Two generations of sneaker sellers locked arms this week. It's kind of a big deal.
Foot Locker Inc. is making a $100 million minority investment in GOAT Group, the parent company of managed online sneaker marketplace GOAT. Notably, the deal represents the marriage of GOAT's digital prowess and Foot Locker's brick-and-mortar infrastructure. With stores in 27 countries worldwide, Foot Locker will be effectively launching GOAT's global presence while providing the physical touch points (i.e. stores) to make expansion possible. So yeah, big deal.
In 2017, Foot Locker was in a hard spot. Their revenue was down as competition from online marketplaces like Amazon and Zappos loomed large. The company emerged from the downturn thanks in large part to its close partnership with Nike, running limited releases, teaming up on promotions, and even opening a store dedicated solely to the Jordan brand in LA.
The GOAT partnership might be viewed as part two in the Foot Locker modernization plan — a plan that has also included investments in similar digital-first companies like Carbon38, a women's activewear brand, and footwear design academy PENSOLE.
Rather than succumbing to online marketplaces or pivoting away from its brick-and-mortar roots, Foot Locker is choosing to leverage its legacy structure as capital, something a company like GOAT is willing to exchange digital firepower and online reach to get in on.
“We are excited to leverage GOAT Group’s technology to further innovate the sneaker buying experience and utilize their best-in-class online marketplace to help meet the ever-growing global demand for the latest product,” Foot Locker's chairman and CEO Richard Johnson said in a statement announcing the deal. “Together, Foot Locker and GOAT Group’s shared commitment to trust and authenticity in the sneaker industry will provide consumers with unparalleled experiences and diversified offerings.”
If the partnership is a smart move for Foot Locker, for GOAT it's absolutely masterful. The LA-based company, which launched in 2015, is gaining more than just capital. In signing the deal, GOAT scored a foothold to 3,000 retail stores around the globe and, more importantly, access to their back rooms. You might think of the arrangement in terms similar to Amazon's acquisition of Whole Foods. In both cases we see a primarily digital company coming into a network of on-the-ground distribution centers overnight.
What's more, the company will have help in that endeavor with Foot Locker's SVP of Strategy and Store Development Scott Martin joining GOAT's board as part of the deal.
"Having Foot Locker as a strategic partner will also expand our business as we continue to scale our operations both domestically and internationally,” explained Eddy Lu, co-founder and CEO of GOAT.
The way we see it, if the shoe fits....