No “hot” tech trend is safe from scrutiny — and NFTs are no exception. Although NFTs, or non-fungible tokens, have garnered a lot of buzz in cryptocurrency circles, executives in potentially impacted industries — namely retail and digital media — have questioned their staying power.
But that hasn’t stopped digitally driven brands, such as e.l.f. Beauty, Gucci and Taco Bell from creating and launching their own NFTs. Most recently, e.l.f. Beauty launched a collection of NFT “Crypto Cosmetics” based on its most beloved products. After successfully launching a pair of NFT sneakers that were sold for $12 a piece, Gucci put an NFT up for auction inspired by its Fall/Winter 2021 collection. The starting bid: $20,000. In a surprising turn of events, even Charmin hopped on the digital bandwagon, selling its own digital toilet paper art and donating the proceeds to the Direct Relief charity.
CBInsights reported that executive mentions of NFTs in earnings calls surged in April and May, shortly following the release of Gucci’s NFT shoe, and that buzz is only continuing to grow as use cases and benefits become more tangible. As the report stated:
“NFTs are a very real opportunity for brands and retailers, with applications ranging from authenticating tangible goods to reducing friction in ecommerce to generating new revenue through virtual sales.”
Most notably, NFTs present a powerful opportunity to activate and nurture online communities and help create more immersive, even lifelike, digital commerce experiences. In a recent episode of the “Retail Remix” podcast, Deb Gabor, CEO of Sol Marketing, and Justin Banon, Founder and CEO of Boson Protocol, shared the applications they believe can drive the most value for consumer brands and retailers.
Listen to the full episode or read the takeaways below:
1. Digital Commerce
NFTs can be used to buy and sell visual art, music, products and collectibles. Because the perceived value of NFTs can change over time, as well as every time an “item” changes hands, there is a feature that pays creators a percentage every time an NFT is sold. This is especially valuable for artists and other digital creators looking to scale their businesses.
However, there are other companies such as Circle and Boson Protocol that are attempting to support all forms of digital commerce. Circle’s payment and treasury infrastructure was developed to make it easy for NFT marketplaces to create more seamless payment experiences, allowing them to accept blockchain payments, as well as credit cards, bank wires and ACH. Boson Protocol takes a different approach by creating NFT vouchers.
“These vouchers lock up funds from buyers and sellers…and then release the funds if the buyer and seller go through the transaction according to agreed-upon rules,” Banon explained. “It’s the same rules as if you were to transact on a platform like Amazon, but instead of needing a platform, they’re encoded within the NFT voucher. The actual NFT automates commerce without the need for a platform or intermediary.”
2. Brand Engagement & Loyalty Creation
From a brand and PR perspective, investing in NFTs can help generate a lot of buzz for a brand. However, Gabor noted that a more meaningful benefit is that NFTs can help activate a growing and highly engaged fanbase.
“NFTs can create this unique brand experience and a way to own a piece of a brand or something that demonstrates your fandom to a particular brand,” she said. “NFTs encourage interaction … The opportunity to promote NFTs and have people want to exchange their hard-earned money for them and then get bragging rights from them, is a way to [allow consumers] to interact with the brand in a way that they’re not directly interacting with products and services.”
Gabor explained that NFTs connect to a broader goal of achieving “irrational loyalty,” which is when consumers will do anything and pay anything necessary to feel closely connected to a brand. “There’s nothing more irrational than buying something that isn’t a product to demonstrate to the rest of the world that you are a fan of that brand.”
3. Digital Products & Art
The most powerful part about NFTs, according Gabor, is that it has turned the very nature of the internet on its head. While the web has democratized information and made content in all formats available and shareable, NFTs create scarcity and exclusivity.
“NFTs fulfill a need that was previously unmet,” she said. “On the internet, things are infinitely available. You have a photograph, and it’s shared on social media, and it’s liked by several million people, and then it’s shared by 400,000 people — it reduces the tangible value of that digital asset. Now, if I, for instance, produce a print that I paint and draw, and I only produce one of those, because it’s so scarce, it increases in value.”
An extreme example of this digital scarcity is when Twitter Founder and CEO Jack Dorsey auctioned his first tweet as an NFT for a whopping $2.9 million. While Gucci took a similar approach for a lesser amount, companies across retail categories can create exclusive NFT art in partnership with creators and other influencers.
“This reminds me of the real-world luxury art market, which is based on value speculation,” Gabor noted. “I think right now, because we’re so early, the brands that are going to win in this space are the ones that do the partnerships with creators and do like the luxury art speculation experts do. When they say, ‘This person creating this art is going to be big,’ the NFTs aren’t just going to have a tangible financial value, but more of an overarching brand value.”
A smaller-scale option is to create a unique NFT product line like e.l.f. Beauty did. In the beauty brand’s case, the NFT investment helped reaffirm its dedication to digital innovation. However, other brands and retailers can use NFTs to generate buzz around a new collection, or even test new designs, products and partnerships on a smaller, more agile scale before creating physical products.
4. Digital Shopping Metaverses
Companies like Boson Protocol are exploring ways to use NFTs to support new forms of digital commerce. Banon noted that they’re starting with what they call “metaverse commerce.” He explained that the demographic most likely to gravitate to NFTs — Gen Z and millennial — have turned to online worlds found in PlayStation Go online and even in games like “Animal Crossing” to socialize, especially during the pandemic.
“Brands are really keen to engage with [these consumers] in those worlds and spaces, and create those experiences,” Banon said. “We just purchased a significant piece of real estate in the ‘metaverse’ within one of these virtual worlds — a blockchain virtual world called ‘Decentraland.’ I think it’s the most expensive real estate purchase today in the metaverse and we’re building this incredible virtual mall experience.”
This virtual mall experience will create a digital, in-world branded experience “where consumers can perform gamified, branded quests,” Banon explained. “You can go on an Easter egg hunt or assemble something, which then gives you the ability to buy digital items or digital wearables.”
Banon notes that moving forward, Boson Protocol’s vision is to build an ecosystem of 3D designers and virtual real estate that can support retail and brand partners: “We’ll be putting a virtual mall in every world, so we’ll be syndicating retail exposure in-world. Brands will come to us and we can give that white-glove treatment where we introduce them to partners and connect them to the technology.”
5. Omnichannel Activation via ‘Physical Twins’
Although many younger consumers find excitement and value in the digital metaverse alone, Banon noted that brands and retailers can also create “physical twins,” or tangible versions of NFTs that can be picked up in stores.
“It’s really building on this digital-to-physical theme of digital quests and experiences, digital-to-physical redemptions, and using Boson Protocol NFT vouchers to be redeemed in stores,” Banon said. “We’re working with some incredible digital designers, mainstream designers, game designers and metaverse architects to create some of these incredible experiences that have the potential to breathe new life into retail.”
Banon added that as consumers begin to venture back to stores, retailers are focused on re-energizing their in-store experiences. He pointed to NFTs as an optimal way to bridge that digital-physical gap by turning online inspiration and engagement into physical traffic and purchases.