NFTs are non-fungible tokens, or a digital asset, that is stored on a blockchain.
NFTs is becoming a commonly heard term and much hype has been written about this new concept, which at it’s basic level is simply a digital asset [token] stored on a blockchain that cannot be altered [non-fungible].
Each of the non-fungible tokens is unique, and they happen to be non-interchangeable. Moreover, NFTs cannot be duplicated or deleted. Hence they are everlasting as well as exclusive to an individual. NFTs can be traded, collected, and can be verified. Non-fungible tokens have skyrocketed in popularity over the past few years and have found places in a number of industries as well. Among the different industries where NFTs have been used, the retail industry happens to be an important one and is one of the major places where non-fungible tokens are readily used.
How Do NFTs Work?
NFTs are entirely unique and non-divisible. With the use of Ethereum blockchain as a public ledger, the non-fungible tokens allow the assignment or claim of ownership of unique pieces of digital data. The non-fungible tokens represent digital or non-digital assets created from digital objects. NFTs can represent anything ranging from electronic art to real-world items such as collectibles, videos, music, GIFs, legal records, signatures, tokenized invoices, and many more.
At any point in time, a particular NFT can have only one owner. The ownership of the NFT is determined by the unique ID and the metadata associated with the same. The present owner of an NFT can sell the ownership to another person, who then becomes the owner of the token. If you wish to create and launch your own NFT, but you are not sure how to proceed with the same, it would be a very good idea to hire a professional blockchain development company to help.
NFTs & The Future of Retail
From a retail perspective, NFTs can be like an individualised way of shopping, not similar to shopping at a physical store or business. For instance, when anyone sells a non-fungible token, it is a distinct digital asset sold by an individual seller. But at the time when a large retailer sells an item at any store or online, it is not very distinct since it lacks any initial value. Still, there is a lot of scope for retailers in this space, which is becoming quite popular in recent times when we see a number of brands entering the world of non-fungible tokens. Let us delve a bit deeper into the topic to see how different retail brands have entered the field of NFT and what they have done.
One of the well-known US fast-food chains, Taco Bell, entered the world of NFTs by releasing a digital collection in March 2021. The fast-food chain tweeted that they were selling taco-themed images and GIFs on an NFT marketplace. All were sold out in just half an hour, and it seemed they were like hot tacos but in the digital format. It gives a clear indication of the immense possibility of business in the retail sector. Or perhaps just the latest social media hype?
Another popular brand, Coca-Cola, entered the world of NFTs and made its presence felt. In July 2021, Coca-Cola sold non-fungible tokens as a part of the ‘Loot Box’ that included a number of items like Coca-Cola Bubble Jacket, which avatars can wear in Decentraland, a popular three-dimensional virtual reality platform. But there was a twist in the NFT offerings from Coca-Cola. Anyone who purchased the ‘Loot Box’ also got a physical ‘Coca Cola Fridge.’ This decision by Coca-Cola played a significant role in bridging the gap between the digital and physical worlds, which many other brands might incorporate as a way to make their way quite easily into the world of the digital future.
The retail giant Nike has recently filed seven trademark applications for the purpose of protection of brand assets, like their “just do it” slogan and recognisable swoosh design as they potentially enter into the network of 3D virtual worlds, Metaverse. Although Nike has still not released any NFTs, there are rumours that Nike is on the verge of launching and selling virtual shoes, clothing, and headwear that users can wear in virtual worlds, which could utilise the NFT functionality.
"I believe the metaverse is the next chapter for the internet."
There is a complete world of virtual reality booming, where buying designer clothes for an avatar is gaining huge popularity. With the advancement of technology, we get closer to entering deeper virtual worlds. Retail brands that have still not entered the world of NFTs might be missing out on a fantastic opportunity to reach out to their customers in unique and new ways. Therefore, without doubt, NFTs will play a significant role in the future of retail.
