Dear Adidas, you’ve mastered limited releases…what’s next?
Is 3D printing the new frontier for Adidas? Maybe…maybe not!
Footwear continues to be the dominant growth driver for brands Nike and Adidas. According to Bloomberg, the industry has grown to $65 billion, owing largely to the robust and enduring demand for limited-edition sneakers.1 While Nike has partnered with Michael Jordan to release his iconic ‘J’s’, Adidas has created a cult like following with its Kanye West-Yeezy partnership. The mass appeal of sneakers has even resulted in enormous valuations in the secondary market with Silicon Valley re-sale start-ups raising upwards of $300 million.2 Taking advantage of the mass appeal, both retailers have committed enormous investments in technology to make access to these limited releases faster and more efficient. Adidas’ answer to Nike’s SNKRS app – which offers consumers the opportunity to enter a drawing for limited release sneakers – was its Confirmed app which allowed consumers in select markets to purchase limited release sneakers ahead of their launch.3 The popularity of the limited release market begs the question: What is the next frontier? Thus far, both Nike and Adidas seem to have locked in on customization – Nike with its Nike Maker’s Experience, which allows consumers to customize shoe uppers in store, and Adidas with its ability to customize shoes based on the terrain of a runner’s city.4,5 As both retailers jockey for market share, commercialization of customization seems a likely frontrunner for their product development strategies.
CNN is already calling the movement a ‘race to commercialization’.6 Adidas has taken the approach of first creating demand for 3D products, building efficiency through scaling and ultimately bringing the customization experience in store. To date Adidas has partnered with Carbon – a startup that aims to revolutionize 3D printing using CLIP (Continuous Liquid Interface Production) – a photochemical process that eliminates the shortcomings of conventional 3D printing by harnessing light and oxygen to rapidly produce objects from a pool of resin.7 The partnership has already yielded the successful launch of the Futurecraft 4D – a shoe with different lattice structures in the heel and forefoot that provide superior cushioning.8 James Carnes, VP of Strategy at Adidas, has foreshadowed plans to scale aggressively and has also mentioned plans for Adidas to become the world’s biggest producer of 3D-printed products.9 With mass production in play the longer term game is in store printing. According to Allen Kim, Adidas sees a future where motion capture tech, data analysis software, and 3D printing come together in the store to create a pair of shoes tailored to your exact needs.10 Currently in its German Speedfactory, guests have had their feet scanned for length and width while cameras recorded their stride, speed, and gait as they ran on a treadmill.11 The hope is that one day Adidas will use this info to create your perfect shoe in no time.
In the near term management should focus its efforts on understanding its target market – first by unpacking the success of the Futurecraft 4D launch and second by understanding the potential consumer base. The Futurecraft 4D launch entailed a limited run of the shoes to the public in early 2017, at a price point of $300 a pair, and it sold out instantly.12 An additional release of 100,000 shoes is estimated to do equally as well.13 In fact, Adidas has already likened the success to the launch of the Adidas Boost, with its initial 100,000 pair release growing to 50 million shoes of production each year since 2013.14 Given the potential for huge gains I would want to unpack what contributed to Futurecraft 4D’s success: 1) Was it the limited release nature of the shoe? 2) Was it the shear use of 3D printing that made it popular? Or 3) Were consumers flocking because of the improved functionality of the shoe? Also, because the Futurecraft 4D is visually very similar to Adidas’ already very popular Boost line, what, if any, impact did this have on the popularity of the shoe? More broadly, in the short to medium term there are several things to solve for from a consumer, channel, and innovation perspective. From a consumer perspective, market research should explore who the target customer is, e.g. avid runners or does this also include consumers that seek customization beyond the functionality improvements offered by Carbon. From a channel perspective, Adidas’ biggest hurdle will be driving in store traffic within a population that has had the convenience to order online. Lastly, from an innovation perspective, the retailer will need to determine how to harness the learning acquired through 3D printing for future product development.
All in all, given the early excitement around 3D printed footwear, are you convinced that Adidas customization via in store printing is the new frontier or has Adidas merely latched on to a marketing scheme around a one-time, awe inspiring in-store experience?
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1, 2 Soper, Spencer, “Silicon Valley Has Developed a $300 Million Foot Fetish,” Bloomberg, February 8, 2018 [https://www.bloomberg.com/news/articles/2018-02-08/silicon-valley-has-developed-a-300-million-foot-fetish]
3 Alvarez Edgar, “Nike and Adidas turn to tech to make sneaker shopping safer,” Engadget, October 16, 2015 [https://www.engadget.com/2015/10/16/nike-and-adidas-turn-to-tech-to-make-sneaker-shopping-safer/]
4 Nike, “New Live-Design Experience Promises Custom Shoes in Less Than 90 Minutes” https://news.nike.com/news/nike-makers-studio
5, 6, 10, 11, 12 Kim, Allen, “Adidas’ vision for the future: Personalization, fast,” CNN, July 11, 2018 [https://money.cnn.com/2018/07/06/technology/adidas-speedfactory/index.html]
7, 8 Carbon, “Carbon lattice innovation — the adidas story” https://www.carbon3d.com/stories/carbon-lattice-innovation-the-adidas-story/
9, 13, 14 Cheng, Andrea, “How Adidas Plans To Bring 3D Printing To The Masses,” Forbes, May 22, 2018 [https://www.forbes.com/sites/andriacheng/2018/05/22/with-adidas-3d-printing-may-finally-see-its-mass-retail-potential/#4b9a41ef4a60]
I think customized sneakers are absolutely an important new frontier. Consumers are increasingly expecting tailored products and if Adidas can be the first to market with that, it could create strong differentiation. That said, they will have to bring the costs way down. Many consumers don’t want to pay more than $100 for shoes. Two big questions for me remain – how much functional benefit (whether comfort, performance, or both) does the consumer gain from customized shoes, and for how many will that justify the additional cost?
