Normally, there is a multi-year hype cycle from when the “next big thing” in tech is announced to when it actually reaches mainstream adoption. (Remember when Jeff Bezos announced the forthcoming arrival of drone deliveries on 60 Minutes? That was in…2013.) That has not been the case with Non-Fungible Tokens, aka NFTs, also referred to as “nifties” by the in-crowd.
Starting in mid 2020, NFTs went from a vague concept that few knew about to a full-on craze. Nothing exemplifies this more than the spring 2021 Christie’s auction of a jpg by digital artist Beeple, which sold for a staggering $69,346,250. While that type of frenzy buying is not sustainable, many brands are already experimenting with NFTs. Rather than the value of any single digital asset, it’s the underlying structure of these digital tokens that make them viable for a number of uses in digital commerce.
NFTs leverage the same blockchain technology that powers the Ethereum cryptocurrency. So, while an NFT can be virtually any type of digital asset, every NFT transaction is verified in a permanent ledger containing every other NFT transaction. As importantly, from a mass adoption standpoint, the ways to buy and sell NFTs is expanding from specialized exchanges to mainstream commerce platforms like Shopify. So, even after the NFT balloon comes back to earth (or after its bubble bursts, if that’s your preferred analogy), the potential use cases for NFTs are numerous and compelling.
Counterfeit products have long been an issue for every marketplace that allows third-party sellers. The problem has reached such an extent that global brands like Nike (more on them later) have pulled their products from marketplaces altogether. NFTs offer a solution, allowing any brand or retailer to provide a digital certificate of authenticity for each and every product sold, tied to the existing SKU-level UPC or serial number. This has the potential to remove counterfeit merchandise from the legitimate market, while boosting consumer confidence and trust with the brand or seller – the lifeblood of successful digital commerce. And for certain product categories, the digital certificate can continue to provide value, as products are resold in secondary markets.
Lookbooks have long been a standard in the fashion industry, but their value beyond brand positioning is questionable. Brands with loyal followings can now turn their lookbooks into entirely new revenue streams. Lookbooks can be morphed into a variant where fashionistas can own digital photos featured in the photoshoot, or even sketches or digital prototypes of the garments themselves. Nike received a patent for what they’re banding cryptokicks. While cryptokicks can allow sneakerheads to track ownership of their physical shoe collections, as noted above, the application goes further. It would also allow individuals to “breed” or morph digital footwear to create new one-of-a-kind iterations, which could then be made by Nike into a bespoke pair of shoes (which almost certainly would never be worn). Where else could apparel, footwear, and accessory brands monetize their product lines and marketing collateral?
Goodbye annoying warranty cards. Nearly all manufacturers have some type of product warranty, but customer activation, via mail-in or online forms, is historically poor. NFTs can easily be used to simplify this process. Through digital commerce channels all pertinent information is captured at the point of purchase, so it’s simply a matter of integrating warranty information as part of the order confirmation process. This spans a wide range of product categories, from consumer electronics to industrial parts and equipment, making this one use case for NFTs has both B2C and B2B applications.
As part of Shopify rollout of NFT transactions, the Chicago Bulls debuted an NFT offering of limited edition digital championship rings, which almost immediately sold out. (The Bulls took this a step further, by adding an element that offered physical products and in-person experiences for those reaching defined parameters.) While certainly not applicable to all industries, the ability to create exclusive digital products can open up new revenue streams, while engaging customers and providing instant gratification through digital delivery. Music (at the artist and label level), video gaming, travel, luxury brands, and others can all tap into this opportunity. The key will be tightly controlling supply vs. demand so as not to dilute the offering and the brand itself.
Building upon the concept of digital exclusives, brands can incorporate NFTs to make their loyalty programs more interactive, engaging, and, because the ledger is built on blockchain technology, 100% trackable and less open to fraud. NFTs can be issued in lieu of points, stars, or other counting mechanisms, and used to trigger rewards within the construct of a loyalty program. Gamification can be introduced to add another layer of interactivity. The program can be tracked across sales channels to reward customers wherever they purchase a product, and exchanging NFTs for products or in-person experiences add another dimension to loyalty programs, beyond the typical spend X get Y promotions.
USER-GENERATED CONTENT (UGC)
What better way is there for a brand to engage their audience than turning their customers into creators? NFTs can take user-generated content beyond the product review or tagged social post. This opens up numerous ways for brands to connect with their fans (and fans to connect with brands) in new and interesting ways. Think fan-fiction for the digital commerce world. The possibilities are only limited by imagination.