Is phygital a possible future for NFT business models? The case of RTFKT

Chris Sirise
5 min readSep 19, 2022

RTFKT’s latest has reignited phygital’s promise but NFT business models may leave more questions than answers

By Chris Sirise, Partner, Saison Capital

The metaverse is merging ever further with the offline world with RTFKT’s latest phygital forging event: #CloneX SZN 1.

In 7 days, 3.91k minters bought 40.7k NFTs and physical items, generating 7,193 ETH (US$11.32M) minting revenue across all transactions, and generating a further US$181.75k in royalty revenue. The average minter had more than two phygital-linked NFTsitems in their basket, and spent more than $2,895.

As one of the most significant phygital drops to date, the spotlight on RTFKT seems to be shared with a bigger question on this trending development: does eCommerce conversion = NFT success?

Phygital as a Revenue Stream

Quick recap — phygital in the NFT space refers to physical versions of digital tokens; a growing value-add for NFTs. In owning the virtual asset, you retain exclusive purchasing rights over a physical version of the token. This means you can wear the same exclusive merch as your metaverse avatar. It’s increasingly becoming a way to represent your NFT credentials offline, to invest in creators and communities you believe in, and fund the projects you want to back.

The CloneX SZN 1 forging event was an opportunity for folks holding NFTs in the collections to forge a physical version of their token — which includes hats, sneakers, jackets and more. It isn’t just an exciting moment in the phygital fashion space — it’s a critical insight into the potential of this revenue channel.

RTFKT has already generated US$180M in royalties and minting revenue to date, with the SZN 1 Forging event increasing this by 6% — in just one week. This is an incredible achievement for RTFKT as an organisation, but also the world of web3 and metaverse fashion.

Comparing slides to sneakers: the difficulty in translating KPIs to NFTs

There’s two ways to assess the success of CloneX minting. On the one hand, 41% of holders paid to mint, which is significantly higher than the e-commerce industry average of 1.78%. That is an incredible conversion rate and commercial success.

However, NFT success is on community investment and connection — and less than half of a community participating in such a huge drop is noteworthy. A large proportion of holders not paying to mint indicates there is a gap somewhere between product, price, narrative and audience. This is a critical lesson for future phygital collections.

It’s worth unpacking if there is still a disconnect in expectations between what the team is building, and what their NFT holders want, and whether the range of options for the next sale across both price and designs can be wider to avail more options.

Finding phygital-market fit

It’s important to note that the average spend of US$2,895 per minter is high — even for luxury fashion e-commerce drops. In comparison, the average pair of Yeezys cost from US$250 — US$550, which are also a statement item released in limited batches of 40,000. This could be attributed to a number of factors: the excitement and urgency of a limited time drop, or ‘one to stock, one to rock;’ the practice of buying one for yourself to wear as a statement, and holding onto one as an investment or stock to flip.

So, on the one hand there is clear demand translating into high total spend. However, in terms of how much of the interested community has converted to sales, the project has fallen short of ‘true’ web3 success. But this isn’t the end of the sale.

What will be interesting to watch now is how prices change in the months ahead, on the secondary market. If physical and digital items sustain or even increase in value, either alone or as a set, we can chalk this up as a product-market fit. If we see prices dip, this could be a lesson about speculative traders trying to play the market, and pricing out community members — which could influence pricing strategies of future phygital plays. Will we start to see NFTs and their accompanying physical merch sold separately — and what will that mean for the value of each element? Will there be scope for re-forges for future token-holders to issue physical versions of their previously forged assets? The answers to these questions could greatly swing the price either way.

Data done by @nlevine19: CloneX Forge Event SZN 1 Overview

This drop has served to demonstrate a possible product-market fit on an emerging revenue stream in the NFT space, which is an incredible achievement for 3 year old RTFKT. With the learnings of this drop, and the subsequent price fluctuations, this could mark a watershed moment for the NFT space in translating virtual assets into physical items and realised value.

While NFTs have disrupted brand-building and community engagement, we are still yet to see a proven business model with NFTs as the core product. Royalties have proven to be an insufficient source of revenue for most projects and a broader question remains on how to build products and experiences on top of NFTs as a technology.

This is a space I’m excited to watch develop and welcome founders, builders and speculative buyers alike to reach out on to share your thoughts as the space matures from degen free-for-all to sustainable business models.

Note: For full disclosure, I do hold a number of NFTs from this event and also other NFTs RTFKT has produced in the past. While I believe RTFKT’s foray into phygital marks a watershed moment in NFT business models, I do not advise or believe that this will or should influence the price direction of NFTs in the RTFKT ecosystem. It is my opinion that NFT price generally does not indicate project or business success.



Chris Sirise

Web3/Fintech VC + Angel, Founding Partner @ Saison Capital. Invested in 50+ companies. Tweets at: