Month: February 2019

Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here. DTC Playbook, Written A values-driven brand with the best X in its category launches on Facebook, quickly gains customers and uses data to improve its products and its marketing process. Ever feel like direct-to-consumer brands are all following the same unwritten set of rules?… Continue reading »

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Nearly two years after emerging from a bankruptcy filing, Payless ShoeSource is reportedly preparing to file for bankruptcy protection again.

Payless joins a group of struggling retailers like Pier 1 imports, Gymboree and Shopko that struggled to carve a place for themselves as customer spending shifts online and mall traffic declines. Payless has faced fast-fashion competition, the lack of a compelling online presence and private-label pressure from large retailers like Walmart and Target, which have made it difficult to attract and keep customers.

More urgently, staff turnover at all levels, coupled with the lack of a long-term strategy, has caused Payless to break down again in the two years after it filed for bankruptcy the first time. According to one former employee who worked on Payless’ digital marketing team in 2018, the retailer failed to tackle core challenges around customer retention, brand strategy and in-store experience in the critical time frame following its bankruptcy exit.

“It was about not having the bandwidth of the team to align with what was going on in stores in North America as well as what was going on online,” said the former employee. “There was a revolving door of employees leaving, and the new organization wasn’t aligned with specific goals or would make very quick pivots if certain executions weren’t working out.”

After Payless filed for bankruptcy in 2017, it closed 400 stores, and a group of creditors, including hedge fund Alden Global Capital, took over ownership. It emerged from bankruptcy with $400 million in loans, after reducing its debt from $800 million.  A key issue standing in the way of a turnaround was dwindling staff numbers. Over the spring and summer of 2018, Payless moved its headquarters, along with many of its departments, from Topeka, Kansas, to Dallas, Texas. During this time, staff positions in the merchandising department and elsewhere were reportedly cut. Many vacant roles were not filled, and another group of 170 employees was laid off in November 2018, according to the former employee.

Thanks to the job cuts as well as management changes, Payless apparently dropped the ball on a long-term project critical to its revival: the relaunch of the company’s e-commerce site.

“A lot of [the problems] would start at the top with the turnover [of] leadership, and not necessarily looking to the big picture of relaunching the e-commerce site,” the former Payless employee said, adding that the new site was supposed to be mostly complete by the end of the summer of 2018. “It was put on hold for no concrete reason, because the investment was already there.”

Instead of being able to quickly address new challenges, employees were often waiting for decisions from leadership, narrowing the window of time available to recover.

“I would say it was less pressure than lack of guidance and sitting around and waiting for direction because things weren’t getting signed or approved — a lot of things had to go through Alden staff or the board of directors. We were waiting around for very simple things,” said the former employee.

Meanwhile, marketing efforts that materialized were carried out without regard to longer-term customer acquisition or retention goals. Last November, Payless worked with an outside agency on a social media campaign around a fictitious shoe brand, Palessi. Payless posed as a luxury brand selling the same products, and it invited influencers to make purchases. Despite an initial buzz generated from the publicity campaign, the brand failed to capitalize on it and build a longer-term audience.

“In a 24-hour news cycle, they hit the jackpot, but how is this going to affect the bottom line, and how is it going to drive sales?” said the former employee. “We needed a big splash to get people talking about Payless, but there was no brief past that.”

Beyond e-commerce and branding, in-store experiences also struggled to captivate customers and build loyalty at its 2,700 locations. While other established retailers focused on private label-brands and exclusive product releases, Payless lost out because it didn’t invest in developing any sort of distinctiveness in its inventory, said digital marketing consultant Judge Graham.

“They continue to be a cheap ‘no name’ brand, and they’ve never reinvented themselves,” he said. “There are too many options; the market is crowded both online and in brick and mortar.”

One reactive strategy used by the brand was aggressive discounting, a way to drive traffic to the online store that took away from a longer-term plan to build customer loyalty, the former employee said. Meanwhile, customers were trained to wait for deep-enough discounts (often 40 percent off ticketed price) before they would make purchases, putting pressure on margins.

“There were very quick pivots in what the global discounts were going to be, straining the levels of effort within existing teams, rather than working toward longer-term goals like retargeting after cart abandonment,” the former employee said.

