NEW YORK, United States —  It’s typically a bad sign when a brand removes a product from stores. For Nike, pulling the latest iteration of its hit Air Max 1 sneakers may prove to be a masterstroke.

Earlier this week, the footwear giant said it wouldn’t be selling a new edition of its Air Max 1 USA sneakers that were supposed to go on sale this week to coincide with the USA's Independence Day holiday. The sneaker’s design included an American flag from the 1770s attributed to Betsy Ross — a symbol associated with the country’s founding but that in recent years has also been co-opted by extremist groups.

Nike has asked for the footwear to be shipped back by retailers, though a few pairs have popped up in the secondhand market. On Tuesday, StockX pulled the sneaker from its site, where pairs were listed for $2,500. CEO Scott Cutler told BoF that “the sale of this product on our platform does not align with our value system.”

Nike’s move touched off a firestorm of criticism, with conservative politicians, including Sen. Ted Cruz (R, Texas) calling for a nationwide boycott, and Arizona Gov. Doug Ducey ordering a state agency to pull subsidies for a planned Nike factory.

Air Max 1 USA listed on StockX | Source: StockX

But for Nike, pulling the shoes was meant to send a powerful signal to its young customers that the brand shares their values, and is willing to weather criticism in order to prove it. According to The Wall Street Journal, Nike’s decision was informed by brand ambassador and former NFL star Colin Kaepernick, who complained that the Betsy Ross flag is offensive because it’s a symbol that’s recently been associated with slavery. The flag is being used by hate groups like the Ku Klux Klan and Identity Evropa, a white nationalist group, according to CNN; the flag represents an aspirational callback to a time when slavery was legal.

In a statement emailed to BoF, Nike said that the company regularly has to “make business decisions to withdraw initiatives, products and services” and that it pulled the sneakers “based on concerns that it could unintentionally offend and detract from the nation’s patriotic holiday.”

The Nike controversy speaks to how America’s culture wars are invading the retail sector with increasing regularity. Brands are now facing pressure to choose a side on controversial issues that at first glance have little to do with sneakers or fashion, from LGBT rights to abortion and gun control.

On Twitter, Cruz slammed Nike, tweeting “I respect Free Speech & I’m exerting mine: until @Nike ends its contempt for those values, I WILL NO LONGER PURCHASE NIKE PRODUCTS.”

I love America. I stand for the anthem, respect the flag & honor the men & women who fought to defend our Nation. I respect Free Speech & I’m exerting mine: until @Nike ends its contempt for those values, I WILL NO LONGER PURCHASE NIKE PRODUCTS. #WalkAwayFromNike RT if you agree. https://t.co/IvXNTgvlHq

— Ted Cruz (@tedcruz) July 2, 2019

Ducey, who had ordered the Arizona Commerce Authority to yank financial incentives it had offered Nike to build a plant in the state, tweeted that “Arizona’s economy is doing just fine without Nike. We don’t need to suck up to companies that consciously denigrate our nation’s history.” (In a statement to BoF, Nike referenced this manufacturing plan, noting that it already is an employer of "35,000 people in the US and remain committed to creating jobs in the US, including a significant investment in an additional manufacturing centre which will create 500 new jobs.”)

Arizona’s economy is doing just fine without Nike. We don’t need to suck up to companies that consciously denigrate our nation’s history. 8/

— Doug Ducey (@dougducey) July 2, 2019

Nike has been at the forefront of brand activism since the footwear giant announced Kaepernick would be starring in its “Just Do It” ads in 2018. The hiring of the former football player, who in 2016 began to kneel during the American National Anthem at football games to protest police brutality against Black Americans, sparked a conservative backlash on social media and calls for a boycott. But joining forces with Kaepernick proved to be a smart move, endearing Nike to its young fans, who overwhelmingly supported the athlete. And while social media is once again currently brimming with hundreds of thousands of angry responses to Nike, analysts expect a similar outcome.

“This is a move that’s going to speak to its customers,” said Matt Powell, vice president and senior industry advisor for The NPD Group. “Nike’s core demographic is with teens, and the teen consumer aligns with this position that the symbol if offensive to some.”

While some conservative shoppers might say they are swearing off Nike, Powell believes it was important for Nike to show where it stands.

“The young consumer in the United States is demanding that brands take visible positions on social issues, and they are likely progressive in their political leanings,” he said.

Powell believes Nike pulling the sneakers was a good branding move, and he points to the success of Nike’s Kaepernick ad. Days after Nike debuted the ad, digital commerce research company Edison Trends reported that Nike sales were surging over 30 percent. Nike stock soared in the months that followed to an all-time high, with its market value rising to $6 billion.