Retail Buyers Made up 80% of NFT Transactions
To throw more light on NFTs in retail, Chainalysis, a blockchain analytics group conducted a study. The study report revealed that retail buyers made up 80 percent of the NFT transactions as sales and volumes boomed in 2021. As per the report, retail buyers that spent less than 10,000 dollars on NFTs accounted for about 80 percent of all the NFT transfers between January and October 2021. The report also mentioned that a total of 19 percent of the NFT transactions on the digital tokens were by larger investors lying between 10,000 dollars to 100,000 dollars, and 1 percent was institutional transfers. The major reason for the NFT boom is due to the fact that celebrities, athletes, giant fashion houses, and other creators have launched their own NFTs.
Nike bought RTFKT Studios, a virtual shoe company that makes NFTs and sports footwear for the metaverse
Is It Time to Explore NFTs?
The NFT market exploded in 2021. These unique digital items for collectors living on the blockchain have gone from being one of the little-known sectors of the crypto world to a mainstream must-have for the artists, content creators, athletes, music stars, celebrities and several others. But the involvement of the small-time retail investors has been the major fuel behind the explosion. The NFT market is flooded with investors since they believe that this investment in buying NFTs can bring about a higher return.
The investors can earn profit by purchasing non-fungible tokens at the time when they are being minted and transformed into a digital asset from a digital file. Since these files cannot be altered or modified in any way, they increase in value when sold. Moreover, non-fungible tokens can be traded freely by anyone. OpenSea marketplace presented data revealing that only 28.5 percent of the non-fungible tokens purchased during minting and are sold on that platform make a profit. The ones who purchase from secondary markets make a profit 65 percent of the time. This gives a very clear indication that it is certainly the time to get involved in the non-fungible tokens.
How Can Retailers Benefit from NFTs?
It is true that not every retailer would be able to sell a non-fungible token like the retail giant Gucci. But there are a number of retailers who wish to experiment with this emerging technology. If any retailer does not want to sell a virtual product, they can still benefit from non-fungible tokens. For instance, with blockchain capabilities, the non-fungible tokens happen to be an excellent alternative for retail payments. Moreover, blockchain being a peer-to-peer form of payment, eliminates the need for any third parties such as banks or other intermediaries. In addition to this, the retailers can readily benefit from reducing costs since there are no transaction fees with blockchain.
Apart from seamless payments, the retailers can also benefit in a number of ways from the technology, like stringent security, complete transparency, and high productivity. Blockchain plays a vital role in bringing about an improvement in the overall transparency of the retail supply chain since the records in blockchain are shared by the retailers, manufacturers, suppliers, and distributors, thereby ensuring a hundred percent transparency as well as traceability. With the help of this distributed ledger, records cannot be modified or deleted, which increases the shoppers’ trust in the supply chain to a great extent. This, in turn, is helpful in overcoming fake or non-genuine goods that happen to be big issues for retailers.
Finally, non-fungible tokens can also turn out to be an interesting way to generate further revenue via virtual sales. The brand Gucci tested selling virtual products that are relatively low in price gained a lot of attention from the ones who wish to experiment with leading technology combined with the exclusivity of the brand name. It is true that shoppers have always been falling for exclusivity irrespective of the fact, whether it is a flash sale or a limited-edition product. Therefore, non-fungible tokens are undoubtedly a great way to generate additional revenue via virtual sales.
What Next for NFT?
With more and more brands getting into the world of NFT, the total number of unique collections of NFTs is on the rise. It is expected that other brands are on the verge of following the trend and getting into the NFT market soon, propelling the growth of the market. Collections of non-fungible tokens provide brands with a unique opportunity to connect with their consumers in an exclusive as well as digital manner. The potential of these tokens to connect brands and consumers virtually is extremely vital in an increasingly digital world. This continued shift would certainly put further stress on limited-edition online experiences in the marketing strategies of different retail brands and, at the same time, enlarge their consumer base to new demographics and enhance overall brand awareness.
NFT in retail is still at the budding stage, but they certainly hold a huge appeal to the growing communities of collectors as well as enthusiasts providing the retailers with a rare opportunity to engage with those customers by expanding their passions into a digital arena. We have already seen the entry of well-known retailers into the world of NFTs, and the number of entrants is expected to rise in the time to come utilizing the potential of the technology to the fullest to get benefitted from the same.