In addition, store presentation and layout were also hurdles for the brand, causing friction for customers looking for a reason to enjoy the shopping experience.

“It’s depressing when you walk in — it’s between a Kmart and a Target — it’s hard to find things, and products are haphazardly stocked,” said Dorothy Crenshaw, CEO of Crenshaw Communications.  “I don’t think the brand really stands for anything other than value, and it’s just not enough.”

 

The post ‘A lot of problems would start at the top’: How Payless bungled its post-bankruptcy comeback appeared first on Digiday.

Barney’s is getting into cannabis.

In March, the luxury retailer will open a cannabis lifestyle shop on the fifth floor of its Beverly Hills flagship store and will begin to sell select cannabis accessory products on Barneys.com, according to Matthew Mazzucca, creative director at Barney’s New York.  

Appropriately, Barney’s is calling its new 300-square-foot shop “The High End” and will sell CBD vape pens and edibles from Beboe and beauty and wellness products like facial serums and lip balms from Lab to Beauty, Saint Jane, Flora and Bast, Foria, The Good Patch and Vertly. Barney’s is also working with several companies to create exclusive cannabis accessory items for the store like lighters, pipes, trays, cases, pastille dispensers from companies and like Devambez and Lorenzi Milano, and jewelry like Grindr necklaces from Good Art HLYWD.

Barney’s is positioning the selling of CBD products to align the company with the home and wellness space, said Mazzucca. Instead of a test pop-up space, Barney’s sees it as a new permanent category and plans on bringing “The High End” to other Barney’s locations, which includes stores in San Francisco, Las Vegas, Massachusetts and New York.

“Everything in the landscape right now feels more on the medical side of things, and we felt like we could differentiate,” said Mazzucca. “This isn’t driven by the flower itself; it’s really about creating beautiful products you can keep in the home, whether you smoke weed or not. It’s more about lifestyle.”   

The only consumable cannabis offering will come from California-based cannabis company Beboe, which makes expensive CBD and THC vape pens ($75) and flavored pastilles. At The High End, Beboe will sell a limited-edition silver and black CBD vape pen for the Barney’s launch and CBD pre-rolled joints and chocolates. For now, THC products are not being sold in-store because Beboe does not have a dispensary license. However, customers who want to purchase Beboe THC products can order them directly from the brand at The High End.

For the time being, Beboe’s CBD pens and products will not be sold on Barney’s.com, only select cannabis accessories. Mazzucca said Barney’s is still vetting through which products will appear online. The ones that do, he said, will be ones that require little in the way of education.

“The focus is on the home wellness piece, and however CBD and THC integrate into that in the future will be adapted into that philosophy,” he said. “The timing and the speed at which these things are going to market is accelerating, and I love the fact we are riding the wave when this is all happening.”

Barney’s worked with Beboe to curate the cannabis accessory items in the shop. Mazzucca said Barney’s was drawn to Beboe products because their upscale products capture luxury women consumers. According to a January report from weed delivery service Eaze, older women are one of the fastest-growing audience segments of marijuana consumers. Last Friday, cannabis company Green Thumb Industries made a bid to acquire the 2-year-old company for the same reason: to capture market share of women marijuana consumers. It’s Beboe’s second partnership with a non-cannabis brand. Last June, it worked with beverage direct-to-consumer company Dirty Lemon to sell a CBD-infused drink now sold out.

For Beboe, it’s a chance to gain even more consumer trust in their company and establish comfort with cannabis.

“For so long, dispensaries in California had a seedy, underground feel to them. People are still hesitant to explore cannabis, but a venue like Barney’s, especially in Beverly Hills, is the top tier as far as luxury taste. People trust it,” said Scott Campbell, co-founder of Beboe.

Barney’s is one of the first luxury retailers to start selling CBD products, and the first to create an entire shop for the new category within an existing store. For Barney’s, this is the largest push into cannabis so far, but it isn’t the first. Two cannabis brands — Lab of Beauty and Body Vibes — are already being sold in Barney’s stores outside of California.

Experts say to expect Barney’s move to only accelerate the speed at which other retailers will adopt the plant.

“As cannabis for medicinal, recreational, and health and wellness uses becomes more mainstream, the competition for share of wallet increases,” said Catherine Lang, an analyst at Kantar Consulting.

