Nike, Sneakerheads, and Kickstarter Exclusives

25 January 2016 | 32 Comments

I don’t like or endorse the use of Kickstarter exclusives. I want to be clear about that before I delve into today’s topic. I like promos, which are decidedly not exclusive–a promo is something you include in backer rewards and then can sell them at an additional cost post-Kickstarter (or give them away to conventions, retailers, etc.) But exclusives? Not a fan.

However, today I’m going to talk about a company that may or may not use exclusives to great success, and how this might apply to Kickstarter.

I recently watched a fascinating TED Talk by Josh Luber about Nike (transcript here). In short, the talk is about how Nike releases a new, expensive shoe almost every week. People wait in line for days to buy these shoes.

Like any business owner, I’m intrigued by anything that has people excited enough to line up for it. So what’s so special about Nike’s strategy?

The key is that Nike produces very few of these shoes, even though they could make more. They artificially lower the supply. Supply doesn’t inherently increase demand, but in the case of Nike, it turns out that there is a significant secondary market for these shoes. They’re viewed as precious commodities among “sneakerheads,” people who collect and prize shoes.

The result is an annual $1.2 billion secondary market.

People will wait in line for these shoes because the value of each pair is likely to significantly increase after the initial purchase. Sneakerheads can sell them for more later or feel special because they paid $200 for a shoe that is now worth $1000.

***

Here’s the question that has been nagging at me for weeks: Why does Nike do this? Sure, they sell a small number of expensive shoes very quickly, but why not just make more of those shoes and lower the price? Here’s what Luber says:

“Unlike Apple, who will sell an iPhone to anyone who wants one, Nike doesn’t make their money by just selling $200 sneakers. They sell millions of shoes to millions of people for $60. And sneakerheads are the ones who drive the marketing and the hype and the PR and the brand cachet, and enable Nike to sell millions of $60 sneakers.”

I’ve bolded the part that I’m not fully convinced about. On one hand, it appears to be true because Nike is so dominant. On the other, correlation doesn’t imply causation. Does the average consumer really buy $60 Nike shoes because a very small number of people are willing to pay over MSRP for limited-run shoes? Do people love the Nike brand because of the exclusive content, or despite it?

***

2016-01-25_1130So why don’t other shoe companies do the same thing? As it turns out, they’ve tried, but Nike’s absolute domination of the market (96% of all secondary market sales are of Nike sneakers) has kept competitors at bay. On a human level, it makes sense–why would you invest in any other brand’s shoe when Nike is a sure thing?

Objectively, though, I think it’s fair to say that Nike shoes aren’t any better than the other brands. Or, if they are, it’s a pretty small difference. Adidas could design the most beautiful shoe ever, but sneakerheads are still going to want the the Nike shoe of the week.

This leads us to Kickstarter. The Nike strategy shows us that it is possible to create added value through exclusives. Whether that value is just to collectors or to the overall public is to be debated, as I mentioned above. But it’s possible, as Cool Mini or Not demonstrates in the tabletop game category of Kickstarter.

The key, though, is that it’s not going to help the vast majority of creators. For most projects, having exclusives is much more likely be be divisive and even despised–it will hurt your brand value more than it helps. It will alienate people who don’t learn about the product until after the Kickstarter campaign, and if you sell the exclusives to them anyway, you will lose your backers’ trust.

***

We all want people to be so excited about our brand that they’re willing to wait in line for a new product. But I’m reminded of a ramen restaurant I frequented when I studied abroad in Japan, a little place in Kyoto called Tonryuu. Tonryuu always had a line out the door, and it wasn’t because they only made a few pots of ramen. Rather, it was because the restaurant was small, and the ramen was so good that it was worth waiting for.

I think that’s the key takeaway for creators. Rather than artificially excluding people like Nike does, just make really awesome stuff.

Also read: https://www.boardgamequest.com/kickstarter-exclusives/

32 Comments on “Nike, Sneakerheads, and Kickstarter Exclusives

  1. I feel the distinction is that Nike probably didn’t start by making exclusive shoes every week. Rather, they noticed that certain hard-to-find styles were being marked up, and I expect there was a slow phase of testing the waters as they increased their limited-edition shoes. Essentially, an established company built upon existing customer demand rather—as opposed to a new company trying to build up by creating “exclusive” content people don’t care about.

