You’ve probably heard about non-fungible tokens (NFTs): digital tokens that prove ownership of one-of-a-kind digital assets including art, images, tweets, and videos. Some of the most notorious NFTs include characters in the Bored Ape Yacht Club and digital artist Beeple’s $69 million NFT titled “Everydays: The First 5,000 Days.”
Before you start rolling your eyes – NFTs can go beyond being arty collectables. And this is where we think things get interesting and why merchants should start paying attention. In particular, early adopter fashion brands are effectively increasing customer loyalty and lifetime value (LTV) by using NFTs to create new revenue streams, acquire new customers and create brand communities.
Building brand communities to connect with customers in meaningful ways is becoming more and more important as customer acquisition costs skyrocket and eCommerce competition continues to heat up. Even if you’re collecting and using first-party data (which is great), it’s important for brands to shift from relying on trigger-based onsite personalization and move towards logged-in experiences and community-building.
NFTs are another potential avenue for building brand communities.
Even if you think NFTs aren’t relevant to your eCommerce business today, it’s still pretty fascinating to track what (mostly fashion) brands are doing in the NFT space. These early adopters may be a harbinger of what’s to come for other brands in different verticals.
Shopify’s tokengated commerce
Shopify is definitely taking note of NFTs and how fashion brands are leveraging them. The company rolled out a product called tokengated commerce that enables merchants to build tokengated stores on Shopify Plus sites using third-party apps. This allows merchants to feature curated collections or content that can be accessed by a customer who owns a particular token/NFT. The Shop app also will natively enable “gated merch” in the near future, but for now it’s still in early access beta.
How retail brands are leveraging NFTs
In retail, NFTs are less about owning a unique piece of art or other media and more about having a ticket to a club – or a community. With that ticket, a customer has bragging rights, sure, but also access to things or experiences that are exclusive to that community. It’s community-building that increases customer LTV and loyalty.
There also are a few other cool strategies involving NFTs that brands can leverage. Following are three key ways to look at the potential of NFTs in retail.
1. Creating new revenue streams by connecting virtual and physical goods
This strategy seems to be working well for shoe brands that are designing footwear for both virtual and physical worlds and linking them in ways to increase the desirability of both. For example, your video game avatar can buy cool virtual sneakers through the game to wear during play. Then, because you’re wearing those sneakers when you reach a certain level in the game, you can qualify to win or gain access to buy physical versions of the shoe, or complementary products, like branded socks. Some examples to check out include Hugo Boss, Jimmy Choo and Axel Arigato.
2. Increasing brand awareness and brand advocacy in new channels
Online video games, which attract hundreds of millions of users, can be a whole new world for building brand awareness. For example, there are more than 200 million monthly users on Roblox, a popular online video game platform. You can customize your Roblox avatar with different features and clothing you can buy in the online store. Another platform, Mythical Games, is built to enable players to earn and buy NFTs, like clothing, as part of the games. Just like in real life, digital clothing and accessories are ways for consumers to show off brand preferences – and some fashion brands, including Gucci, Dolce & Gabbana and Ralph Lauren have been testing the waters with different video game platform partners.
Beyond video games, the future likely holds other ways for consumers to participate in virtual and augmented worlds – the “metaverse” – although no one is entirely sure what that will look like. But there’s a lot of interest and investment in creating it, so it’s yet another reason to keep NFTs on your radar.
3. Unlocking membership levels or experiences
Using NFTs as a key to unlocking benefits in loyalty programs or memberships may be the easiest way for brands to get started experimenting with NFTs, especially with Shopify’s tokenized commerce product. Membership is the appeal of the Bored Apes NFTs – members become part of an exclusive club and get access to special events and other perks. On a smaller scale, other brands offer NFTs for sale in exchange for free brand merchandise, early access to new or limited-edition products, discounts, member events, and more.
What makes NFTs different from a traditional loyalty program membership is that the NFT itself holds value. Consumers can sell their membership to someone else. And although they may be leaving the loyalty program fold, by selling it they’ve found your brand a new customer or member! That’s pretty slick.
There’s more than meets the eye with NFTs
NFTs are still so new it’s hard to comprehend what they are or will become, and the many creative ways they may be used. As with any emerging technology or market, it can pay to watch what others are doing and maybe start experimenting in baby steps. This can help you understand how it works and if and how NFTs might resonate with your customers – if not now, maybe in the near future.