With the passing of the Farm Bill and legalization of recreational cannabis across the United States, luxury retailers have been slowly tiptoeing their way into the space, said Lang. In January, Neiman Marcus announced it would carry CBD-infused beauty products in its stores. Other retailers like DSW and Sephora have embraced the trend as well.

“This level of commitment from Barney’s should help turbocharge the growth of the industry and acceptance of CBDs in our daily lives,” said Christopher Lehmann, cannabis analyst and managing director of Landor’s San Francisco office.  

The post Weed meets luxury: Barney’s is launching a cannabis shop inside its own store appeared first on Digiday.

Quora has all the answers — and wants to sell ads against them.

Founded in 2009, the question-and-answer site attracts more than 300 million unique visitors per month, according to the company’s pitch deck, provided to Digiday by an advertiser. That’s up from 200 million in June 2017. Over the last couple of years, Quora has been maturing its ad platform.

The post Pitch deck: How Quora is selling advertisers appeared first on Digiday.

Price, not transparency or partnerships, remains the priority for clients when it comes to their agencies.

Last year, agencies pitching for the $1.7 billion global ad account for GlaxoSmithKline were asked to make upfront guarantees on the cost of media, despite it being widely acknowledged that those guarantees can’t be made for digital media, according to an executive who was on one of the pitch teams. Most, of course, complied.

The pitch had gone on for six months and was managed and audited by ID Comms and Ebiquity. It gradually morphed into negotiations over cost savings once the procurement team took over. Before that happened, GSK’s marketers had scrutinized each agency’s operating model and probed how they would provide full transparency into the money made on the media bought.

But the longer those discussions went on, fewer business KPIs and strategic relationships came up. Finally, agency executives found themselves in a corporate box overlooking a rugby pitch, giving GSK procurement team an overview of the savings they could make, said the agency executive.

Following those talks, Publicis won the account. “GSK reviews our media agency arrangements based on a number of criteria including strategic thinking and differentiation, understanding of our business, systems and reporting, quality of talent, the cost of media and contractual terms,” said a spokesperson from GSK, when asked for comment.

Savings often trumps all else if there is no clear winner on other criteria, and even then the numbers need to be highly competitive. It can create a race to fulfill those guarantees with cheap impressions that may not be safe, viewable or real.

Consultant education
Sources said that lack of education by pitch consultants –and agencies refusing to push back on invalid processes or decisions — makes matters worse.

“Running a tender for an agency or technology partner is not the same as procuring steel or glass,” said Ruben Schreurs, managing partner at digital media consulting firm Digital Decisions. “There is so much in-depth nuance in cost structures, and even more so when you go into operating models and strategic fit, that it is simply insane to apply too much weight to the bottom-line pricing in the decision process.”

It’s the standard trajectory of how many big media accounts are handled now. Transparency issues are the reason many advertisers go to pitch, but cost pressures are often what decides the outcome. According to data from Ebiquity, out of the 100 pitches it conducted last year, 54 percent said the top criterion used was cost improvement, and 34 percent said it was “strategic vision and expertise.”

At Adidas, which had a pitch for its $300 million media budget last year, the brand spent six months planning an operating model that went to agencies in the pitch document. The pitch, which was managed by MediaSense, was won by Mediacom. Sources said it was because the agency offered good price guarantees, although the company says the decision was more layered than that.

Progressive advertisers want fair remuneration, but there is still a disconnect between the marketing and procurement teams.

“The dynamic is changing, but I don’t think we are where are we should be,” said Laetitia Zinetti, managing principal for media management at media analytics specialist Ebiquity. “It can be difficult for an advertiser to differentiate between agencies on their strategic capabilities, so they look at how efficient they’re going to be — not just on the media costs but on the remuneration and technology costs too.”

The problem is advertisers are struggling to know what they don’t know about online media, and the pitch consultants are scrambling to fill in the blanks.

“The field of pitch consultants is growing fast, and levels of expertise are not everywhere,” said the media director at a luxury advertiser on condition of anonymity. “For remuneration, we use full-time equivalent payments and an incentive element. We want our partners to be profitable, but ideally at the same rate as we are. We do, however, see a shift in the market toward outcome or performance-based remuneration.”

