Like New (worn for a day or two), Gently Worn (worn for a little longer), and Cosmetically Flawed (small error during manufacturing).
The like new/gently worn goods are restored in-house by the Nike team and then given a grade- The pricing depends product type and grade condition. The Cosmetically Flawed products is really nothing new with sneakerheads and outlet raiders as they are products that may not fit the retail scenario due to stitches and misaligned logos.
Last but not least are returned products that are not fit for Nike Refurbished–these are the ones that end up being recycled for future use.
Primarily, Nike plans to roll the Refurbished program at 15 outlets including Factory Outlets, Clearance Stores, and Community Stores. The best thing about it is that Nike guarantees that all products purchased from Nike Refurbished have a 60-day return policy. Overall, a win-win for the consumer and the brand as well.
We just hope resellers won’t flip stuff they buy from the program as it’s going to be shameful–an all time low really if that does happen.
Expect some grails to appear from time to time, remember the Air Jordan 1 Banned from 2011? For some reason, those are outlet sneakers…just saying!
But what’s the purpose of this move really? Why just now? Let’s face it: Nike is not a generally earth friendly company–why the move? We cannot really pinpoint why, but we’d like to give them a round of applause for this initiative. Consumer and earth friendly efforts? We’re up for it!
Speaking of the almighty Swoosh, here’s hands down one of the best Air Maxes that Nike will put out again and again! 
Source: Sneakernews 

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