    Also, it appears the Nike exclusives are prized for their collectability, where as when we’re talking about board games, the exclusives are often game content and are desired as, essentially, expansions. The people who most like board-game exclusives are probably the collector-oriented sort.

  2. Cool Mini or Not is a perfect example of a game company utilizing “exclusives”. All of their add-ons could be considered exclusives in the framework of this topic. You don’t need them to play the game, but they can enhance the experience. They also tend to be more limited in availability after release. The core game will generally have a larger print run, but the add-ons will either get to distributors much later or not at all.

  3. Aaron: Yes, I mentioned Cool Mini or Not near the end of the post. I compared them to Nike–what they do with exclusives cannot be replicated by the vast majority of creators.

    Do you think people like the CMON brand more or less because of the way they implement exclusives?

  4. I think people like CMON less for it but back their Kickstarters more.

    Or at least I hear almost all hate regarding the exclusives while their campaigns are being generously overfunded. Maybe this is from separate camps of people or maybe there’s a huge mix of people who hate the exclusives but don’t want to miss them.

  5. Jamey,

    Great article…a definite ‘think-piece’ ~ I’m particularly intrigued by your comment on causation and on limiting supply doesn’t necessarily drive demand. In this case, as Nike is a multi-decade leading industry leader, they do in fact make an item (despite their abysmal record for using overseas labor) that many people want.

    Interestingly, though, the argument against this type of content isn’t particularly compelling, because if you want the $200 sneaker, you may buy it. If you don’t want it or can’t afford it…you don’t buy it. While I absolutely agree with you that I don’t find exclusive content particularly appealing in the Games’ industry, where different designers are creating very different games, Nike is producing…really, just another type of sneaker.

    Cheers,
    Joe

  6. Joe: That’s a great point about how two games can be vastly more different than two pairs of sneakers. I wonder how Nike would fair if they started increasing supply of the $200 shoes to meet demand. Perhaps they would lose the sneakerheads, but I’m not convinced that Nike needs them as much as sneakerheads (or, at least, the guy who gave the TED talk) would like to think.

  7. Something else to consider is what role exclusives play.

    For a boardgame, an exclusive fancy die with a “hit” icon in place of a 6, a “maybe” icon in place of the 4 and 5, and blank on the other 3 sides is very, very different from an exclusive expansion or the like.

    I would argue that Nike’s exclusive shoes are fancy upgrades, not expansions.

    For some people they are a nice to have, and trigger their collector response.
    But nobody is unable to enjoy the utility of product as the utilitarian components are non-exclusive.

  8. Well, here’s the thing: I’ve been there (with nice component upgrades that didn’t impact gameplay on Euphoria), and it didn’t work out in the long run. Because if you tag them with the “exclusive” label, even if you want to sell them post-Kickstarter–even if you have extra copies to sell–you can’t do so. I mean, creators do that anyway, but it’s a great way to lose your backers’ trust. I won’t rehash the full story about Euphoria here, but it’s in my book. :)

  9. Pink’s Hot Dogs, anyone?

    The Nike thing reminds me more of the “Pledge $150 to have your face in the game.” type “exclusive” than any other type.

  10. Jamey: Where do you draw the line between promos, which you like, and kickstarter exclusives, which you don’t like?

    Are kickstarter exclusives that are available from CMON’s booth at conventions really worse than promos that are available only at a specific convention, or only at a specific OP event, or only in a specific magazine, or only from backing a fund raiser, or only from buying direct from the publisher, or only in a promo advent calendar?

  11. Paul: In the truest sense of the word, an “exclusive” may only be available at the time that you say it’s available. So if you say something is “Kickstarter exclusive,” it means that the only time it will ever be available is during that specific Kickstarter campaign, never again. Creators don’t always do that–I see the term misused all the time, sometimes deceptively, sometimes unintentionally–but that’s the literal meaning of it.

    A promo is different simply because it’s not exclusive. You’re not bound by the covenant of exclusivity. You can sell them or give them away as you wish, and you can even make more of them if you want.

