NFTs & Ecommerce: What You Need To Know
February 15, 2022
The Bolt Team
If you’re curious about Ecommerce NFTs, you aren’t alone. Keep reading to learn what they are, how retailers are using them, and how they’ll impact Ecommerce in the coming years.
What are NFTs?
NFT stands for non-fungible token. To understand what it is, you need to understand the word fungible. Any item that’s fungible is essentially interchangeable with another identical item. For instance, one dollar can be substituted equally for another.
By contrast, non-fungible describes something that’s unique and can’t be replaced. Take the art world. You can own a copy of a Monet painting, but there’s only one original.
In the same way, NFTs can be copied while the original remains digitally unique and irreplaceable. They’re one-of-a-kind digital assets with exclusive rights of ownership. And any digital asset can become an NFT, from photos and graphics to videos and music.
But they differ from physical collectibles. When you buy an NFT, you’re buying a token, not the actual asset. Your purchase includes the rights to the item or information inside it, as well as a certificate of ownership that can be verified publicly on the blockchain.
What makes NFTs unique?
First, they’re exclusive. There is only one Beeple collage and only a limited supply of the Kobe Bryant KB24 collection.
They also have what is called provenance. That means they have an origin and may have a history.
And finally, they can be traded, sold, and resold like any other commodity, creating a unique marketplace that adds to their value.
Though NFTs are more commonly associated with works of art or collectibles, they may also include experiences. For example, In December 2021, Adidas launched the NFT collection, Into the Metaverse. The limited edition collaborative collection offered physical apparel as well as an NFT and sold out in hours, earning Adidas $22 million.
Nike has also joined the NFT game by acquiring RTFKT, a major player in the creation of digital sneakers and collectibles. Nike plans to add virtual products and experiences to their product line, including exclusive prelaunch product drops for dedicated fans.
Even conferences are embracing the NFT craze. A good example: the never-ending ticket issued for the upcoming CEX conference organized by Joe Pulizzi and Brian Clark.
To fully understand this new type of digital product, it helps to see a few newsworthy NFTs.
One of the most notable is Beeple’s “First 5000 Days,” which sold at Christie’s for $69.3 million. Another is CryptoKitties, a collection of cute digital cats that you can breed. In September 2021, it generated over $7 million in just 24 hours.
Not all NFTs generate millions, though. Less sensational examples of Ecommerce NFTs are also worth paying attention to.
Artcade, for example, was created by Los Angeles-based retailer Fred Segal. This NFT offered a “dynamic retail experience” that included an NFT gallery with digital wall displays, physical and digital products for sale, and a streaming studio.
Another example is an NFT platform for musicians called Royal. Created by Justin Blau, the DJ and music producer known as 3LAU, it helps artists partner with their fans to co-create and co-own music. Through NFTs, fans can sell music rights and earn royalties.
How are retailers using NFTs today?
NFTs are tradable, collectible items, which makes them the perfect addition to Ecommerce stores. Here are seven ways retailers are using them.
1. Sale of collector’s items
Retailers are selling NFT collector’s items that hold significant emotional value for superfans. Used this way, they increase brand awareness and build relationship with fans.
For example, last July, Coca-Cola sold its first NFT at the International Friendship Day Auction. The multi-sensory token reimagined some of the brand’s iconic assets for the metaverse. The winning bidder won a digital loot box and a real vintage refrigerator filled with ice-cold Coca-Cola.
San Francisco’s Golden State Warriors became the first professional sports team to launch an NFT. It was a collection commemorating the team’s six NBA championships, including digital collectibles of their most iconic games.
This type of token resembles old-school baseball or football cards. You can find NFT trading cards for anything from sports teams to golfers to musicians.
2. Digital duplicates for the metaverse
As mentioned above, Nike recently acquired RTFKT Studios, a company that delivers digital collectibles that blend culture and gaming. In collaboration with teenage artist FEWOCiOUS, RTFKT sold real sneakers paired with virtual ones. The result: They sold around 600 pairs/NFTs in just six minutes to the tune of about $3.1 million.
Another interesting digital/physical hybrid is jewelry. Jewelry from the website Artsy can be rented in the Mall of the Metaverse on Microsoft’s AltspaceVR app. It’s known as Mixed Reality Extensions and can be worn in different virtual worlds.
3. Loyalty programs
NFTs allow merchants to give consumers real-world utility. Loyalty cards, event tickets, and even health records can be moved onto the blockchain. This benefits both the consumer and the retailer.
For example, loyalty programs on the blockchain cut costs and improve the customer experience. Consumers can access different loyalty programs from one digital wallet and use their rewards interchangeably. They could redeem grocery store loyalty points on a vacation and use rental car points for dinners at a gourmet restaurant.
