第 307 期：耐克的旋风周

One of the biggest questions asked this week: what will Nike do next? In just seven days, Nike landed three major stories. Known to make the best out of controversial situations, Nike’s biggest brand test may come in early summer 2019. That’s when the brand will be tasked with spinning one of the most embarrassing failures in its recent memory. For Nike – a brand that has positioned itself as a sociological compass as of late: this week began as a test of their evolved brand position. Nike has tended to the question: “how do we address what others have broken?” This week, they were forced to ask: “how do we address what we’ve broken?”

It’s been a whirlwind week for Nike. Five days ago, the biggest amateur basketball star since Lebron James was injured after his shoe malfunctioned in a game. The sporting event was in such high demand that tickets were for sale on the secondary market for nearly $2,900 per seat. Students waited the customary 39 days outside of the Duke arena for their coveted seats. And President Obama made a rare, sideline appearance with his custom Rag & Bone “44” aviator jacket and black Allbirds. When Zion Williamson went down with his knee injury, a television camera panned to the former President who is seen pointing with concern, “his shoe broke.”

It’s been a whirlwind week for Nike. Four days ago, the biggest story in recent NFL history settled an alleged collusion case against the league. The former quarterback’s case against the league’s team owners. The case was said to have some merit and it’s rumored that the cash value was substantial enough to please both sides of the table. The case was settled with complete confidentiality, paving the way for the small chance at a return to the gridiron. Colin Kaepernick, who’s announced signing by Nike caused waves throughout all of sports, released his first product with Nike on the day after the conclusion of his lawsuit. Now a symbol in and of itself, Nike’s simple, generic black jersey with his former number sold out instantly.

It’s been a whirlwind week for Nike. Just one day ago, arguably the greatest athlete of all time voiced and starred in a new Nike ad. Serena Williams narrated over just a few of the recent, iconic moments for women in sports. It was an emotional advertisement directed by Kim Gehrig, the same woman who directed the recent Gillette ad that called toxic masculinity into question. While the Gillette ad was met with, both, praise and disgust – the Serena Williams-narrated project was widely loved. In a matter of hours, the ad was reportedly watched over 17 million times across Facebook, Instagram, Youtube, and Twitter. Featuring Simone Biles, Chloe Kim, Ibtihaj Muhammad, and several members of the U.S. Women’s National Soccer Team, some would argue that Gehrig’s ad was the star of the Oscars – the ad’s broadcast premiere.

In our Member Brief entitled “The Nike Report“, I wrote:

Nike wants to own iconography. And in sport, that also means sports history. For a company that wants to own history, they own very little of it today. If you’re a history enthusiast, you can watch clips of Jesse Owens in 1936 Berlin exhibiting heroics in first-generation Adidas track spikes, hand delivered by Adi Dassler. Or you can watch Muhammad Ali swinging at other boxers with Everlast on display. Now, Under Armour owns his rights in a protective attempt to prevent Nike from using their marketing wizardry to build their cache. And in a similar attempt, Adidas owns the rights to Jackie Robinson.

Nike has always been in the business of iconography: Pre, Jordan, Bo, Tiger, Serena, Agassi, Kobe, and now Lebron. But as the brand’s stock trades at historic highs, the Portland company seems to have its eyes set on more. It’s emphasis has shifted towards its role in sports history, supporting people, social movements, and milestones that may not be as popular in the moment as it will be once the history shifts. History has a way of changing things. The way that consumers view things today may be different in a decade or two. The brand seeks to be on the right side of history – as long as it is or will be profitable. Careful capitalism, if you will.

The Zion Debacle

Nike’s week began with a shoe malfunction during one of amateur sports’ biggest stages and ended with a new ad that made consumers temporarily forget about the high profile injury. But from all accounts – Zion Williamson, himself, is undeterred. Several credible sports news outlets are on record with his plan on returning to the team. In a recent San Francisco Chronicle article, “Why Zion will keep playing at Duke“:

Why? Because he’s a competitor, a joyous athlete having the time of his life. Because he couldn’t imagine quitting on his teammates. Because the NCAA Tournament is one of the grand theaters of sport, giving him exactly the exposure he needs going into the draft. And because there’s nothing more ludicrous than the perception that every high-profile freshman is really just a dimwit who never goes to class and spends 14 hours a day on the basketball court.

Unlike many potential first round draft picks, Zion’s earning potential may actually rise if he closes out his “one and done” season in championship fashion. His brand equity has rare potential. Marketers like Adidas, Nike, and Under Armour pay a premium for athletes who are more than the game that they play. Listen to Zion in a post-game interview. He’s as All-American as a kid can be. From his mannerisms to his charisma and book smarts, he has the potential to transcend the sport that he plays. Much like a few of his predecessors.