  12. Jamey: Hasn’t CMON essentially redefined “Kickstarter exclusive” to be the same as “promo”? They added the text “Is an exclusive item for Kickstarter backers, with remaining stock available through conventions and special promotions only” to their projects and have been giving away exclusives at the last 3 Gen Cons. They took a lot of abuse when the exclusives first showed up at their booth but now it’s accepted and other project creators have followed their lead. They’ve even reprinted some of their exclusives.

    I hadn’t thought about promos being something to sell. I can think of a few games where some of their promos were available for purchase, but I thought it was fairly rare. Interesting.

  13. Paul: I actually think it’s pretty common to sell promos. Look at the BGG store.

    As for the definition of “KS exclusive,” I’m definitely aware of what you’re talking about. But I’ll be honest–it frustrates me every time I see it, because it’s super misleading to people who don’t read the fine print. Fine print should be for clarifications, not completely redefining what words mean.

  14. My view on the matter is that exclusives should be collectables only, not stuff that is would actually make the game better. For example, a game with real metal coins (the exclusive) vs. plastic coins (the none exclusive). The exclusive material in this scenario creates personal and playable value to the game. This can lead to those who do not have the exclusive material to feel as if they have a lesser or even incomplete version of the game.

    However you can have exclusive material that does not add or take away from the games playability but still adds value (whether perceived or actual) the exclusive material. For example, a game with one single metal coin and the rest being plastic vs. a game with all plastic coins. This gives exclusive and collectable material to those who value such things but, since it is limited to one coin, is not likely to be played in the game. It also ensures that those who did not receive the exclusive material did not in-turn reserve a lesser version of the game.

    There are plenty of other ways to do exclusive material that does not drastically alter the quality/value of the final product but still are individually valuable. Such as, artist/creator signatures, exclusive polls, alternate rule book, and personal recognition through letters, videos, posts, etc.

  15. Betta: I wish that were true, but in my experience, if you create something people want–whether it’s a component upgrade/addition or a gameplay addition–and you don’t allow people to buy it post-Kickstarter even if you have stock to sell them because of the “exclusive” label, they’re not going to be happy about it. From a creator perspective, if I’m lucky enough to create something people want, I want to be able to get it to people after Kickstarter–I want to include people, not exclude them. Particularly with my experience with Viticulture and Euphoria, I’ve found that non-backers want to be included just as much as backers do, even if it costs them extra.

  16. Jamie: Aren’t the promos on the BBG store fundraising promos? Promos given or sold at cost to BGG so they can raise funds for their site? It’s different than, for example, Plaid Hat Games selling some of the promos for Dead of Winter on their website.

    Back on topic… I can understand Kickstarter exclusives. It’s a way to convince people to back a project now rather than waiting to read reviews and buy from an OLGS later. I’m also happy to see CMON and others making the exclusives more available by having them at conventions or giving them to the BGG store.

    But I have trouble wrapping my head around so many of the other types of promos that pervade our hobby. For example…

    Why are there Arkham Horror and Eldritch Horror promos available only to the few who attended Arkham Nights each year in Roseville, Minnesota? Or a Colt Express promo only available in the French magazine Plato? Why does supporting the Dice Tower get you promos that aren’t available anywhere else? Why does the BGG store not get restocks of the promos that sell out? Why does Cryptozoic give one set of promos for buying Hot Rod Creeps at Gen Con one year than has another completely different set of promos for buying it the next year? (ok… that was personal) Why does Brettspiel Adventskalender 2015 exist?

    The Nike limited releases seem very similar in purpose to all the various limited availability promos in tabletop gaming. Do all these promos “drive the marketing and the hype and the PR and the brand cachet” as Luber suggests with the Nike shoes?

  17. Paull: Promos on BGG partially go to pay BGG, but they also result in ad credit for the publisher. Either way, the point is that it’s very common for people to pay money for promos.

    Those are good questions about other promos. I think the key, though, is that they’re not exclusive (at least, many of them aren’t). If there is a special Arkham Night promo given to the people in attendance, if they aren’t labeled with the word “exclusive,” it means that FFG can sell or give away the same promo later without impacting their integrity.

