Since the blockchain boom, NFTs have been among the hottest debates in the tech industry. It comes to a point where people stopped getting surprised at the absurd amount of money NFT pieces get sold (such as when the Nyan Cat getting sold for nearly $60,000, or a tweet from Twitter CEO Jack Dorsey selling for $2.5 million) but instead, debating on whether they are just a fad or holding great impacts on the global future.
As NFTs’ popularity swells, eCommerce businesses are incorporating NFTs in their business strategies. Today, let’s explore this recent phenomenon and see how it can affect every single eCommerce business in the time to come.
What is an NFT?
NFT stands for Non-Fungible Tokens, which means it is non-exchangeable. For example, a 10-dollar bill can be exchanged for 10 bills of one dollar, which makes it a fungible 10-dollar bill. But imagine, if your 10 dollar bill is signed by BTS – the world’s biggest boyband – will you exchange it for 10 bills of one dollar? Now, it has become a one-of-a-kind dollar bill and can’t be exchanged for other bill notes – it’s non-fungible now.
While fungible assets can be physical (house, money, property) or intangible such as cryptocurrency, NFT is strictly digital-based. An NFT can represent any physical asset in digital form, for example, audio or video files, digital artwork, etc. When a customer buys an NFT, they are purchasing ownership of the product, not just a license to use it. They can keep ownership for as long as they wish, or sell it to a new buyer as a result of this.
How NFTs – digital ownership change the eCommerce landscape
By this point, you’re probably wondering: How can NFTs possibly enhance my business – as my products are all physical goods? While it looks like the switch to selling completely digital products may pose a threat to eCommerce merchants all over the world, it actually opens new ladders of opportunities in all industries.
Selling digital-physical product bundles
Just like what we’ve said in our previous blog about eCommerce in Metaverse, while people start to explore the digital verse, they also want their avatars on these digital landscapes to own the same exact or better products than they do in real life. Thus, pairing NFTs with physical products offers brands a new way to appeal to both Metaverse-early adopters and traditional buyers who only care about owning real products.
Some of the brands that are ahead of the curve are Nike, which has secured a patent for an NFT-based line of sneakers known as ‘Cryptokicks’. By building its own blockchain system, Nike pairs real-life sneakers with an NFT version so that customers own the joy of using the actual product while enjoying using their purchases in unique ways such as digital artwork.
The fashion and art industry are also rising trendsetters for NFTs, demonstrated by the huge investment and participation from other top brands such as Balmain and Gucci.
Balmain’s CMO, Txampi Diz believes that NFTs are an important part of the company’s future “The most important element about these projects is to really tie the NFT – tie everything digital to a physical experience. This is a perfect example of how I see the future of NFTs.” They have just launched the latest NFTs as a bundle purchase with a new line of trainers, retailing at $1,069/ pair with the signature of the brand’s creative director Olivier Rousteing.
For Gucci, regarding their history of experimenting with virtual try-on to leverage the AR and VR trend, their digital-only products seem like a logical next step. Right now, you can own Gucci sneakers at only $11.99 a pair – a much more affordable way to get your (digital) hands on some collectible Gucci products. As the trading capabilities roll out, the value of limited releases is likely to go up (just like they do for real-world designer clobber), so this is definitely one to watch.
Instant gratification
Despite the spike in the popularity of eCommerce, there is always one thing it can never compete with brick-and-mortar experience, which is the capability to buy the product immediately. Even with the consumer demand to have same-day delivery, companies are struggling to create frictionless experiences and meet tight delivery deadlines, especially under unexpected conditions such as the strike of a pandemic and its variants.
Thus, the boom of NFTs and hybrid shopping allows people to fill this experience gap. When they decide to purchase a tangible product that comes with a virtual NFT, customers have immediate ownership of these products, even if they have to wait for several days to receive the actual item.
While this looks more like an added-on right now, the mindset to offer products that don’t have shipping or storage costs is exciting merchants all over the world because they can increase the scope of their product catalog while increasing their profit margins on each sale at the same time, especially when the Covid strike has brought up many logistical challenges in eCommerce.
Value-added loyalty programs
Amid the cut-throat eCommerce market, no merchants are staying out of the loyalty programs war to keep customers coming back and increase their LTV. However, while so many are joining with so little creativity or new ideas, nearly 40% of consumers choose not to join loyalty programs because they are seen to lack value, according to RetailWire.
The problem with the pricing fight is that it can only win customers for a very short period – once they find places offering better prices, they will not hesitate to leave you. So to win the long-term game, adding unique and genuine value is something you should invest in.
This is a perfect place for NFT collectibles to fill in the gap. Rather than merely redeeming points on products that a large number of customers can have access to, NFTs offer something truly at the core of customer insight: scarcity. NFTs are entirely unique offerings that customers cannot obtain anywhere else. This creates exclusivity, which adds value to your program by not limiting it just to monetary exchanges.
NBA fans are among those enjoying this trend the most, as now they can collect and trade Top Shot Moments through their dedicated online platform – Moments. Here, NBA fans can trade anything, from video clips to signed clothes and even cards with a picture of the player on them.
Product verification
Another critical function of NFT in the future is its ability to verify the authenticity of a product. For example, every customer purchasing an old yet high-ticket luxury item like a Chanel Classic Flap Lambskin purse or a pair of Christian Louboutin heels would want it to be authentic. And with the technology and tactics to create the like-real counterfeits evolving rapidly, differentiating the real items from their fake ones can be quite tricky, even for experts. This is when blockchain-backed verification systems of NFTs come to play.
With a digital certification that can’t be traded and will stay forever (instead of a physical card that you can lose), NFTs support your product’s premium price by adding in that extra layer of luxe with an NFT for these items. With garments that also came with an NFT that functioned both as a personal signature and deed of ownership, the goods’ perceived value would increase, while the brand’s fight over counterfeits may see the light at the funnel.
Wrap up
Today, eCommerce has so many things to bring to the table, and NFTs can be one of them. By combining NFTs and eCommerce, you can associate the brands’ experience with a sense of product scarcity to gain a high-level profit value.
The key to seizing the leading position is to get things started right at the beginning of the curve – subscribe to our Blog to get the latest piece of industry insights, or contact our eCommerce experts to strike the right chord and explore the opportunities today.