Clients may even respect when agencies push back: “I worked on a pitch recently where a major agency declined to pitch in a major market because they felt they couldn’t compete on price,” said the marketing procurement director for a global CPG advertiser. “I was surprised, and it was a bit inconvenient for us, but ultimately I respected their honesty — and they saved their people a lot of work for likely little reward.”

This marketer said price guarantees are still useful criteria to judge an agency’s ability to buy digital but insisted the primary focus should be on the effectiveness of that media. “Pitch consultants continue to struggle in this area,” said the marketing procurement director, who is part of a broader push at the advertiser to take both pitch management and media management in-house.

“The KPIs on which we judge agency performance in online clearly need to include price, but should be much broader and encompass how well that agency fits with our strategic priorities such as reach versus quality, viewability or value chain transparency,” said the marketing procurement director. “I have yet to see a structured approach to this from pitch consultants that doesn’t ignore pricing but enables comparison on these broader ‘softer’ metrics.”

New models
Advertisers continue to use price guarantees to award media agencies because the cost of media is easier to determine than its effectiveness. Absolut, BT and L’Oreal have all tried to adopt newer ways of paying agencies in recent years. Whether it’s driving sales, customer loyalty or selling a car, measuring the effectiveness of these outputs is still subjective, which makes it hard to see the value. Few advertisers and agencies can get to the balance of risk and reward.

When Volkswagen ran its media pitch in 2016, one agency on the account proposed a cost-per-car remuneration model, according to one executive on the pitch. The carmaker declined. It’s hard for an advertiser to commit to outcome-based models like a cost per car when advertising is one of several factors that could impact sales, and subsequently hard to attribute a value to it. Scrapping the more traditional commission-based remuneration models like price guarantees is not a simple process.

“There is often a tension in media agency reviews between strategic marketing objectives and the need to demonstrate efficiencies,” said Nick Manning, svp at consulting business MediaLink. “Bluntly put, marketing wants innovation, and procurement wants lower costs for the same media. Digital has to be handled differently. It’s about effectiveness and value, not price, and performance has to be tracked differently. You can’t benchmark digital in the same way as TV.”

The post When it comes to agencies, brands care more about cost than transparency appeared first on Digiday.

Bleacher Report set out in 2018 to turn House of Highlights into a meaningful business. This year, the company is planning to invest in and expand the sub-brand — and business — into live events.

As part of its game plan for NBA All-Star Weekend from Feb. 15 to 17, Bleacher Report will host its first big physical activation for House of Highlights. Dubbed “The House of Highlights,” the event space will include a studio, a gaming room and a basketball gym, as well as live and video programming. Adidas, McDonald’s and Twitter are on board as sponsors and programming partners: McDonald’s, for instance, is branding the gym and a challenge where local high school basketball coaches compete to win grants for their teams and players. (McDonald’s has a broader deal with Bleacher Report and House of Highlights, which includes sponsorship of the Twitter live show.)

The House of Highlights brand has shown up at previous events produced by Bleacher Report, including a branded lounge at an event tied to the NBA’s Summer League last year. But this is going to be the sub-brand’s first “big boy activation, where House of Highlights is standing on its own,” said Howard Mittman, CRO and CMO of Bleacher Report.

This weekend’s event will be the first of more events planned around House of Highlights in 2019 and beyond. Bleacher Report has created a dedicated “event practice” within the House of Highlights organization, which now has 15 employees excluding shared services. “You can absolutely expect to see more live events and participatory physical experiences,” said Mittman.

Mittman declined to say how much revenue House of Highlights brought in for Bleacher Report in 2018; he confirmed that the sub-brand is still profitable and has another year of “aggressive” revenue targets ahead. “We had established aggressive goals for the brand in 2018 and surpassed those goals in the middle of third quarter last year. And now, we have established even more aggressive goals for ourselves this year, and we’re off to a great start,” he said.

Growth for House of Highlights will come as the brand continues to expand beyond its Instagram roots, where it recently crossed 12 million followers. Last year, House of Highlights launched new programming on YouTube and a live talk show on Twitter. This year, the brand will show up even more on “NBA on TNT,” amid other content partnerships between Bleacher Report, House of Highlights and Turner Sports.

