Web3 design studio RTFKT, which Nike acquired last year, launched its first IRL “smart” sneaker, the Nike x RTFKT Cryptokicks, during Art Basel in Miami on December 5. The company specializes in virtual sneakers and collectible NFTs.
The launch, however, exposed a number of issues involving RTFKT’s approach and the expectations of its NFT holders. Among them were the company’s lack of global shipping, the customer confusion about its different NFT projects, and the unexpected costs for its IRL sneakers. These problems led to a floor price drop to 1eth ($1,232) for its MNLTH NFTs. The results offer a learning opportunity for brands on how to manage NFT holder benefits. For starters, communicating with the community, ensuring worldwide participation and clarifying roadmaps are key.
Nike’s NFT initiative is not the first of its kind. Brands such as Rebecca Minkoff and Balmain have also experimented with NFT projects over the last year. Below, an explanation of the Cryptokicks product, the backlash surrounding their drop and the top takeaways from the activation, according to experts in the field. RTFKT did not respond for comment.
What are Cryptokicks?
RTFKT Cryptokicks are innovative IRL shoes that come in four colorways. They feature auto-lacing, a feature that Nike announced in 2019. The IRL shoes also have enhanced lighting, haptic feedback, gesture control, walk detection, a move-to-earn mechanism, app connectivity, machine learning algorithms and wireless charging via an RTFKT Powerdeck.
There are only 19,000 units of the sneakers. They are being sold as digital collectibles that can be redeemed for their physical counterparts in a process RTFKT calls a Forging Event.
The functionality for the sneakers is unlocked through the RTFKT IRL App. Sneaker owners are able to verify their IRL sneakers using their digital counterpart through RTFKT’s World Merging NFC chip, a physical chip in the base of the shoe. The brand has hinted that it will launch IRL quests, where users could use the move-to-earn mechanics and engage with fellow community members and Cryptokicks owners.
What went wrong with the drop?
The Cryptokicks launch was connected to RTFKT’s MNLTH NFT that officially launched in April. As is typical of NFTs, MNLTH NFT buyers were promised exclusive access and perks.
As access to the MNLTH NFT sale was first airdropped to holders of previous RTFKT NFT projects in February, many assumed that the MNLTH holders would be rewarded for their loyalty by receiving first access to the Cryptokicks. As such, RTFKT received a flurry of backlash from NFT holders on Twitter when this was not the case.
What’s more, most RTFKT NFT holders had to pay full price for the sneakers. Only holders of MNLTH 2 — an iteration of the original MNLTH NFT — received a $150 discount on the $500 shoes. Most expected not to pay for the sneakers, as the initial MNLTH NFT went for $30,000 at the time of sale.
Worldwide availability proved to be another sore point. The IRL shoes are not available to those outside of the U.S. RTFKT has since addressed the problem by allowing European customers to secure distribution from the U.S. to Europe through services that first ship to U.S. P.O. boxes.
Grant Flannery, vp of planning at creative growth acceleration company Huge, owns around 100 NFTs from brands like the Bored Ape Yacht Club, Gutter Cat Gang and RTFKT. He bought a MNLTH 2 NFT.
“The reason the community was most annoyed about the launch was that it was not communicated beforehand that the shoes would only be available in the U.S. Plus some people, myself included, invested a lot of money only to be told I had to pay more money to actually get something and the original [NFT purchase] was almost worthless,” said Flannery, who is based in New York. “This all could have been avoided had they been clear from the start that the product was only for the U.S. […] In saying this, they responded fast, communicated and listened, and made immediate changes to help the community get what they wanted within 24 hours.”
Flannery said NFT holders appreciate honesty over everything else. “We all know that there is a risk [in buying NFTs], and the market depends on speculation. So most holders want to be kept in the know so they can make the right decisions for themselves,” he said. “The No. 1 thing brands need to think about is their vision and purpose in the space. […] Holders expect frequent updates and value to be given to them and not extracted from them.”
The redemption period, or the time in which people are able to exchange their Cryptokicks NFTs for physical sneakers, was originally set to run until December 19. After customer feedback and criticism on Twitter stating the timeframe was too short, the deadline was moved to May 1.
MNLTH holders also complained about public access to the shoes. They assumed it would be an exclusive product, though a public draw was offered from December 7-9 for any leftover supply. Additionally, some users criticized the growing number of small-scale NFT luxury brand collaborations and drops, saying they’re diluting the value of the main projects like MNLTH.
Ultimately, it appears the complications drove the NFTs’ value down: The value of the MNLTH NFT has slipped from from 2.8eth ($3,450) to 1eth ($1,232) since December 4. The value of the separate RTFKT X Nike Trillium Lace Engine NFT that allows access to minting for one pair of Cryptokicks has also sunk, from 1.6eth ($1,971) to 0.2eth ($246) since December 4.
How could this have been mitigated?
In Rebecca Minkoff’s opinion, an NFT project manager is crucial for brands leveraging NFTs. Minkoff works with NFT marketplace Mavion, which manages the experience on the brand’s behalf. “We have a very tightly managed perks plan with Mavion, and they are leading the perks and timelines for our NFT launches through to September 2023,” said Minkoff.
For web3 brands like fashion designer Charlie Cohen’s RSTLSS, continued investment and long-term planning are essential. “We need to move past this 2021-2022 narrative of NFT projects and jpegs, and instead think about how NFTs’ underlying technology can be used in a way that’s authentic to a brand’s vision,” said Cohen. “Ownership, collectibles, tickets, access, verifying and tracking of physical items, interoperability — this is what the tech is here for. And brands have only scratched the surface.”
Cathy Hackl, chief metaverse officer and co-founder at metaverse strategy company Journey, said it’s also important that brands use NFTs to talk to their communities, not at them. “Explore what they would like to see from your brand in 2023; ask them what’s of value,” she said. “You can’t please everyone, but most times, your community can tell you how to prioritize them. Brands should ask themselves how they’re providing value to their existing community and the communities they want to further bring into their ecosystem.”
Anne-Liese Prem, brand strategist and web3 educator, owns 30 NFTs from leading fashion-related projects in the space. “This is a very rare time when brands can journey into the future together with their customers,” she said. “As an educator and NFT holder, I’m looking for continuous surprise, entertainment and special opportunities that are for the NFT community only.”
According to Prem, brands should use NFTs to test new concepts like co-creation, token-gated access and limitless creativity. “Brand’s should stay authentic and true to their DNA, and be honest when they mess up. This space is very new, and things go wrong all the time,” she said. “If brands move now and have a smart roadmap for the next few years, they can tap into a unique opportunity to engage with early adopters and be part of the culture in the making.”
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