More and more brands are moving into “commodity activism,” as some scholars have coined it, and it’s something shoppers expect too. According to Sprout Social, 65 percent of consumers feel it’s important for brands to act on political issues. Liberal shoppers, according to Sprout Social, also have stronger spending habits when it comes to supporting brands they feel have aligning values. Patagonia, for example, pledged the $10 million it had saved from tax cuts implemented by the Trump administration to environmental causes last year, and Gucci donated $500,000 to the gun control rally organised by the survivors of the Marjory Stoneman Douglas High School shooting.

Nike is sure to face more backlash in the coming days, but its decision proves that it's still committed to the values that came with its partnership with Kaepernick. Powell believes Nike will weather the latest storm, and likely come out ahead.

“The Nike shopper wants to know where brands stand, and if they don’t see companies acting, they will take their business elsewhere,” he said.

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NEW YORK, United States — Back in May, Richard Ma, a technology executive from Toronto, dropped $9,500 on a dress for his wife, Mary.

The dress had a chic, cape-like silhouette with a silver, iridescent shimmer and a subtle pattern of colourful swirls. It also wasn’t real; not in the literal sense, anyway.

The dress was created by Dapper Labs, a company that makes consumer blockchain products, and was designed by The Fabricant, a virtual fashion house based in Amsterdam. Ma had purchased the dress on Ethereum, an open-sourced Blockchain platform, in a charity auction at a blockchain conference in New York. Mary isn’t going to wear the dress so much as look like she is; Dapper Labs did a photo shoot with her and using augmented reality technology, created images of Mary in it, which she can share to social media.

Mary Ma wearing a virtual dress her husband, Richard bought for $9,500 | Source: Dapper Labs

Ma is no ordinary consumer — he runs a blockchain security company. But the fact that he was willing to spend nearly $10,000 on a dress that doesn’t exist hints at the dawn of a new market in virtual fashion.

In certain corners of the tech world, spending real cash on digital apparel is as routine as taking a trip to the mall. And a number of companies are looking to bring virtual fashion into the mainstream.

That future may not be as far off as you think: apps that allow users on Instagram and Snapchat to alter their appearance are wildly popular, and brands like Gucci and Nike have also started using augmented-reality technology to let shoppers virtually “try on” clothing and shoes. The beauty industry is already deep into this space with augmented reality makeup apps.

Convincing customers that digital fashion can be just as covetable as their IRL equivalents is the next step. Virtual fashion would allow shoppers to keep up with trends without having to worry about fashion’s sustainability issues. The products would also earn consumers their coveted social currency — likes on social media, that is — and can also push the boundaries on what is possible in fashion design because the clothes don’t actually need to exist.

Shoppers might never come around to virtual products the way they do with real ones, but that doesn't mean the tech industry isn't going to try.

Inspiration from the gaming world

Virtual products have been popular in the gaming world for a while. Players of popular games like League of Legends and Overwatch eagerly drop extra cash on “skins” - outfits and accessories for their digital personas.

Epic Games’s Fortnite, the wildly popular online game that has over 250 million global users, reportedly earns $300 million a month selling skins. In May, Nike debuted two skins for the game that feature Jordan sneakers that are only available to be “worn” in Fortnite.

From games, it’s a small step to social media, another virtual world where people spend an ever-growing share of their time. According to a study by Global Web Index, Gen Z spends about 3 hours a day on social media, and a Nielsen report from 2018 found that US adults spend half their day interacting with the online world.

“There are few places that get users to care about their digital appearance as well as Fortnite, but Instagram is also one of these places,” said Matthew Hartman, a partner at seed-stage venture capital firm Betaworks Ventures who’s invested in social media startups and is interested in investing in virtual fashion tech.

There are few places that get users to care about their digital appearance as well as Fortnite, but Instagram is also one of these places.

The opportunity for virtual fashion extends to the world of avatars, a growing category amongst Gen Z users, according to Akash Niham, the CEO of virtual avatar startup Genies, which launched in November 2018. A competitor to Snapchat-owned Bitmoji, Genies allows users to create digital clones of themselves or celebrities, and place their Genies in messaging apps and on social media.

Users can deck their avatars out in all sorts of wares, dubbed "wheels," and brands like Gucci and New Balance are paying Genies to have branded products in the app. Nigam said there’s been so much interest in dressing avatars that Genies will be adding more fashion-branded wheels in the coming months, and will begin charging for them.

Spending money on Gucci for an avatar is quite different than dropping thousands of dollars on a virtual dress, or real fashion product for that matter. But Nigam sees his product as a way for brands to convert future fashion customers: “Some kids can’t afford Gucci in real life, but they can in the digital world. It works as an entry point.”

Brands jump into the digital fashion space

In November, Carlings, a Scandinavian fashion brand, debuted a 19-piece virtual collection that sold for €10 to €30 (roughly $11 to $34). Shoppers who bought the virtual products submitted photos, which the brand turned into 3D images.

Stefanos Constantinou, an employee at Vice Media who bought a few pieces of the virtual collection, said the collection was a good way to keep up his Instagram #OOTD (outfit of the day) streak without contributing to fashion’s waste problem.

