No. 292: GOAT, the media brand


Marketplaces are beginning to own demand. Today, a high school kid named Darius Bazley signed an endorsement with New Balance for $14 million.  When you make an agreement like this, you forfeit your ability to play NCAA basketball. In his case, it is by design. He’ll train for the next year in preparation for the 2019 NBA Draft. And in the meantime, he’s successfully monetized his early success and hedged against later injury or failure. He’s a millionaire without playing a single moment of NBA basketball.

In May, Bazley signed with the prominent agent Rich Paul, who represents LeBron James, John Wall and Ben Simmons among Klutch Sports’ 18 N.B.A. clients. This week, Paul revealed he has arranged for Bazley to spend the heart of the college basketball season — January, February and March — as an intern at New Balance.The internship, to be precise, is folded into a handsome shoe contract Bazley, 18, has landed with New Balance on the lure of his pro potential. According to Paul, Bazley’s multiyear deal will pay him $1 million “no matter what happens” with his N.B.A. career — and can pay up to $14 million if he reaches all performance incentives.

In America, sneaker culture has been a catalyst for many notable shifts in media, sports, education, and business. Shoe promotion began with a marketing concept that continues to evolve. Almost 100 years ago, Converse sneakers debuted with little to no fanfare. This is the way things remained until four years later when pro basketball player Chuck Taylor made a few design suggestions. His celebrity endorsement set a marketing precedent that continues today. Without Mr. Taylor, there would have been no Michael Jordan or Kobe Bryant or Lebron James – basketball athletes who we can attribute billions of dollars in economic impact.

People find meaning in sneakers, so their choices are driven by brand identity.

Elizabeth Semmelhack

With this storied foundation, ne of Y-Combinator’s 100 most promising startups is responsible for one of the most meaningful maneuvers in online retail marketing.

The precursor to GOAT was a startup called GrubWithUs and it was failing despite $7 million in capital raised by cofounder and CEO Eddy Lu. GOAT, short for greatest of all time, was a last minute hail mary that scored. Thanks to a resale promotion of Kanye West’s then-popular Adidas shoe, the eCommerce reseller and database exploded in popularity in 2015.

After four months of operation, in November of 2015, the then-nobody company launched a Black Friday campaign discounting the hottest styles of the year at retail prices. “That year we were talking about the Turtle Doves, the Supreme Fives,” said Lu. “The internet picked it up and it kind of blew up, and every kind of blog picked up this Black Friday campaign.” Over 100,000 users installed the app to take advantage of the sale, causing the newly-launched startup app to crash repeatedly. 

Business Insider

This fueled a new fundraise of $5 million in 2016. And an additional $80 million over the next two years. In March of 2018, GOAT merged with legendary sneaker reseller Flight Club, a New York City retailer credited with pioneering the online reseller space. Partly to bolster its street credibility but mostly to better compete against StockX, a sneaker stock market of sorts. Funded by Quicken Loans and Cleveland Cavaliers owner Dan Gilbert and decidedly more connected in the sports world, the StockX app has raised $50M in the past few years.

Kyle Kuzma’s Partnership with GOAT

You may not have heard of Kyle Kuzma but the second year player hit the ground running as an NBA rookie in the 2017 season by averaging 16.1 points in 31 minutes for the Los Angeles Lakers. In the final year of a two year Nike deal, Kuzma is permitted to wear any shoe with a Swoosh. And given that the NBA recently loosened its dress code for the 2018-2019 season, athletes can now wear any color of sneakers during their games. To recap, GOAT partnered with a young, up and coming player that:

  • plays for the most visible NBA franchise
  • plays in one of GOAT’s most pivotal markets (Los Angeles, California)
  • plays beside the most visible player in the NBA (Lebron James)
  • is permitted by his current contract to work with GOAT (Nike)

GOAT, the media brand. By partnering directly with an NBA basketball player, GOAT is cutting out many of the media companies that have grown to become gatekeepers for sneaker culture. Rather, GOAT is laying the groundwork to control its own content. They can determine the shoe featured and the day that it’s worn. In doing so, they can optimize around the varying degrees of serendipity that these types of partnerships influence. The result: greater organic predictability as their stable of athletes continues to grow through and beyond the NBA.

In covering Wish’s good fortune, 2PM discussed the unpredictability of these types of arrangements in depth in No. 276:

With Lebron’s recent signing, the new face of the organization will move the Los Angeles Lakers from number five to number one overall in jersey sponsorship value. The anticipated $25 million in advertising value that Wish is set to generate in 2018-2019, on top of other advertising efforts, may finally push Wish into a mainstream media conversation dominated by few.

In that article, we assess the value of Lebron James’ arrival in Los Angeles. GOAT’s arrangement with Kyle Kuzma took advantage of this increase in value for the Los Angeles Lakers. Given his exclusivity with Nike, Kuzma will likely work closely with James (who has a lifetime deal) to feature shoes that will further increase the resale value of select Nike shoes.