  18. I used to be a fan of exclusives, but ever since I read about your experience with Euphoria, I think that the small (and temporary) benefits they bring don’t outweigh the larger, more long-term risks. I’m reading chapter 7 of your book now, and the section “ten better reasons to compel backers to support your project than exclusives” is very compelling. I particularly like the idea of replacing exclusive content with promo content, to be included now for free, but after the campaign at a price. Promo content adds value to your project, while not making people feel excluded if they discover your product after Kickstarter.

  19. Mike: That’s exactly my thinking too. Promo content is so much more flexible than exclusive content, yet it has nearly an identical impact on people’s desire to back the project now rather than wait.

  20. It may also be worth considering that Nike is, after all, NIKE. Companies that are already huge and notorious can get away with gimmicky stuff like this because they already have a cult following that they can draw on. The revenue they generate ends up being extra on TOP of the millions they’re already getting. Most of us mom-and-pops on Kickstarter would come across as presumptuous, I think, to offer some sort of elitist/exclusive offer.

  21. Is there a board game designer that has made a very limited print run of a great game? What if Stephan Feld or any other popular designer did that? Do you think people would “wait in line” and pay four times as much for the game?

  22. Daniel. Although it may be possible to do that it wouldn’t make since for that particular industry. In comparison to Nike, there is a huge difference in the product-consumer relationship. Where shoes are typically only worn/enjoyed by one person and worn/displayed to other consumers through use, table top games are very different.
    Table top games involve multiple consumers instead of one and are both displayed and consumed in more social/intimate settings. Makeing exclusivity counterproductive.

    Simply put, games are meant to be shared…shoes aren’t.

  23. I think there is an important distinction to be made between crowdfunding exclusives and limited editions. What I have done in my blu-ray release projects is produce limited editions.

    * I make enough for the backers, plus extras to cover damage replacement + 1-2 years of aftersales; usually this gets me to a manufacturing price-break point which means I can add a little bonus or upgrade for the backers.

    * I pledge never to repress, but reserve the right to do a basic re-release without the special goodies.

    * I guarantee that the limited edition will never be available for less than the crowdfunding price — this is crucial, IMHO.

    * The backers are credited on the project.

    I feel this is the best of both worlds; the backers get something special, the people who missed out have a year or two to get the special set if they really want it, and if there is sufficient demand, I can produce a subsequent edition for distribution through regular channels as opposed to directly.

    This strategy may not work for producers for whom the crowdfunding sales are a small % of the expected total sales, of course. And I will admit that in the Anime world, everyone knows about my weird little company so they know where to go to get the sets when they find out about them. However one thing to keep in mind is that using this strategy, all sales are at retail; without the distribution expenses, you make several times as much per copy sold, so you can tolerate lower unit sales.

  24. Robert: Thanks for sharing your strategy of limited rewards. I’ve tried to emphasize that on my projects as well. Like, when I print a collector’s edition through Kickstarter, that’s the only printing of that edition I will make, and the number I make depends on the number of backers. Because I haven’t put an “exclusive” label on it, if I have some extra copies after all KS copies have been delivered, they’re fair game for me to sell or use for our charity auction. If they were exclusive and someone came to me after Kickstarter to buy them, I would have to say no (which I did for Euphoria, and I really didn’t like it).

  25. I agree. Nike are a sure thing – both in the secondary market and the retail market. Obviously they have the pull and the marketing dollars to attract big celebrities and personalities to shill their product – but they also have the savvy to continue to create a brand that people will constantly keep in high esteem. It’s not because they have a superior product – but that they artificially keep their product numbers lower and continue to push out new designs. In translating this to a kickstarter board game – I can see where you are trying to draw the parallels. Promos are a bonus that early adopters are getting that can later be purchased at retail – should the original board game ever make it there. In that way everyone is still able to play on a level playing field – but the original players get it earlier and they get it cheaper. And that’s rewarding the people who initially believed in your vision. Opposed of course to the idea that only the original backers get the rewards.

  26. Wow what a difference a year can make! Adidas has taken to throne from Nike in this short period of time and they did it both by manipulating the supply and demand chain but also, and more importantly, by creating a great product that people want – the ultraboost and NMD sneakers. The third part of the equation which I think is what proves the point that you weren’t so sure about, is creating the hype. They did this by stealing Kanye West from Nike and supporting him in making an incredible sneaker – both aesthetically and functionally – the Yeezy Boost.

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