What to Know
It’s the first time the No. 1 sneaker retailer in the U.S. has worked on a subscription model
Nike is stepping into the subscription business.
The No. 1 sneaker retailer in the U.S. is launching a subscription service for kids called Nike Adventure Club.
It will allow parents to order shoes for their kids ages 2 to 10 either on a quarterly, bimonthly or monthly basis, paying monthly fees of $20, $30 or $50, respectively. The last option shaves off $10 per pair of Nike shoes purchased, with the average kids sneaker retailing for $60.
The launch comes just as the back-to-school season is in full force. There’s momentum in Nike’s kids business, which has grown revenue 11% over the past year on a currency-neutral basis, a spokeswoman said, not breaking out exact sales. She said kids is one of the fastest-growing categories on Nike.com. And more brands, like Urban Outfitters and American Eagle, are testing subscription models, seeing this as a new source of recurring revenue and a way to amass more loyal customers.
“One of the things [Nike CFO] Andy Campion gets excited about, is we are now building relationships with kids from 2 years old,” said Dave Cobban, general manager of Nike Adventure Club. “Hopefully they will remember us and feel strongly toward the brand.”
Signing up for Nike Adventure Club is ideal for parents constantly finding themselves in the aisles of DSW or Kids Foot Locker, with their child churning through sizes or roughing up their shoes on the playground. That adds up to a lot of shoes.
“You would be surprised at the amount of times I touch a child’s toe [in a shoe], and the child’s toe is curled up,” said Dr. Miguel Cunha, founder Gotham Footcare, a New York podiatry center.
Cunha said he sees children under age 3 needing new shoes three to four times a year, with children ages 4 to 8 needing two to three new pairs a year, and children 8 to 12 needing about two pairs a year. “But if the child is playing a lot of sports, you don’t need to wait that amount of time,” he said. “If there’s wear and tear ... the point of the shoe is to protect the foot.”
Cobban said Nike has been testing this subscription platform in stealth mode for the past two years, using Facebook ads to target parents for a business called “Easy Kicks.” It amassed about 10,000 members on Easy Kicks, he said. Nike has been working with this group to figure out what parents will want most out of Nike Adventure Club, which goes live on Monday.
In the Nike Adventure Club boxes, the company is sending more than just shoes. Each box will have the child’s name on the outside and will include an activity guide, stickers and an additional gift like a drawstring backpack. Nike is also creating a website for Nike Adventure Club members to find activity prompts and, of course, pick their shoes.
It will offer about 100 shoe varieties to choose from, including ones made by Converse.
For parents worried about getting his or her child’s size right, each Adventure Club shipment comes with the option to initiate a return once a box arrives. Users have the ability to immediately select a new shoe without waiting for Nike to receive the merchandise that didn’t work the first time.
“For us, the whole focus is how do we make sure the kid is in the right size shoe,” Cobban said.
Nike’s first venture into subscription services also offers a glimpse to the future. The company hinted there could be more types of boxes to come, for example one for runners, with people training for marathons sometimes going through a pair of sneakers every three months.
Nike certainly isn’t the first brand to launch its own subscription vertical, either, though there are few footwear options out there today.
Walmart has teamed with Kidbox to sell boxes of kids clothes. Amazon has its own box program called Prime Wardrobe. Ann Taylor has a rental option similar to Rent the Runway, where shoppers can purchase clothes at a discount or return looks when they’re finished. Urban Outfitters also follows this model with a subscription rental service called Nuuly.
To be sure, the verdict is still out on whether or not consumers will pay for these types of boxes consistently.
McKinsey & Co. said in a 2018 study that the subscription e-commerce market had grown by more than 100% annually since 2013, with the largest retailers in the business generating more than $2.6 billion in sales in 2016 from subscription models, up from just $57 million in 2011.
But in surveying 5,000 consumers in the U.S., McKinsey found nearly 40% of e-commerce subscribers have canceled their subscriptions. And only 55% of people who’ve consider a service ultimately subscribe.
‘We work to retain the kid’
When it comes to where parents shop for kids shoes today, the market remains pretty fragmented. But Nike does appear to have an edge as a brand.
The top 10 destinations for parents buying kids sneakers in the U.S., by sales ranking, are Foot Locker, Walmart, Ross Stores, Dick’s Sporting Goods, Amazon, Kids Foot Locker, Nike Outlet, Kohl’s, Famous Footwear and Skechers, according to NPD Group’s Consumer Panel data.
Within that, brands like Nike reign supreme, according to NPD Group’s retail and footwear analyst Matt Powell.
“Nike is paying attention to kids shoes where some other brands are not as focused there,” Powell said. “Their sheer size allows them to have the resources to spend on kids shoes. ... It’s challenging for smaller brands to really play there. ... In many cases, you are developing a totally different shoe [for kids].”
Teens love Nike, too. According to an April Piper Jaffray survey, Nike remains teens’ favorite brands for shoes and apparel. And in many cases, that adoration for Nike gear comes from being introduced to the brand at a young age — many are seen sporting Nike shoes on the playground.
“We acquire the parent, and solve the problem for them,” said Dominique Shortell, head of retention and member experience for Nike Adventure Club. “Once they are in the service, we work to support the whole family. Then we work to retain the kid. That is our member ... we aim to make them happy.”
“We are working with that 2- to 10-year-old that is just getting into shoes for the first time,” she added. “We’re helping get them into sport and making that a daily habit.”
Nike shares are up about 10% this year, bringing its market cap to about $128 billion.
This story first appeared on CNBC.com. More from CNBC:
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