This blog was co-authored by Phillip Jackson, Kyle Leighton, and Stephen Burke.
Every day we read articles or hear podcasts about the next phase of the Internet, generally referred to as Web3. Web3 is more than the next iteration of social media and E-commerce. Many predict that it will reorganize crucial aspects of society, and will have far reaching consequences on the way we live our lives.
For this reason, Web3 is a revolution. Some say it’s a revolution that’s coming, but like all revolutions, we don’t recognize them as such until they’re well underway. Such is the case with Web3.
The rallying cries of the Web3 revolution -- crypto, blockchains, NFTs -- are already making their mark on the world. Whether we want to or not, we will need to adapt to the new world order.
For instance, NFTs may seem confusing to people. Why would someone pay $3,000 for a JPEG of a bomb, or $350,000 or more for one of a Bored Ape? The answer is simple: NFTs are way more than JPEGs or snippets of digital art. They are tools with many uses that happen to be built on an underlying technology that is non-fungible -- meaning they have an immutable digital footprint on a blockchain.
To be sure, many investors value NFTs for their artistic qualities, and they especially like the fact that, like the Mona Lisa, there’s only one of them. But unlike any painting by the grand masters, provenance isn’t an issue. The blockchain proves an NFT is unique and who owns it.
Later on, as the value of NFTs increase, some investors intend to resell their NFTs and pocket a tidy profit, which as we’ll see below, may have interesting ramifications for E-commerce brands that opt to mint NFTs of their own.
And some investors just like the cache of owning an NFT, and the world is presenting them with opportunities to flout their clout. For instance, people who opt to upgrade to Twitter Blue can link their NFTs to their profile pics. Or, flaunting a shirt that’s only available if you own, say, an Adam Bomb NFT signals to those in the know that you’re in the club.
You may not value that prestige, but if you’re in the throes of building your DTC business, you should know that this cache can open new opportunities for your brand.
5 Things All E-Commerce Brands Should Consider as They Enter the New World of Web3
#1: NFT’s Will Redefine Loyalty
A funny thing happens when people spend their hard-earned cash for a retail membership: they have a motivation to get the most out of it. Nothing cements loyalty quite like a hefty fee. The market has already proven that people are willing to pay in order to gain the opportunity to buy stuff; it’s why 105 million of them are willing to pay up to $120 for a twelve-month membership at Costco.
For many brands, the NFT is replacing the plastic card shoppers carry in their physical wallets. What’s more, they’re offering additional perks to people who own their NRFs, from access to hyper exclusive inventory, and investment opportunities, to ownership in physical property.
Built on smart contracts, NFTs holders won’t ever need to worry about their ownership status if a brand is merged with another company or is acquired by a bigger or foreign brand. Things that are non-fungible and recorded on public blockchains aren’t lost in the cracks. That makes an NFT way more valuable than the Costco-type membership.
Granted, only the early adopters understand the inherent advantages of this yet, but that means there are arbitrage opportunities for early movers.
#2: Redefining Identity on the Web
NFTs will redefine identity on the Web, and in the process, provide more security. Imagine a world where, based on the NFT in your wallet, you can provide some portion of your identity to an E-commerce platform and complete a purchase without ever entering your credit card information.
“NFT-secured virtual selves may in many ways become more secure than identities in everyday life. Passwords can be stolen, biometrics hacked, passports forged. Identity secured in the blockchain is more difficult to fake and steal,” writes the Financial Times. “The transformative value of NFTs may reside in enabling humankind’s seamless ‘commute’ between physical and virtual domains – and from metaverse to metaverse – by establishing and securing each individual digital identity.”
#3: Immutability Has Many Implications for E-Commerce
Buying crypto is very easy. Consumers can buy it via PayPal, Venmo, download a digital wallet to their phones, or even visit a Bitcoin ATM. But let’s not get hung up on crypto as currency. What makes crypto special is the fact that it enables the blockchain to work, ensuring that the underlying ledger stays immutable.
Immutability will take on new meanings and use cases for retail. For instance, many consumers have made it clear that they value sustainability, but are wary of greenwashing (brands claiming they’ve “gone green” when they actually haven’t). Does this manufacturer really use non-toxic dyes?
Supply chain management is a blockchain use case that will resonate with consumers who care about a range of issues, from sustainably sourced raw materials to factories that pay living wages and benefits to their workers.
Authentic stamps at the blockchain level will provide these brands with irrefutable proof they can share with consumers, and are likely to become table stakes in the future. It’s why companies that provide supply chain blockchains, like VeChain, exist. VeChain has partnerships with major enterprises, like Walmart.
#4: New Era of Personalization Will Be Contextual, Not Lookalike
Amazon rocked the Web1 world with its recommendations engine, and now just about every E-commerce site has one. NFTs are likely to take recommendations to a whole new level. Smart contracts can store a wealth of data, and leverage underlying algorithms and bots to shape the holder’s future purchases. This sets the stage to usher in a new era of personalization, one that’s based on contextual context, rather lookalike modeling.
What’s interesting is that intelligence lives with the NFT, not the consumer who happens to own it at the time. If you sell me your NFT, all the intelligence that powers the recommendations you saw and acted upon -- the years of insights the algorithms have gained -- are transferred over to me. I have no need to train the algorithms from the very beginning.
Let’s say the NFT you sold me was for some kind of brokerage account you used to build your portfolio. Am I happy to gain the insights from your buying decisions? You bet I am! And so is the brand that issued the NFT.
#5: Enable E-Commerce Spending Among Those Previously Shut OutCrypto will enable a greater number of consumers to purchase online, many for the first time ever. What’s more, it can increase their spending power in meaningful ways.
Not everyone has access to credit cards or bank accounts. Six percent of the adult population in the US -- about 1.4 million people -- are “unbanked.” These are people who lack the proper ID or sufficient funds to open a checking account or apply for a credit card, and turn to check cashing stores or the USPS Postal Savings Systems for all their banking needs. E-commerce, often the most affordable place to shop, simply isn’t an option to the unbanked.
Increasingly, however, the unbanked can purchase crypto from any number of ways, including a digital wallet they install on their phones, and use it to purchase from any online retailer that accepts it. Crypto eliminates the need for a credit card, which can be life changing for the unbanked.
Eliminating the friction of credit cards and bank accounts is a primary reason why El Salvador enacted it’s Bitcoin law, which declares that Bitcoin will be legal tender of the country, and elevated to the status of the US dollar.
But the unbanked aren’t the only ones who may increase their E-commerce spending due to crypto. Many people are building up their reserves of crypto in their digital wallets, and now that their investments have doubled or tripled in value, they feel a lot richer. Luxury items are more affordable to them now, and they’re more opt to splurge on them if, in real terms, they’re only paying one-third of the cost.
Keep Up With the Trends
It’s worth keeping up with the trends, even if you’re not ready to jump in yet (although if you do, you will benefit from a rare arbitrage opportunity).