2PM - No. 775: GOOD TIMING

Equipping the Metaverse / Quartz: The popularization of NFTs opened the door to more interest in the metaverse, this breakdown explains why. Today, it is common to see someone proudly showcasing their NFT as their preferred identity over social platforms. Nike is betting that your Ape or your Punk will need some kicks. "Picture your digital twin rocking Nike sneakers and a tracksuit to a Microsoft Team meeting or Facebook’s — I mean, Meta’s — virtual rooms while you actually lounge on your sofa in pajamas and fuzzy socks. That’s the future Nike is imagining for itself. On Oct. 27, Nike filed over half a dozen trademarks with the US Patent and Trademark Office (USPTO), including those for its swoosh logo and slogan “Just Do It,” that reveal plans of making and selling virtual footwear and apparel."

Here's the takeaway: Nike is taking its first steps toward the metaverse. More brands will follow.

The company, which is on track to pull in $50 billion in sales this year, has filed seven trademark applications that show intent to create and sell virtual goods including “footwear, clothing, headwear, eyewear, bags, sports bags, backpacks, sports equipment, art, toys and accessories for use online and in online virtual worlds.” With its swoosh logo and “Just Do It” tagline also part of the trademarks, Nike’s getting ahead of its own brand being used and co-opted by third parties in the metaverse. But it’s also planning on participating directly: the company is also planning to hire virtual material designers. The timing couldn't be better: 

Nike is at the head of a trend that will become the norm for retailers who identify the burgeoning Web3 opportunity. As 2PM reported in July:

Every brand should have a digital supply chain or a set of components that, when properly constructed, equip a retail business with an important class of end products: content, first-party data, digital products, and community.

There’s no better brand than Nike to pioneer the marketing of goods inside the metaverse. It has a vast network of signed-on celebrity athletes to help drive appeal. Customers who are loyal and engaged enough that sporting Nike sneakers in virtual spaces is a no-brainer. Many of these customers are currently left out of some of Nike’s most coveted drops or only dream of actually securing a rare pair of Nike sneakers for themselves; the metaverse can be a solve for that by creating more demand, driving more purchases and making an unattainable purchase attainable in a new way for more people. Nike is not just ensuring control over its digital brand as Web3 spaces proliferate; it’s also creating entirely new revenue and marketing streams.

The adoption of Web3 principles will be gradual, but Nike has already been laying down the foundation by building up its direct-to-consumer business and investing in its own apps and stores while demoting retailer relationships. Web3 and DTC are natural partners, and these brands will be the first to jump in. It’s not just a new sales stream on the line – it’s also status. Who you are in digital spaces will become as important as who you are in real life, in a similar way Instagram followers have become a status symbol. Nike’s caught on. Who’s next? This is a call for all retailers to pay attention to Web3 before Nike has too great of a lead. 

How NFTs are shaking up the art world

A. NFTs / The Guardian: The volume of trade suggests that hundreds if not thousands of new millionaires were minted. The least wealthy generation in modern history may have found its solution to the wealth creation gap. [1]  "You’ve probably never heard of Jones, but he’s the most successful NFT artist working in the UK. He started making NFTs in 2019. “Five years ago, I was struggling to pay the mortgage,” he tells me. “I went from having to borrow money from friends to pay the bills to making $4m in a day.”

Black Friday Special: Conversion Bear has partnered with 2PM Inc. throughout the month of November to help brand retailers sell more products. They're offering a 30-day trial during the year's most important month. You're going to want to be store #2. 

NFT games are fun. Filing taxes afterward is a nightmare

B. NFTs / Protocol: It is easy to see how tax reporting issues can arise with financial transactions that were once exclusive. The tax implications for the many with this new access to the trade of alternative assets could have an unexpected impact on their personal finances. This excerpt breaks down how. "Did you sell your cute digital creature on Axie Infinity? That's a taxable event. Did you sell it less than a year after you bought it? (The answer is almost certainly "yes," given the timing of the play-to-earn boom.) Well, then it's a short-term capital gain. If you converted your NFT into a cryptocurrency before cashing out, that counts as two separate investment transactions. Even seemingly trivial in-game item swaps can have tax implications."