Below, is a sortable breakdown of the NBA’s top stars and rookies. Williamson currently ranks number 15 among the combination of high powered NBA veterans breakout rookies. Two of his metrics surpass the median social media interest of the group.

[table id=38 /]

This begs the question, which shoe brand will land Zion? By most accounts, Nike will be the shoe brand that markets a fortified signature shoe for the 6’7″ 290 pound, 19 year old phenom out of Salisbury, North Carolina. Both Duke and UNC are deeply entrenched in Nike lore. Michael Jordan’s brand is adored at his Chapel Hill alma mater. And no college coach in America is paid more by Nike than Duke’s Michael William Krzyzewski.

According to Patrick Rishe, a sports business writer for Forbes, Williamson is looking at a shoe endorsement deal that will yield an annual value of $9-10.5 million. This figure would place him seventh overall, far surpassing the NBA’s existing rookie deals – even the highly inflated Puma deals. And ESPN’s Dan Le Batard was quoted as saying that Williamson’s brand and visibility is worth a rookie contract worth $80 million.

The story of the week was about Nike’s short term recovery. While the brand temporarily lost $1.1 billion in value after the injury, the stock’s devaluing was a red herring of sorts. At the surface, pundits and casual observers viewed the malfunction as a gift to Adidas, Puma, or Under Armour. Summer 2019 is shaping up to another example of Nike’s masterful messaging. All data and smart commentary points to a different conclusion.

Footage of this product malfunction will be on repeat for as long as the young athlete is in the spotlight. It’s part of his Williamson’s story. Nike’s next shoe, specially designed for him, will likely be marketed as ‘fail proof.’ It will be a product advancement and a symbol of material progress. If things go their way, Nike will engineer first shoe made for a giant who plays with the explosive leap and versatility of a player 100 pounds lighter and five inches shorter. Fortunately for Williamson, it’s in Nike’s best interest to offer him one of the richest rookie contracts in its history.

Read the No. 307 curation here.

报告人：Web Smith |大约 2PM

Member Brief: A Familiar Strategy

Amazon operates in such a way that it’s no longer just a business, it’s a generational institution. The Bezos-led retailer lords over the industry with an astounding 300 million shoppers, each month. For a vivid picture, there are 325 million Americans and 110 million Amazon Prime subscribers. Amazon Web Services (AWS) powers a disproportionate number of government and digital publishing websites. And on top of these figures, Amazon is the number two employer in America with nearly 600,000 workers on its payroll. Only Walmart employs more (2.5 million).

本会员简报专为以下人士设计 执行委员为了方便加入，您可以点击下面的链接，获取数百份报告、我们的 DTC 权力清单和其他工具，帮助您做出高水平的决策。

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第 306 期平台和光晕效应

The commerce platform report. The term “halo effect” was first coined by a psychologist in 1920. Edward Thorndike used the moniker to describe the methods that military officers used to assess the performance of their soldiers. These assessments often revealed little variance across the categories of performance. Either the soldiers were good or bad; few performance evaluations noted “good” performance in one respect and “bad” performance in another. It is said that the halo effect is influenced most by a person’s first impression. If we see them as bad, they can do no good. If we see them as good, they can do no ill. Today, this phrase is most-often applied to brands and their equity.

The halo effect is a type of immediate judgment discrepancy. It is the tendency for an impression that is created in one category to influence the opinions of impressions created in another category.

Shopify is seemingly everywhere. In December, Digiday’s Hilary Milnes reported that Shopify’s ecosystem of 20,000 partner developers generated $800 million in agency business in 2017. It’s estimated that Shopify’s partners (several of whom are mentioned here) will earn north of $2 billion in revenue in 2019.

To build a Shopify-like eCommerce platform is not hard to do. What’s very hard to do is replicate the partnership ecosystem and the value they drive. It’s their moat. It’s not the software — their competitive advantage is the partnerships.

Jay Myers, VP of Growth at Bold Commerce

The halo effect of Shopify’s ecosystem will not be easily combated. With many of the partners becoming standout B2B brands themselves, Shopify’s group of independent eCommerce agencies serves many functions: recruiting, evangelizing, and perhaps a bit of espionage – often relaying word of advancements and initiatives proffered by competing platforms. This brand halo effect is amplified thanks to the era of the direct to consumer (DTC) brand.

2019: top commerce providers that DTC brands are looking to for partnership | Source: Cloudways

The brand appeal and staff architecture of this cohort of internet-first companies are keys to understanding why so many challenger brands instinctively select Shopify. Though not a Shopify Partner, Gin Lane’s “work” page notes the many digitally native brands that they’ve steered to the platform. These names include: Harry’s, hims, hers, Sunday Goods, Ayr, Stadium Goods, Rockets of Awesome, Cadre, Recess, alma, Smile Direct, Dia & Co, Warby Parker, Everlane, Quip, Shinola, Bonobos, and Shake Shack. Similarly, Red Antler’s “work” page boasts partnerships with Burrow, Casper, Allbirds, Brandless, Crooked Media, Snowe, and Boxed. These brands, which skew mightily towards Shopify and Shopify Plus, serve as media darlings and public relations fuel.