“You’ll see a much deeper expansion into original content,” said Mittman. “You’ll continue to see the evolution of House of Highlights outside of Instagram and continuing to evolve out across a variety of other places.”

This includes House of Highlights doing more content around sports other than basketball. One area of greater focus will be the NFL and football in general, which is drawing views across both Bleacher Report and House of Highlights. On Super Bowl Sunday, Bleacher Report and House of Highlights generated 52 million video views across platforms, the company said.

“[House of Highlights] is most closely associated with basketball — that has been the case since its founding,” Mittman said. “A big part of what I want to do this year is do things outside of basketball.”

The post Bleacher Report’s House of Highlights is expanding into live events appeared first on Digiday.

Swedish local news publisher MittMedia is using robot-generated content to drive subscriptions.

Robot journalism has typically been touted as a tool to save time in busy newsrooms, but MittMedia has gained 1,000 digital subscribers across 20 of its local news sites using automated content, over the last year.

The publisher, which now has nearly 80,000 digital subscribers, found that real-estate articles are the most effective at converting loyal users into digital subscribers. At the end of 2017, it launched the “Homeowners Bot,” which writes a short text on every house that is sold in the local market, identifies an interesting angle, like the most expensive house sold in the year, and adds an image from Google Street View.

The company now writes 480 articles a week on home sales, according to the company. Since introducing the tool it has published in total 34,000 articles, which have converted nearly 1,000 paying subscribers. Subscriptions to its titles start at €10 a month ($11.28).

“A really good robot text can have a bigger impact and be more read than a really good news article, but only if it’s a topic readers really care about,” said Li LÉstrade, head of content development at MittMedia. “Each article reaches a smaller group of readers on average, but in total, we get an exchange on par with anything written by our most-read reporters.”

On each bot-written article, the publisher uses the byline “MittMedia’s Text Robot,” and through research, it found that 68 percent of 102 respondents didn’t notice the piece was written by a bot.

Publishers like Bloomberg, Reuters and The Washington Post have also explored robot-written stories that rely on structured data. The obvious benefit is the publisher can churn out repetitive, simple stories at a high volume, leaving the humans to do more of the investigative work. This high volume typically meant using robots to automate things like earnings or sports reports, which would help increase ad impressions and aid coverage in local newsrooms.

The publisher has also found that when the articles are placed in front of the right person at the right time, they subscribe, said LÉstrade. Because there are a large number of automated articles, the danger is either they will dominate the site or look too irrelevant if they aren’t distributed to a specific group of readers.

“Automated articles are often pretty niche and super interesting to a small number of people. That makes them perfect for a personalized news feed or a niche product,” she said. “It’s key to nail the context.”

MittMedia has a central editorial team that works with data-driven content development of nine people to improve the retention of digital subscribers. According to the media group, bringing more flexibility to unsubscribing has stabilized churn rates. Subscribers can pause their newsletters or unsubscribe by clicking a button, a popular feature for avid followers of seasonal sports like ice hockey.

Robot journalism is hot in Sweden. One of the country’s largest national titles, Schibsted’s evening tabloid Aftonbladet, which reached 250,000 digital subscribers by the end of 2017, has also pushed into automated content. MittMedia has partnered with tech company United Robots on automated content. Along with two other Swedish publishers, MittMedia is expanding the amount and type of automated content it publishes beyond property sales articles to include sports write-ups, texts about company registrations, bankruptcies and traffic and weather news.

The post Robot writers drove 1,000 paying subscribers for Swedish publisher MittMedia appeared first on Digiday.

Policing ads.txt files is an ongoing battle for publishers.

Ads.txt was a tool launched with much fanfare in 2017 to help combat a persistent form of ad fraud: the unauthorized selling of publisher ad inventory and domain spoofing. But last week, a major flaw was highlighted as ads.txt was revealed by DoubleVerify to be the latest target of fraudsters.

Publishers were concerned but unsurprised by the news. But they also called for the buy side to ensure they’re keeping up their end.