Kuzma is currently entering his final season of a shoe deal with Nike. The first brand ambassador for the GOAT app, he will be seen in pre-game and on court in shoes that will be featured on the homepage of the site. In theory, this will not only drive traffic for the shoe reseller, it will increase the value of the shoes that have been injected into the LA Lakers storylines.

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GOAT’s September search analysis: a needed shift towards Nike business

The NBA’s brass has been incredibly creative, allowing their players to forge their own futures outside of their time on the court in ways that have been increasingly beneficial for the league For Kuzma, this is a smart partnership. But it is also a new door into the NBA’s marketing machine. Self-expression isn’t just about pre-game any longer. And for GOAT, an app that got its start by way of an Adidas craze, the Kuzma partnership allows them to hedge with deeper ties to Nike.

Learn more about GOAT here. And read the no. 292 curation here.

By Web Smith | About 2PM

No. 289: Nike and hyperlocalization


I walked into the Melrose store and I didn’t think that it was for me at all. I’m not the millennial luxury consumer. And that’s who Nike’s after. The Los Angeles retail fixture is very specific to the area, in aesthetic and in offering. Every square foot of the store is built for Instagram. And for a moment, I realized that though I am a millennial, I am not the millennial that Nike pines for. This store is for them.

In July, Nike opened its first “Live” retail concept in the Melrose area of Los Angeles.  The brand joins Amazon and Nordstrom in the use of consumer data to inform in-store product and marketing decisions. Nike by Melrose is a 4,557 sq. ft. retail space located at 8552 Melrose Avenue in the West Hollywood area of Los Angeles. Further affirming Nike’s move towards luxury positioning, the storefront is located on a fashionable retail development in an area that’s home to $6,000 / month condos and illustrious, single family homes. Just down the road is Nordstrom’s take on the local concept.

Nike is making its push into luxury by attracting high margin consumers.

2PM Data

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Nike plans on emphasizing in-line stores, while deemphasizing outlet retail in 2019 – on
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As Nike moves to a higher margin DTC model, revenue will fall while profitability rises.
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Pre vs. Post Kaepernick: Nike’s marketing will emphasize high margin millennials

By greenlighting millennial-driven, experiential retail, Nike is leveraging its sizable eCommerce traffic to direct their merchandising decisions. Participation in brand development is at the top of mind for millennials. The more that enthusiastic consumers are a part of the process, the more interested the more interested they’ll be in the result.

Best customers are the place where you want to make the investment. They have a greater affinity for the brand, buy more than the non-customer and the cost of acquisition of non-customer is high.

Matt Powell of NPD

Hyperlocalization of physical retail considers the following variables for the consumer experience:

  1. direct-to-consumer commerce data
  2.‘s best sellers
  3. Nike Plus member engagement
  4. buyer population within 3-5 miles of the the physical location
  5. median household income of the adjacent parcels
  6. gender and fitness data (Nike Plus)

Nike by Melrose offers styles specific to the geography, which isn’t revolutionary. It’s not uncommon to see stores like Dick’s Sporting Goods lean on team merchandising for local markets or stock types of sports gear for higher class suburbs. But these styles will be determined solely by: the area’s buying patterns, app usage, and engagement. This means that Nike by Melrose could ignore wider trends (national and city-wide) in lieu of products preferred by the neighborhood’s brand advocates.

A sea change is clearly taking place in the retail market — but it is not the retail apocalypse. In our view, it is instead a renaissance — driven by huge shifts in economics, competition, and consumer access to options, all fueled by exponential advancement in technology.

The Great Retail Bifurcation [.pdf] by Deloitte

And this is part of the appeal. Nike, like Amazon Go and others in the online-to-offline space, are working to remove friction. In store, customers can use the Nike app to scan products for context. Through the app, members also have access to curbside pickup and phone-locked lockers to house their potential purchases while they’re en route to the store. By catering to customers and stocking high-probability purchases, Nike is employing data to reduce customer acquisition cost (CAC), online and in store.

Nike’s store is pushing the limits of how we view eCommerce today. In a way, the store reinforces our dependency on eCommerce and digital media. Nike’s GM of Direct Stores Cathy Sparks is tracking KPIs like member engagement and participation to gauge the success of the stores. Scale come next, Nike is looking at expanding its “Live” stores across America and Europe. The shoe brand’s number one priority? Consumer loyalty.

Additional reading: Can a DNVB Achieve Modern Luxury? 

By Web Smith | About 2PM

Member Brief: The Nike Report

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What were they thinking? Nike was born in 1964, in the midst of the American civil rights era. Shielded from it all, the brand was then known as Blue Ribbon Sports and wouldn’t become the Nike that we know, today, until the company hired a young basketball player out of University of North Carolina. But to understand Nike’s particular brand of capitalism, look no further than one of their earliest tent poles: their partnership with late, running icon Steve Prefontaine. One of the first examples of their go-to style of marketing was by way of their partnership with him.

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