4. Proof of ownership and transactions
With the proper legal structure, anything can be tokenized. It’s a matter of linking NFTs to a physical piece of property or information, such as property titles, car deeds, and healthcare information.
This gives merchants, retailers, and dealerships a secure way to transfer ownership. And since NFTs are publicly verifiable on the blockchain, there’s no disputing ownership.
5. Prelaunch of physical products
We’ve seen companies like Nike and Adidas tie NFTs to product drops for loyal customers. But tokens can also be used to prelaunch physical products. Early-access NFTs generate buzz and exposure before a new product launch, allowing you to build a solid base of early-bird customers.
And NFTs are becoming easier to create and sell. Shopify now makes it possible for merchants to mine and sell NFTs. Instead of forcing merchants to go through a third-party marketplace, Spotify lets you sell directly from your storefront.
The Chicago Bulls were the first to take advantage of this feature. In July 2021, they launched NFTs depicting the team’s iconic six World Championship rings on Shopify’s platform.
6. Physical display
NFTs are exciting and innovative, but they have one problem: They’re 100% digital. You can’t admire them unless you pull out your phone or tablet.
Displaying NFTs on specialized tablets is one way around this. They turn NFTs into gallery-worthy works of art. That’s what L.A.-based clothing company Fred Segal did when he created an in-person gallery to display collectibles, limited-edition apparel, and gaming hardware.
The exhibition featured works owned by a group of top NFT collectors, including pieces from the Bored Ape Yacht Club, The Mutant Ape Yacht Club, Doodles, and Cool Cats. The most valuable NFT on display was a Bored Ape Yacht Club piece worth 35.47 ETH, or about $142,466.32.
7. NFTs redeemable in the physical world
Finally, you can offer NFTs or sell the rights to redeem physical products. Treasury Wine Estates is a perfect example of this. They recently sold NFTs that were tied to a rare Penfolds Magill Cellar 3 barrel of wine.
The barrel NFT will be divided into 300 individual bottle NFTs. These will be uniquely tethered to the 300 real-world wine bottles that will come from that rare barrel. Holders of the NFTs will be able to redeem the physical bottles corresponding to their specific NFT when the wine is finally released.
What does the future hold for NFTs in Ecommerce?
The uses for NFTs in Ecommerce are still evolving. But what about the future? Are we starting to see any patterns emerge that can give us an indication of what to expect?
Here are three predictions:
Prediction 1: Multimedia experiences accompany physical products
More brands are using experiences to add value to NFTs. We’ve already seen this with never-ending-tickets. But the possibilities of bundling experiences with physical products or other offerings are endless.
Let’s say the maker of kitchen appliances sold NFT experience upgrades that offer cooking courses with renowned chefs. Or they could include exclusive access to TV cooking show tapings.
The more unique the experience, the more value is added. For example, a travel agent might tie an exclusive travel package to a one-of-a-kind, in-person dining experience with a celebrity chef in Paris. The experience could be as unique as the NFT itself.
In March 2021, the band Kings of Leon became the first band to release their album as an NFT. The music is available on all major audio platforms, including iTunes, Apple Music, Spotify, and Amazon. But the NFT version came with perks.
Only six “golden tickets” were made available for sale. In addition to the NFT version of the album, the owners of each ticket got four front-row seats to any Kings of Leon concert for life. They also got a VIP experience that includes:
- A personal driver
- A pass to hang out with the band before the show
- A personal concierge to take care of them
- Exclusive lounge access
- Four bags full of merchandise
Prediction 2: Supplying your virtual world in the metaverse
As the metaverse grows in importance, NFTs will be a vehicle through which metaverse residents can purchase virtual real estate, furnish their virtual houses, and clothe their digital selves. The products you’ll buy in the metaverse will be, in essence, NFT versions of your blender, your hoodie and your lawn-mower.
Prediction 3: Digital ownership certificates
By combining NFTs with DeFi (decentralized finance), you’ll be able to verify ownership and do away with middlemen or brokers when purchasing high-value physical items.
The Splyt platform, for example, uses NFTs to represent real-world items instead of digital items. Inventory data is stored on the blockchain, and entrepreneurs can sell NFTs and collect royalties when an item is resold. Buyers can be assured their purchase is authentic because of the security built into the NFT.
This is known as a trustless environment, which means users are not required to trust each other in order to transact safely. The platform is the middleman. And with no one taking a portion of profits, the gains are redistributed to users.
The bottom line
NFTs are here to stay. There’s too much interest from corporations, trading communities, retailers, sports teams, and venture capitalists.
And the applications for Ecommerce are promising: additional security, unique benefits, and an enhanced customer experience.
With Ecommerce NFTs, you can upsell value-added bundles, create multi-sensory products, and provide the instant gratification of a virtual version of a physical purchase. They’re also a smart way to future-proof your business.