“Ads.txt was a welcome initiative to tackle ad fraud, but in reality, it is a sticking plaster to treat the symptoms of a market that is distorted by opacity by design,” said Hamish Nicklin, chief revenue officer at the Guardian. “Without a fundamentally more transparent system ad fraud and bad practice will continue to thrive. This could be solved if buyers and sellers reconciled transactions through a transparent system of programmatic receipting.”

Several publisher sources believe ads.txt has helped to curb the volume of fraud. Since the tool was introduced, a publisher’s power to police who resells its inventory is stronger, for instance. Around the time ads.txt was introduced, one digital media publisher received as many as five daily requests from unknown companies demanding to be added to its ads.txt file. That’s now slowed to one a week. “These were mainly from resellers who were trying to arbitrage our inventory,” said the executive. “We ignore all of them unless we know who they are, which is very rare.”

An increasing number of agencies have declared they now buy ads.txt inventory. Yet publishers are skeptical as to just how many are buying ads.txt-only inventory because doing so would theoretically reduce the scale of buys they could make, according to publisher sources. Last October, Digiday Research showed there was a large gap between the number of publishers that had implemented ads.txt and the agencies that buy only ads.txt inventory in the U.S.

“An audit of who has implemented ads.txt from the publisher side versus how adopted it has been on the buy side would be interesting,” said a publishing executive at a British newspaper. The same executive said that several agencies have admitted recently that they don’t buy this way as it restricts the scale of their buys. “That does bother me as it indicates we have a way to go to ensure both buy and sell side are aligned.”

However, some agencies are bullish on buying ads.txt-only inventory. “We make a conscious decision to only use DSPs that allow us to remove all unauthorized sellers from our programmatic buys to increase our confidence in the supply chains we are using,” said Matt McIyntre, head of programmatic for EMEA at Essence. Simon Harris, head of programmatic activation for Dentsu Aegis, posted an article last week informing agencies and publishers how to get the best out of ads.txt, including how to address the scale issue.

Most seasoned digital marketers and publishers know there is no silver bullet for solving fraud, and yet more is required from both sides for ads.txt to become less of a fraudster haven, according to publisher and agency sources. “They [publishers] should be holding their SSP [supply-side platform] partners, especially resellers, to account for delivering revenue and vetting actors signing up to their exchanges,” added McIyntre.

Most of the work is needed on the buy side, according to Augustine Fou, an anti-fraud researcher. He believes that fraudsters will continue to take advantage of ads.txt as long as the buyers aren’t scrutinizing beyond the domain name given. If a bona fide publisher domain appears in the ads.txt file, they can still be a fraudster because it’s easier to fake a domain name than to fake a seller ID. “Agencies need to ask the DSP to include the seller ID in the bid request,” said Fou. “Most of the placement reports — which are what agencies get to show their clients where their ads have been seen — are the domain, not seller ID, which is the most important bit.“

Publishers also want more assurance that demand-side platforms and agency buyers are vetting the companies that make it into the ads.txt files. “There are a lot of ways to get around ads.txt, and this [scam] does represent one that the publishers can’t really help to avoid,” said an executive at a major news publisher. “We need DSPs to pay attention to the account numbers and the security IDs where provided, and we need the SSPs to be more selective in who they allow as partners.”

Some agencies are now pushing for adoption of ads.cert — the sequel to ads.txt which in theory will make it harder for fraudsters to spoof inventory or resell it without authorization from the publisher. But it will be some time before that’s adopted en masse because it comes as part of the next phase of the real-time bidding framework.

Meanwhile, other efforts to stamp out fraud continue. The trade body the Trustworthy Accountability Group has today (Feb. 12) launched an initiative in which it will alert advertisers and their agencies if their ads are running on pirate sites in Europe. Called Project Brand Integrity, the aim is to protect brands from association with illegal, stolen content. A similar effort has been run in the U.S., and reduced the number of impressions on pirate content sites by more than 90 percent over two years, and eliminated all ads from premium brand advertisers on those sites, according to TAG.

The body has commissioned anti-pirate software vendor WhiteBullet to monitor and document ads on infringing sites. TAG will then share the information with the advertiser or its agency.

City of London Police Intellectual Property Crime Unit and Europol will help raise awareness of the program and support brands and their agencies in their compliance efforts. PIPCU has worked with advertiser and publisher trade bodies for years, to reduce pirate sites raking in profits from ad revenue provided by unwitting advertisers. As a result, more than 1,800 pirate websites have been shut down, according to PIPCU, since it started in 2016.