I agree with Michael. Customized footwear is a major opportunity for two reasons. With 3D printing we are approaching a point where many products can be customized to your own preferences, which will shift the expectation for products towards customization wherever possible. I expect that the customizations will be focused on functional improvements, which will tailor the sole of the shoe to your foot and walking/running form, as well as cosmetic, which will be designing the color and shape of the shoe based on personal preference. Both of these offer a short-term premium for shoe companies, but may become table-stakes over the long-run.
I agree customization will continue to be key in sustaining differentiation in an increasingly competitive market with new entrants. 3D printing is an interesting vehicle to deliver this in an efficient manner. Moreover, players such as Nike and Adidas have the scale and footprint to be first movers in this space.
Is now the time however to further invest in the “in store” experience given the shift to e-commerce? Per your point above, is this simply just a marketing scheme? Does 3D printing have the same appeal in a factory/warehouse setting in terms of overall value proposition to the customer relative to cost to the company?
I am curious as to what those Futurecraft 4D shoes cost Adidas to make – while my initial reaction was that people are willing to pay a premium for this new technology, I realized that Adidas could be selling these at a loss to try to build hype around the general concept of 3D printed shoes. Unit costs will surely decline with increased volume, but I’m curious as to how low Adidas expects it to be. There definitely seems to be a market for $300 shoes, but 3D printing can’t play a central role in Adidas’ strategy until the production costs are low enough to sell at a more accessible price point. Allen Kim seems very keen on this technology, so I’m curious if he sees a world in which every Adidas product is 3D printed. If so, is it an imminent reality or a long term vision?
In-store 3D printing for Adidas is not necessarily a new frontier FOR Adidas. If anything, it’d be a new frontier for the industry but Adidas isn’t the first mover here. Nike, arguably a luxury brand, has benefited from customizable shoes for at-least the past two years (though I have no knowledge of whether they employ 3D printing in their manufacturing. Nonetheless, customizable shoes is a growing trend and if Adidas can become a cost effective alternative to Nike in this space it would be beneficial.
I agree that this is definitely the new wave of shoemaking, especially in the luxury retail or professional sports community. However, I wonder how the production capabilities of 3D printing can be scaled to appeal to a wider customer base and how they might reduce the costs associated with this new technology. I also wonder at which price point the market will accept. Will they be able to create demand to sustain the $300 (or even higher) price? In your reading, did you get any sense that Adidas is capitalizing on sustainability and waste-reduction trends that this technology seems to enable? Finally, one point in your article that I disagree with is the concern about in store vs online retail, as it seems that footwear is still primarily an in-store, experiential purchase despite the dominance of online retail.
Wonderful Article!
As described in the link below, the shoe manufacturing process involves a lot of manual work.
https://sneakerfactory.net/sneakers/2018/01/how-does-a-factory-make-shoes/
3D printing technology has the potential to change the process drastically. Moreover, sneakers can be more technology oriented if manufacturers apply 3D printing in their manufacturing process. I really wish to know more about the progress in this area in the future!
Thank you Tyler for the interesting read! A couple of questions that come to mind:
2. If customized shoes become widely available at a reasonable price, then could that make customized shoes less desirable than a limited edition shoes that are prized possessions owned by a small group of people or is this a fashion category where the performance benefit delivered with customization protects Adidas from this risk?
2. How would customized shoes with varying levels of performance and composition impact the Adidas brand consistency?
Such a great article! While I do think there is some “cool” factor of 3D printing sneakers that drives demand for Adidas, I believe ultimately people bought the sneakers because they are well designed and more comfortable shoes. 3D printing allows for the most customization of any sneaker to date. This can have a huge impact both on athletes and every-day sneaker wearers. However, I totally agree with your analysis – Adidas needs to do significant customer research to confirm the immense demand and continue to develop products that meet customer needs – whatever those may be!
I love this idea of customization in store by 3D printing. Definitely would love to try out! The footwear stores like to promote value adding service of customizing the shoes as avid runners need to find shoes with an optimal fit for specific foot size and shape. I totally agree with your worry about in-store traffic and customization demand beyond functionality. I am wondering whether Adidas can combine the special design and 3D customization to make this a distinctive offer to fans. I believe this will create more buzz than offer it as a standard product.
This is really interesting. If I understand your article correctly, Adidas could actually allow its customers to watch as their customized shoe is being 3D printed in front of them. If that is the case, I think it could really prove to be a differentiator for them from Nike in terms of the customer experience in the store. Should create quite a wave of media interest as well.