Shoppers wearing looks from Carlings' virtual collection. | Source: Carlings

“I have tons of shoes that I wear once or twice and then move on from, and so this is a better way to try new things and get the hype out without having to continually acquire stuff and destroy the planet,” Constantinou said.

These virtual clothes are a drop in the bucket compared to the volume of products sold by Carlings, which has 200 stores across Scandinavia, and Carlings products sell for a higher price point. But Ronny Mikalsen, the CEO of Carlings, said he was excited at the possibility of a big fashion brand producing digital products on a larger scale.

“Just imagine how many free items are shipped to bloggers and influencers who wear products once and throw them out,” he said. “Digital fashion would completely eliminate that.”

Virtual products could also potentially bring more hype to a collectable category like sneakers, said Steven Vasilev, the founder of custom sneaker brand Free Customs. Later this summer, Vasilev, who is better known by his nickname, Zaptio, will launch a virtual sneaker company called RTFKT (pronounced artifact), together with Chris Le, a gaming skins developer, and Benoit Pagotto, a brand director of Fnatic, the professional esports organisation.

RTFKT will sell real custom sneakers that start at $300 and go up to $3,000, with each pair coming with a digital version. Customers can get the sneakers IRL, or they can have RTFKT store the product once it's bought, and use the virtual images instead (the shoes live as a custom AR filter and can be accessed with RTFKT’s app).

"Social media makes up a huge part of sneaker culture and our business model will allow kids to flex what sneakers they’ve bought without having to worry about actually wearing them,” Vasilev said.

A path for fashion’s manufacturing flaws

Tech companies like Google, Apple, and Amazon have entire teams dedicated to study AR and VR, and are spending billions doing so.

Instagram, too, has been getting into the virtual product space. Facebook’s Spark AR Studio, which was launched in 2017, used to create Instagram filters and effects for Instagram Stories in-house. In May the company announced they were opening the technology, allowing anyone to create custom filters. While most Instagram filters are focused on facial movements, Pagotto said “this technology is going to open ways for people to augment themselves, and their environment. Once people will start focusing on their body, it will bring in new demand for virtual products, like dresses or sneakers.”

Still, the virtual world remains more of a promise than a reality. Startups working in this space remain on the fringes, waiting for virtual reality technology to hit the mainstream.

Some designers are making a different case for virtual fashion, hopping onto the trend toward reducing fashion waste.

For the last few years, Clément Balavoine, a French designer who works at Facebook-owned virtual reality hardware company Oculus, and Janis Sne, a digital fashion designer at Adidas Germany, have been experimenting with their fashion line Neuro Studios, which Balavoine describes as “digital-first” fashion.

The process of making a virtual product. | Source: Neuro Studios

Products from Neuro Studios, like its utility vests, high-waisted track pants, and bomber jackets, range from $200 to $500 and are created first as 3D images. Neuro Studios has sold only about a dozen items. Balavoine said his company is less about selling product, and is more invested in proving that a sustainable, tech-driven supply chain works.

“We're trying to sell a new way of thinking because we find it sad that the same techniques of production have been used for decades when they are extremely wasteful,” Balavoine said.

Some brands are already turning to digital assets to gauge customer interest. Earlier this year, Claudette, a New York-based streetwear company, tested a product on a CGI Instagram character named Cade, who was created by the startup SparkCGI. Cade, a cool, blond “15-year-old” Instagram influencer with nearly 100,000 followers, wore a crew neck shirt from Claudette, and Layan Al-Dabbous, Claudette’s designer, said the company was able to test shoppers’ responses before creating the product by seeing how they reacted to it.

“Cade’s followers loved the tee and kept DMing him, asking where they could purchase it,” she said. “I didn't even know that the world of CGI fashion existed, but it showed me, going forward, that this is a really good way to promote and test clothing.”

Kerry Murphy, the founder of The Fabricant, which designed the dress Ma bought for his wife, said virtual fashion, at a minimum, can fix the sample process.

The Fabricant recently created a virtual catalogue of the latest collection of Napapijri, the Italian brand owned by VF Corporation. Napapijri plans to use the digital assets at retail summits, and Murphy said it reduces their waste because they don’t have to constantly procure samples for clients.

We find it sad that the same techniques of production have been used for decades when they are extremely wasteful.

This type of technology is already being employed by companies like Ann Taylor, BetaBrand and Hugo Boss, which use virtual clothing to partially replace sampling in the design process, as does the fashion supply chain company Li & Fung. Murphy said he is optimistic fashion can cut down on its waste once this technology trickles down to all mainstream companies.

“The design industry is ridiculous and reminds me a lot of how the film industry used to exist, where it was manually cutting film,” said Murphy. “They are constantly going through trial and error, and creating so much waste when digital tools much faster. With digital catalogues, we can reuse and recycle and change the templates and think far ahead. It’s cost-effective and time-effective.”

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