Tobi Lütke on Twitter

I usually don’t highlight financial milestones here, but this one is worth mentioning: As Shopify passes the $1 billion-dollar revenue mark it does so with the highest growth rate of any SAAS company ever. 🎉

In this way, Shopify’s halo effect extends beyond the agencies with whom they partner. The challenger brands, themselves, become recruiting vehicles for like-minded companies looking to build brands from zero to one. As such, newer companies like Great Jones follow the same branding methods and staff architecture guidelines

On DTC Brand Architecture

It’s common for digitally native brands (DNVBs) to go to market with over $3 million raised. This pre-revenue war chest affords companies an early branding and public relations prowess that almost guarantees seven figures of revenue in the first year.

Partnering with a Red Antler or a Gin Lane can cost a brand up to $400,000. There are often added developmental costs that these challenger brands will have to incur. In addition to the cost for the brand standards, messaging, and the essence of the brand, the right PR contact can cost a young company another $180,000 to $240,000 per year.

No. 297 The DTC Industrial Complex:

There is an entire eCommerce branding industry that fosters the ideation, launch, and early growth of direct to consumer (DtC) brands. When you notice a new digitally vertical native brand in 2018, there’s a platform aura around many of them. First you’ll notice the early PR sensationalism that they can only garner if they graduate from the right school or leave the right corporation. Then, the founders must live in the right city, have the right investors, and pay the right $25,000 per month public relations retainer.

The challenger brand CEO is very well-educated and, at this stage, CEOs tend to start the brands post-business school. Founding teams tend to begin with some combination of a product developer, finance lead, and a customer acquisition lead. Software engineering is an afterthought for many of these young product companies; this competency is often outsourced to a partnering agency. Universally, the priority for challenger brands is two-pronged: (1) making a great product (2) find an efficient way to sell said products. This often reduces the urgency to partner with technical founders or hire early, technical employees. Whereas F = founder, B = early branding, and P = early product development:

F(marketing) + F(finance) + B(outsourced) + P(outsourced) = DTC founding architecture

Shopify’s ecosystem appeals to this particular architecture. The Ottawa-based company’s continued growth depends on their management’s ability to increase the percentage of challenger brands that grow into enterprise clients. And from enterprise clients to Top 1000 online retailers. Shopify’s volume-driven style of business is a mark of its commitment to small business retailers. But it’s not the only method of accelerating enterprise growth. There are several commerce platforms with notable gross merchandise volume (GMV) across their enterprise level of clients.

The Platform Landscape

From BigCommerce to Oracle and Salesforce, the DTC era of retail extends beyond the brands that are the most talked about in design, tech media, and public relations circles. Here is the data on the top nine by gross GMV. While Shopify generates the most media buzz in small business circles: Adobe, Salesforce, and Oracle are quietly leading the enterprise+ business. BigCommerce is often viewed as Shopify’s younger sibling, however their enterprise clients now generate a gross GMV of 2.5x Shopify’s enterprise clients. The following data is derived from a recent Digital Commerce 360 report (2019):

[table id=37 /]

The platform ecosystem is vast. Of the top 1000 retailers, the majority of brands are built in-house and on custom platforms. Nearly 450 retailers have outsourced their technical capabilities to these nine companies. Moving forward, we will likely see platforms like Adobe building tools and an improved halo effect to address Shopify’s key audience and vice versa. Shopify will build tools to address more of the needs of top enterprise plus clients, as well as continuing to support the needs of the DTC brands that are adopting physical retail channels.

Specializing for a particular segment of the SMB to enterprise to enterprise plus spectrum may have dire consequences for platforms in this increasingly competitive space. As Shopify has shown, there is value in building early loyalty. Shopify is counting on a number of their industry-leading number of DTC and SMB retailers moving through the funnel to enterprise services. Additionally, Shopify’s reach grows as brands transition to Shopify from Magento or custom builds. A trend that the Adobe acquisition of Magento has potentially impacted. This continued growth would begin to tip the enterprise / enterprise+ GMV scales in their favor.

Commerce platforms advertise new capabilities with the idea that the technical merits of a platform, alone, will attract new business. To this effect, many of these platforms have deprioritized brand marketing superiority and influential partnership development in favor of technical product development and traditional advertising. Whether or not the improvement of competitor platform capabilities will outlast Shopify’s hard-wired brand loyalty remains to be seen. Objectively speaking, the sheer volume and positive brand association plays in Shopify’s favor. As does their halo effect.

Read the No. 306 curation here.

报告人：Web Smith |大约 2PM