For a 55-year-old company, Nike can still learn a few new tricks. Its most recent: Nike Adventure Club, a subscription service for kids.
Nike joins the growing movement of legacy retailers and brands like Walmart, American Eagle and others that are working with subscription business to gain more insight about the online customer—and secure a reoccurring revenue model.
“The try-at-home subscription model is something that’s clearly gaining traction,” said Greg Alvo, CEO and founder of Ordergroove, an enterprise commerce company. “Nike’s really coming at this strategically that this could transform [its] business.”
Nike’s Adventure Club offers three different options for kids aged 2 to 10 to get a new pair of shoes. The subscription has three options: four pairs a year for $20 a month, six for $30 and a new pair every month for $50. But before rolling out the new business, Nike operated the company for two years as a new company called “Easy Kicks,” to test out the model and recruited 10,000 members, according to CNBC.
Adventure Club is a customized box with the child’s name on it, an activity guide and stickers. More than 100 shoe options will be available, including Converse, with free shipping, returns and exchanges guaranteed (and a recycling program).
Nike’s already laying down the groundwork for more variations on the concept—such as a subscription box for runners, according to CNBC.
But Amy Konary, vp of customer business innovation at Zuora, an enterprise software company focused on subscriptions, told Adweek that more likely, customers of Adventure Club will point Nike to where it needs a subscription business next—and what other components Adventure Club needs before it gets stale.
Konary said at the current price point, the company faces a challenge in figuring out what else will keep customers, whether it’s experiences, personalization or discounts to kid-related activities. Otherwise, parents still have a slew of other (cheaper) options to go with that don’t require a subscription.
“[Nike is] going to have to build in experiential components that make it worth it—that’s it more than simply ‘my kid needs a new pair of shoes,’” Konary said. “They will have to provide value beyond getting you a pair of shoes for the pricing to make sense.”
But, the more alluring factor of a subscription business is the reoccurring revenue. According to data from Ordergroove, 67% of retailers surveyed said more revenue is one benefit of a subscription business model, with 61% stating it gives them greater profitability and 50% saying it offers greater revenue predicability. Other KPIs increase as well, with 57% stating net promoter scores increase and 86% stating that subscribers are “more satisfied” than its non-subscriber base. And for an audience that wears out sneakers like it’s their job, a subscription service can make sense.
“This is the beginning for retailers, instead of a one and done [transaction],” Alvo said.
Nike isn’t alone in testing out a subscription model; companies like American Eagle and Urban Outfitters have rolled out rental subscriptions, and Foot Locker’s invested in Rockets of Awesome, a direct-to-consumer kids brand that offers a clothing subscription. Other players in the kid space include Rent the Runway and Stitch Fix. Meanwhile, Steve Madden acquired Greats, a 5-year-old DTC luxury sneaker brand, for an undisclosed amount.
“This is the beginning of a trend for Nike,” Alvo said. “There’s many applications of this model to transform their model.”