Saks' Marc Metrick on the benefits of a breakup

eCommerce / WWD: This is perhaps the first look at how Saks.com works with its existing brick and mortar footprint. It is certainly worth your time, especially if you're interested in following Macy's or Selfridges' potential eCommerce spin-offs. I have linked to an older Member Brief on the potential at Macy's for those who are. But back to Saks: "Metrick said more than 300 operating service agreements are in place “to make sure the consumer is having an omnichannel experience. We split for purposes of our investment and our focus and our strategy, but we are holding the omnichannel experience together for the consumer through these operating service agreements to make sure the ecosystem of Saks Fifth Avenue remains omnichannel.”

Allbirds dropped 'sustainable' claim from IPO after SEC objection

DTC Brands / Financial Times: In May 2020, I wrote on the idea of the Allbirds IPO and its sustainability marketing play. I went on: "If Allbirds can continue building its own brand while becoming the authority and sustainable supplier to well-known brand partners, then it can unlock a business that would be new ground for the DTC era." But it seems to be more marketing than not after all." "Allbirds announced in August that it would pursue a “sustainable public equity offering” that would guarantee the company met various environmental, sustainability and governance standards. However, it repeatedly weakened the proposals in subsequent updates to its IPO prospectus. In September it removed references to a sustainable “offering” and said it would instead follow a “sustainability principles and objectives” framework."

By 2PM: A lot of credit should go to Figs for reigniting the DTC exit craze. The scrubs company is currently trading at a $6.4B market cap. Here's what 2PM published to members in May 2021: Figs Resuscitates the DTC Strategy

Benefit Cosmetics is upping its global DTC checkout experience

eCommerce / Glossy: Bolt is on a roll with nearly bi-weekly announcements of high volume customers. They were previously the quieter of the two prominent, venture-backed "one-click" providers. But with the volume of recent announcements, they're quiet no more. "Benefit Cosmetics announced on Tuesday that it has partnered with checkout and shopper network company Bolt for its U.S., U.K., France and Germany eCommerce sites. This marks U.S.-based Bolt’s foray into Europe as third-party checkout competition heats up. Benefit Cosmetics is the first LVMH brand to use a third-party checkout service, opening the possibility for more brands in the conglomerate to adopt the practice in the future."

The rise of Manner Coffee

Brands / SupChina: Okay, this is a pretty wild excerpt. This may also be a great signal to western CPG brands looking to launch Chinese affiliates now that the CCP seems to be discouraging its tech giants. "The coffee hype among investors this year comes amid a shift in the political winds. After a major crackdown on technology companies, part of Xi Jinping’s Common Prosperity agenda, and the emphasis on a new development model, one that favors domestic consumption in the “real economy” (the flow of goods and services) over financial goods, home-grown consumer brands may be the future."

By 2PM: Some additional reading if you love coffee and enlightenment. 

UNLOCKED MEMBER ESSAY: Standing before a small audience of Austin business owners and investors, I shared a bull case for eCommerce. Within 15 years, online retail will become our primary channel for product discovery and over 40% of all North American retail.

The retail real estate footprint in America will continue to decrease as aging malls shutter, strip malls become more experiential, and the exurban landscapes of the South and the Midwest becomes home to more warehousing. This will give rise to a greater dependence on online retail. Beyond our growing dependency on digital channels, America has a per capita square footage of 23.5 to China’s 2.8 sq. ft. China’s eCommerce as a percentage of retail is near 40%. America’s is steady around 15-16%. Our nearest proxy, Canada, is at 14.5 square feet per capita – a much healthier figure for a Western civilization. Over-retail will eventually play to the online retail industry’s advantage. But the fortune will not be evenly distributed.

On Zillow, Carvana, and Accountability (🔓)