This article is provided by Reshift Media, a Canadian-based digital marketing and development organization specializing in retail businesses.
Being the sole owner of something that holds great value is priceless, right? Well, it turns out that in the complex world of digital assets, where you may come across terms like a non-fungible token, cryptocurrency, and the blockchain, there is a price you can pay to obtain complete ownership over a digital item that is subjectively valuable to you – but it doesn’t always come cheap.
A non-fungible token, more commonly known by its acronym NFT, has gained incredible popularity over the past few years. This technology plays a large role in how many individuals, who are well-versed in this space, buy, sell, and trade digital items that hold value (think of it as a digital collectable item).
The rise of NFTs poses the question – what role do businesses in the physical retail industry play in all of this?
What is an NFT?
As previously mentioned, an NFT stands for a non-fungible token. When something is fungible, it means that it can be replaced or exchanged for an identical item. For example, a pair of jeans that are produced by the thousands would be considered fungible because each pair of jeans are interchangeable from one another, as they are essentially identical. Meanwhile, non-fungible means the item cannot be replaced or copied. A famous piece of art, for instance, is non-fungible because there is only one original.
An NFT is a one-of-a-kind digital asset that exists on a blockchain, and it essentially acts as a certificate of ownership. If someone purchases an NFT, often using cryptocurrencies, they obtain ownership of it. Since the digital asset is non-fungible, which makes it non-replaceable and one-of-a-kind, it helps add validity to the fact that you are the only one to own it. Plus, the blockchain also helps with this authenticity since it can be publicly accessed.
Types of NFTs
Essentially, anything digital can be an NFT. This leaves a lot of room for imagination and a variety of assets. A popular example of an NFT is from Twitter CEO, Jack Dorsey, who sold his first tweet as an NFT for just over $2.9 million. The individual who purchased the NFT now has ownership of that unique digital item (the tweet).
Anything considered a “digital collectable” is an NFT since it is one-of-a-kind. Some of the more common types of NFTs include:
- Trading cards
- Memorable sports moments
- Domain names
- Items in a game
Although a majority of NFTs will not likely break your wallet (depending on what you are purchasing) there are instances where millions of dollars are spent on digital assets. For example, a digital artist named Beeple sold a collage of his work as an NFT in March of 2021 for $69.3 million.
What NFTs mean for retailers
In Q3 of this year, NFTs generated over $10.67 billion in trading volume, which is a 704% increase from the previous quarter, and a 38,060% increase year-over-year. It is apparent from these numbers alone that the popularity of NFTs is on the rise.
From an outside retailer perspective, NFTs may appear to be a very individualized way of shopping, opposite from what it is like shopping at a physical business. For example, when someone sells an NFT, it is a distinct digital asset (it is non-fungible) sold by an individual seller, but when a large retailer sells an item at a store or online, it is not typically very distinct because it lacks any initial value (it is fungible). However, as it turns out, there is room for retailers in this space, and it is becoming more popular than you might think.
An example of brands entering the NFT space includes the fast-food chain, Taco Bell, which released a digital collection in March of this year. Taco Bell tweeted that they were selling GIFs and images (taco-themed, of course) on an NFT marketplace, and it turns out the demand for digital tacos is hot! They reportedly sold out in half an hour, which demonstrates just how much possibility there is for businesses.
Coca-Cola is another large brand that made its presence known with NFT collectibles. In July 2021, they sold NFTs as part of a “loot box”, which included several items, such as a Coca-Cola bubble jacket that avatars can wear in the 3D virtual reality platform – Decentraland. However, Coca-Cola offered something a bit different with their NFTs – whoever purchased the loot box also received a physical Coca-Cola fridge. This decision helped bridge the gap between the physical and digital worlds, which many brands may incorporate as a way to ease into this digital future.
More recently, the retail giant Nike has filed seven trademark applications to protect brand assets, such as their recognizable swoosh design and “just do it” slogan, as they potentially enter into the metaverse. Although they have not currently released any NFTs, there are rumours that they are going to launch and sell virtual clothing, headwear and shoes that you can wear in virtual worlds.
The popularity of virtual goods is steadily increasing from both the public and brands alike. As more companies create and sell NFTs, it is helping generate more hype and brand interest, while at the same time making the buying and selling of NFTs more mainstream.
There is an entire virtual world out there, where virtual real-estate is booming and buying designer clothes for an avatar is becoming popular. As technology advances and we get closer to entering deeper virtual worlds, brands that are not somehow involved in this space may miss out on an incredible opportunity to reach customers in new and unique ways.
Is now the time to get involved?
Across industries, retailers are creating products for virtual environments, such as NFT furniture that their customers can buy to furnish their virtual property or wearable NFTs that can help make avatars stand out. This futuristic opportunity is happening right now and tapping into these environments can potentially provide brands with more revenue opportunities. There are also opportunities for brands to collaborate with other companies, thanks to the vast qualities of the virtual worlds; it is an open stage for endless digital prospects.
Despite the excitement surrounding NFTs, it is important to note that for an NFT to be successful, there needs to be a perceived social value associated with it. Thinking back to the example of Jack Dorsey’s first tweet – owning the tweet comes with a certain level of “hype.” Of course, not everyone will think spending $2.9 million to own a tweet is worth it, but there is clearly a market for it.
Retailers need to determine if there is a current market to create non-fungible items of their own. There are some obstacles to NFTs, such as the argument that it takes a large amount of electricity to stock blockchain data, which makes some hesitant to enter a space that still needs to get past the various bumps in the road.
Either way, NFTs are certainly something to watch, as they continue to increase in popularity, particularly among brands. The interest among digital consumers is there, it is just a matter of who will take the leap into this relatively new virtual world of consumer purchasing.
About Reshift Media
Reshift Media is a long-time partner of the Retail Council of Canada. The company is a Toronto-based digital marketing and development organization that provides leading-edge social media, search and website/mobile development services to retailers around the world. Please visit www.reshiftmedia.com to learn more.