place in the footwear industry today.
The RTFKT techquisition is expected to support Nike’s continued growth, enabling the sportswear brand to produce its own virtual wearables. Among other things, Nike shall provide funding support to RTFKT to further explore possibilities presented by the metaverse.
“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.”
- John Donahoe, Chief Executive Officer, Nike
The deal rationale revolves around Nike’s goal to accelerate its digital transformation without having to rely on outside help and will support Nike with its extensive efforts to participate in the metaverse.
The techquisition follows Nike’s purchase of the AI-powered data mining platform company Datalogue. As seen from the previous acquisition of Datalogue, shifting to direct-to-consumer and digital channels, has helped drive efficiency and productivity.
Furthermore, in 2019, the Jordan brand partnered up with Fortnite, where characters of the game wore Nike-branded sneakers. Nike has also secured a patent for Cryptokicks, a technology invented to combat counterfeiting of footwear using blockchain, which Nike plans to use as a nonfungible token.
Nike intends to engage in similar technology-related acquisitions soon to continue its path towards digitalisation.
“Nike is protecting their trademarks for this new era…The trademark filings would very clearly be a nod to this idea of the metaverse.”
- Josh Gerben, trademark lawyer
The size of the global apparel and footwear market is estimated to grow from $1,558 billion in 2020 to $2,605 billion by 2026, a CAGR of 8.9%.
The expected growth can be attributed to the increasing demand for designer athletic shoes and the rising health awareness, coupled with the growing demand for innovative footwear designs.
Furthermore, the importance of sports activities, as well as the increasing influence of celebrity endorsement and international sports, encourage the involvement of people in sports activities, which increases the demand for athletic shoes.
COVID-19 has harshly impacted the footwear industry across the globe, and business priorities have changed to inventory management and liquidation strategies.
The footwear and apparel industry has companies competing on several factors, such as price, quality, marketing activities and product offering.
The global footwear market is mostly driven by growth in e-commerce sales, surging sneaker demand, bulging outdoor activities demand and a rising population. It is segmented into athletic and non-athletic footwear.
Like Nike, several footwear and apparel companies have acquired technology companies that can help them achieve their growth potential. For example, Under Armour acquired Rewire Fitness in 2021, a human performance company intended to provide solutions to mental resilience and mind/body recovery.
RTFKT plans to support Nike’s continued growth while also driving economies of scale as it expands to other markets seeking advanced capabilities. RTFKT is the youngest brand in Nike’s portfolio, which includes other brands such as Jordan and Converse.
"This acquisition is another step that accelerates Nike's digital transformation and allows us to serve athletes and creators at the intersection of sport, creativity, gaming and culture."
- John Donahoe, Nike President and CEO
Nike’s techquisitions are a great example of how a traditional footwear company is actively engaged in the journey of transforming itself to deliver greater value to its stakeholders – particularly its shareholders and customers – by properly positioning itself for the future, ready to tackle any disruptions, especially in a pandemic.
The essence of such a transformation unfolding is embedded in a strategy execution approach we have trademarked and call Techquisition, which my firm, Aquaa Partners, has designed and delivers to its clients every day as an experienced and trusted expert partner.