Adidas sees virtual items as its next big product category

Virtual products are shaping up to be the next battle in the war between Nike and Adidas.

Only a few days later Nike announced the launch of a web3 platform where users will be able to buy and sell items like NFT sneakers and jerseys, Adidas has unveiled its first collection of NFT digital apparel. The 16-piece “virtual gear” set includes hoodies and outerwear that Adidas says owners will be able to use in different online environments, like on avatars in virtual worlds or as images of profile.

Adidas previously released a collection of 30,000 non-portable Into the Metaverse NFTs at the end of 2021, but the company said the Wednesday launch represents a new milestone.

“It’s now an official business area,” said Erika Wykes-Sneyd, vice president of Adidas Three Stripes Studios, an internal incubator and think tank for Web3, metaverse and virtual member experiences. She compared the move to virtual gear to Adidas moving from shoes to apparel and then introducing Adidas Originals, calling the new digital items “a future archive for what comes next.”

However, Adidas is not yet putting its virtual gear on sale directly to the public. The items will be available to holders of an NFT capsule that the brand dropped in May to owners of its Into the Metaverse NFTs. These holders can randomly generate one of 16 digital handheld devices by choosing to “burn” their NFT capsule, rendering it unusable again. Holders can also sell their unused NFT capsules in marketplaces where anyone can buy them. On OpenSea, the largest NFT marketplace, the current lowest price for an NFT capsule is around 0.3 ETH, or around $360.

Virtual goods are technically ambitious: Adidas has tried to design them to be able to function in different gaming and virtual world environments, including those that may emerge in the years to come, each potentially with its own aesthetic. The idea that a digital element can work across multiple domains in this way is called interoperability and remains one of the obstacles to creating the metaverse envisioned by people like Meta’s Mark Zuckerberg. Adidas is planning a future that doesn’t yet exist, and it’s far from certain that it ever will.

To help it achieve this, each individual item is built on an evolving NFT smart contract, an automated program triggered by certain conditions, such as the transfer of ownership of the NFT.

“We made this decision because it allows us in perpetuity to enter the smart contract and make adjustments or changes to it,” Wykes-Sneyd said. “It can allow us to breathe new life into the collection as, say, new capabilities or features start rolling out to other platforms.”

To draw inspiration from the digital designs, which were overseen by Nic Galway, the brand’s senior vice president of creative direction, Adidas consulted the Web3 space and its own archives. The Neobone Jacket, for example, is made up of a set of curved neon tubes that are actually shaped like the tread of the sole of Adidas’ Superstar sneaker. Wykes-Sneyd said the company put the same time and rigor into the designs that it would for a collection it would send down a runway.

Of course, the environment is a little different, given that there are no physical constraints. Looks tend to be a bit more extravagant, like a shaggy pink hoodie covered in eyeballs with the logo of one of its Web3 brand partners, Bored Ape Yacht Club. Although Adidas tried to maintain some restraint.

“One of the things we stand on as a principle is just because you can doesn’t mean you should,” Wykes-Sneyd said.

Adidas joins other fashion and footwear brands that see a business opportunity in virtual goods as consumers spend more time online and in virtual environments, where players often purchase cosmetic upgrades for their characters. In a BoF Insights Report last year, around half of survey respondents in the US said they were interested in buying a digital asset in the next 12 months, including game skins and NFTs . Currently, NFTs and digital products are primarily a marketing opportunity for fashion brands, but experts expect them to become sources of income so in the years to come.

It looks like the sneaker wars are already happening online. Nike made a significant investment in virtual fashion last year by acquiring RTFKT, a maker of NFT sneakers and other items, and has just released a platform under its own brand. Puma recently launched a space for customers to also purchase virtual goods. Adidas has released its own NFTs and is also moving into digital products.

James T. Quintero