Why Starbucks NFTs are selling for thousands of dollars

DIn the crypto bull market of 2021, countless big brands flooded into the space with their own NFTs (non-fungible tokens), hoping to cash in on a very lucrative craze. Two years later, as the crypto hibernation has set in, many of these projects have shrunk or been abandoned. NFT sales fell 83% year-over-year in 2022, according to Non Fungible data.

But in December, one of the biggest brands entered the NFT world: Starbucks. The company’s project, called Starbucks Odyssey, acts as an extension of its rewards program, where users can earn benefits for buying coffee and completing online games and quizzes. Starbucks called it a “revolutionary Web3 experience” and hailed the project as “a new, next-generation loyalty program model.”

Since the project was launched in beta – a test phase with selected customers – in December, it has already raised a surprising amount of money. More than $200,000 in sales have been completed, and NFTs that cost customers little more than a few cups of coffee are being sold on the secondary market for as much as $1,900. Crypto enthusiasts are rallying behind the program on social media, claiming it serves as the perfect bridge for crypto to enter the mainstream. Bank of America analysts praised the program as “more comprehensive than the industry’s previous NFT efforts.”

On Thursday, a newly released batch of 2,000 Starbucks NFTs sold out within minutes at $100 apiece, with the site crashes for a moment in the midst of the frenzy of activity. Buyers excited showed off their purchases on social media soon after.

But the hype may be overblown. So far, this frenzy of activity still has little or no bearing on whether most regular coffee drinkers will integrate Starbucks NFTs into their daily habits. While Starbucks has promised future rewards and benefits to entice a wider audience, for now it appears that the program is triggering Starbucks adoption among the crypto community as opposed to the other way around.

“Chasing Pokémon”

Starbucks’ NFTs aren’t even called NFTs: the company calls them “stamps,” and they’re largely not held on the blockchain. Stamps are collected when customers complete a series of tasks, including passing a quiz featuring coffee and Starbucks trivia or ordering two non-dairy milk drinks. The stamps are then stored in users’ Starbucks Rewards accounts. The company recently opened up the option to buy some stamps outright as opposed to having to earn them.

For now, the program’s adoption is driven by people who love Starbucks and crypto. Chris Fierro, who lives in Rhode Island, is an avid NFT collector, an ex-barista and a self-proclaimed coffee fanatic. He says that when he heard about the Starbucks Odyssey, it sounded like a “home run,” he says. Fierro says the experience has been seamless with his previous Starbucks routine: when he goes to a store and completes a task, like buying a bag of coffee beans, the credit is automatically loaded into the program.

Fierro has earned all four “stamps” and greatly enjoys completing the online activities needed to earn them. “I think it’s kind of a next-gen game where it’s like, ‘Oh, I can get something free out of this. I have two minutes to take this quiz, or see where my coffee was grown.’ I don’t think there is anything in there that is burdensome or feels like homework, he says.

But Fierro’s activity, consisting of minor purchases and demonstrations of brand loyalty, does not explain why Starbucks NFTs sell for hundreds of dollars on the secondary market. This trading activity is instead happening because NFT enthusiasts (read: gamblers) have found the project, and are betting that these NFTs will increase in value.

The value of most NFTs comes from their scarcity and utility, and Starbucks uses both characteristics to increase their values. Starbucks only issued 5,000 editions of their first NFT, a Holiday Cheer stamp. The benefits of owning such a stamp have yet to be announced, but the company has hinted that NFTs will provide holders with exclusive perks, from martini-making classes to trips to coffee farms in Costa Rica.

NFT traders are thus essentially betting that the price of this NFT, which has skyrocketed to more than $1,000, will be less than the rewards that Starbucks has yet to announce. “People are speculating that the value will go up or they want the whole set, which is a big thing with crypto. We’re all still chasing Pokémon,” Fierro said.

Slow adoption

Starbucks makes a tidy sum from these transactions. But the activity isn’t an indicator of whether regular Starbucks customers — many of whom barely understand the concept of NFTs — will jump through the hoops required to join the program and earn rewards. Starbucks has sought to make signing up as easy as possible, creating a streamlined experience with its NFT marketplace Nifty Gateway that doesn’t require users to set up a crypto wallet or remember a seed phrase for security. However, this system makes users’ stamps less secure, and prone to disappearing entirely in the event the program is shut down, in the same way that FTX’s NFTs disappeared after the company went bankrupt.

So far, mainstream adoption appears to be slow. “It seemed more like a gimmick and I got sick of it within minutes of using it,” Reddit user cobieheath, who frequently writes in the Starbucks subreddit about life as a barista, wrote in a message to TIME in January. “I don’t personally know anyone else who has used it. I haven’t even heard customers talk about it.”

When TIME asked Starbucks baristas at JFK airport this week if they knew about the program, they responded with confusion.

And even winning over Starbucks Odyssey’s target audience has been slow progress in some cases. In January, Maika Isogawa, a Web3 founder who is also an avid Starbucks fan, described the app to TIME as “poorly executed,” particularly because she disliked a “Flappy Bird-esque game that looked like something I built my freshman year in college ».

But in March, Isogawa said she has since warmed to the program. “I think Starbucks is one of the few companies that 1. tries some kind of web3 loyalty program and 2. does a decent job at it,” she wrote in an email to TIME.

A representative for Starbucks declined to comment.

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