We are now well and truly in the throes of digitization. After decades of advancement and evolution, and a recent acceleration precipitated by impacts of the COVID-19 global pandemic, the progress of digital technology continues unabated. Its many innovations have collectively helped to change the world around us, highlighted primarily in the ways we communicate with one another, our modes of information transfer and sharing as well as the ways in which we consume that information. These changes are distinct within the retail industry where digitization is going a long way toward supporting greater speed, efficiency and accuracy of just about every aspect of a merchant’s operations. As the development of digital technologies maintains breakneck speed, many are speculating about the future of retail, trying to sustain the velocity in thinking required to keep up with its evolution and get out ahead with the latest advancement that offers valuable applications to their businesses. And, according to lauded retail futurist and Founder of the consultancy firm Retail Prophet, Doug Stephens, one of those advancements is the non-fungible token (NFT), a digital notion that he suggests retailers and other businesses ought to pay attention to.
“It’s easy to dismiss NFTs as a passing fad, given the nature of some of the digital products currently being traded,” he admits. “But it would be a mistake to do so. The more important subtext behind the rise of NFTs is that for the first time, using blockchain technology, we’re able to apply the economic concepts of scarcity and authenticity to a digital item – be it art, collectables, music, etcetera. Anything, so long as its rarity and authenticity are legitimized, can have inherent and increasing value. At the same time, blockchain technology provides a newfound ability to allow for the purchase of digital tokens for goods that can be traded for real world goods.”
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Put simply, an NFT is a unique digital asset, something like a digital contract, that represents ownership of digital content, serving to confirm its authenticity and originality. Leveraging blockchain technology to establish proof of ownership that’s stored and accessible on a public data ledger, some are starting to take notice of the benefits of tokenization. Although there aren’t too many brands that have started to explore the use of NFTs, Stephens points to many within the creative spaces – mainly the creators and purveyors of unique and one-of-a-kind pieces of content – as some of the earliest adopters.
“At this point, we’re seeing most of the activity in NFTs focus on digital art, memorabilia and collectibles,” he says. “In the art world for example, artists like Mike Winkelman, also known as Beeple, have gone from selling pieces of digital art for hundreds of dollars to selling pieces for tens of millions, all because we can now authenticate not only the rarity and authenticity of a product – in this case art – but we can also use the blockchain to validate true ownership over a digital asset. This is a capability that was nearly impossible to do prior to the advent of the blockchain.”
A rising tide
Very much considered by most at the moment to be leading-edge technology, the full potential of NFTs has not yet been realized en masse. The entire concept around their use seems to still be in the education phase, with its exploration and assessment by the majority of retailers and other businesses only just beginning. However, as Stephens points out, there are some, mainly within the artistic disciplines, who have already begun to experiment with NFTs. Famed rapper Snoop Dogg announced in late March 2021 the launch of his “A Journey with the Dogg” collection containing eight pieces of digital art that are said to encapsulate his early years and inspiration. Legendary skateboarder Tony Hawk also recently auctioned a video of himself landing a 540-degree Ollie. Even Twitter CEO, Jack Dorsey, has capitalized on the early movement, auctioning an image of his first ever tweet. These NFTs are being bought by bidders online for hundreds of thousands, sometimes millions, of dollars. And, although it may only be a narrow group of people cashing in on the trend today, Stephens doesn’t believe it will be long before retailers and brands begin reaping their benefits as well.
“Currently, aside from high profile artists and celebrities, most of the activity we’re seeing is either within gaming platforms where players can purchase and own exclusive game elements and “skins”, a term used for in-game apparel or player identities,” he explains. “Some streetwear and running shoe brands have also been first movers, likely because their target customers align well to the technology. And finally, the sports collectibles market has really embraced the category. There has been some early experimentation by brands like Gucci, Nike and a handful of others to test and explore NFTs as a concept but I expect to see much more penetration into consumer goods in the coming year. We’re only at the very beginning of the trend.”
Beyond digital assets
At the beginning of the trend, indeed. It’s a sentiment echoed by Dr. Merav Ozair, leading blockchain expert and fintech professor at Rutgers Business School, who also sees the untapped potential inherent in the tokenization of digital assets as well as physical products. She, too, points to the powerful authentication capabilities of NFTs as the most dynamic and purposeful qualities they offer, suggesting that their applications within the retail setting are immense. And, considering when their use might be more widely utilized across the industry, she says that their impact is imminent.
“We don’t need to think too far out when it comes to the use of NFTs throughout industries, particularly when it comes to physical products within the retail ecosystem,” she asserts. “In fact, there are already use cases. Just recently, BlockBar was launched, which is a marketplace for liquor and luxury spirits that’s backed by the blockchain. And, it’s not the first, either. Purveyors of liquor have been selling their products as NFTs for some time now on various platforms. The ability to authenticate product as legitimate with tokenized certification is what’s driving current interest in the notion of NFTs, and it’s interest that is only going to increase going forward.”
Protecting brands and consumers
She goes on to explain that it’s authentication capabilities that brands, particularly those operating within the luxury space, have been searching for in an effort to curb or mitigate altogether the issue of counterfeit product for some time. It’s an issue that’s existed within the industry for a very long time, and one that impacts both the sellers and prospective buyers of the product. However, with the introduction of NFTs and the security of the blockchain, Ozair says that the counterfeiting of goods will become next to impossible.
“NFTs present an incredible opportunity for retailers and brands to protect their businesses from an integrity and credibility perspective,” she says. “Through their use, brands can ensure the legitimacy of their product, providing clear differentiation from those that are counterfeit. And, it also instills a confidence in the consumer who knows that they are purchasing the real deal. NFTs present the potential to eradicate fraudulent sales of all kinds of different product, revolutionizing certain sectors and verticals within the retail industry.”
The security and protection that NFTs and blockchain technology provide against counterfeiters is an excellent example of the positive outcomes that are being precipitated by the digitization of the world around us. It’s reflective of opportunities to perhaps one day soon include tokenization within an integrated economy where tokens are transferred and traded with real financial value. In fact, according to Ozair, it’s all part of an acceleration toward greater digitization that’s been fuelled by impacts of the pandemic, and one whose forward progress will likely continue uninterrupted, indefinitely.
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“Digital is here to stay. There’s no doubt about that. The only question right now is: in what ways will it impact society? And, in my estimation, every product and service, in one way or another, will land in blockchain technology. It will allow everyone globally to interact and engage in different ways, with tokenization facilitating this transition and transactions. At the end of the day, everything is transaction-based. NFTs will allow for a more efficient and seamless experience for customers, democratizing society and opening up boundless new opportunities for retailers and brands of all sizes, everywhere. At the moment, those with the greatest imagination, finding the most creative and significant ways to apply NFTs and blockchain technology to their products and service, will benefit the most.”