The post ‘It is a sticking plaster’: Ads.txt is not stamping out fraud appeared first on Digiday.

Last week, Foot Locker invested $100 million into sneaker resale platform GOAT, which merged with boutique brick-and-mortar sneaker reseller Flight Club last year. The investment is reportedly the largest ever single investment into a sneaker resale platform, dwarfing other similar investments like the $44 million investment StockX got from Google’s investment arm GV and Battery Ventures last year. (Stadium Goods received an undisclosed amount from LVMH in February of 2018.)

This news is proof that sneaker resale is a huge market. The major platforms like GOAT, StockX and Stadium Goods are all worth well over $100 million each. Stadium Goods was acquired by Farfetch earlier this year for $250 million. While Foot Locker is by no means a bit player in the sneaker world, it is clear that resellers have a lot of buzz and dollars floating around them. By investing heavily into GOAT, Foot Locker seems to be planning for the future by making itself more visible to lucrative sneakerheads.

“The greatest benefit to Foot Locker in investing in GOAT is the potential to elevate its brand among sneakerheads,” said David Naumann, vice president of marketing at Boston Retail Partners. “Sneakerheads are extremely passionate. Associating Foot Locker with GOAT and making their stores a location to order or pick up their cool shoes will make sneakerheads think more highly of Foot Locker. They may even pick up another standard shoe or T-shirt or something while they’re in the store.”

Foot Locker has also recently invested $15 million in women’s luxury activewear retailer Carbon38 and $2 million in the Pensole Footwear Design Academy.

According to the joint announcement from GOAT and Foot Locker on Friday, the investment is the preliminary step of an ongoing partnership, which will see the companies combining their resources in physical and digital retail.

While Foot Locker does not have the same breadth of inventory as GOAT (Foot Locker typically only sells recent releases, while Goat has rare sneakers from years past), it does have a substantial physical presence and distribution network through the U.S., with stores in almost every state in the country. This physical presence is something that GOAT, which only has three stores in Miami, New York and Los Angeles, does not have.

“I see this as a smart move for Foot Locker and the secondary selling community as a whole,” said Michael Sharp, co-founder and CEO of creative agency Standard Black. “Foot Locker gets to participate at ground zero for sneaker culture, and GOAT’s mobile technology will allow them to have more seamless sneaker releases in the future. Foot Locker has had a few hiccups with their app crashing for sneaker launches and this should correct it.”

The investment also echoes an idea that has been floating around the sneaker world for a while: that the primary and secondary markets are coming together. As explained by Josh Luber, the founder of StockX, it is inevitable that primary retail and secondary retail will converge. He cited StubHub as an example of a secondary market upstart that eventually became a major figure in how the primary market of event tickets were sold.

“I suspect that what happened at both of those companies is that they are looking at their customers and recognizing that they are not competitive with each other, but that the same people have interest in both Foot Locker and GOAT,” said Corey Pierson, CEO of customer analytics platform Custora. “If that’s the case, there’s all the more reason for them to work together. But you also have the ability to enrich both without cannibalizing or stepping on each other’s toes.”

But there is a possibility that Foot Locker’s play here could backfire. Jonathan Treiber, CEO of Revtrax, mostly agreed that Foot Locker’s investment is a smart way to stay relevant in the changing sneaker market, but he also noted that Foot Locker needs to be proactive about ensuring that its own business remains up-to-date, rather than just relying on GOAT.

“Without the strategic partnership to provide physical locations to GOAT and block out the competition, they’re really just holding an expensive lottery ticket that would produce capital gains without any operational benefits,” Treiber said. “If I had to guess, Foot Locker paid a premium in valuation to GOAT for these potential benefits. The question is whether Foot Locker could have invested $100 million in their store experiences, exclusive offerings or elsewhere to drive better business results in the mid-term.”

The post In a sneaker market dominated by resale, Foot Locker is aiming to stay relevant appeared first on Digiday.

Reddit was valued at $3 billion after a new financing round for the discussion forum that brought in Chinese internet giant Tencent as an investor.