NFTs have come into the mainstream on the back of the art, collectibles and gaming spaces. From Beeple selling his NFT art for $69 million to Visa buying Cryptopunk, there have been multiple stories about the collectibles space that raise eyebrows. The sudden ease of converting anything into a unique digital asset that can be bought, sold and traded is aggressively fueling the idea that uniqueness of a thing holds value. From Jack Dorsey to Tim Berners Lee, everyone seems to be getting on the bandwagon.
NFTs — essentially strings of code — are stored on a blockchain, which establishes the ownership of a digital asset. Their market value tripled in 2020, reaching more than $250 million. In the first half of 2021, sales volume reached $2.5 billion, and by the end of the year the NFT market was estimated at more than $40 billion.
NFTs are expected to play a major role in the metaverses of tomorrow, the places where augmented reality meets the internet. This scenario isn’t being missed by consumer products companies, many of which have begun testing the waters. High Street fashion retail is going in first, spearheaded by major brands such as Gucci, Dolce & Gabbana and Burberry. Additional big names to have entered the space include Nike, Samsung and Coca Cola, which are creating virtual stores and hosting virtual events.
The metaverse ecosystem still has a long way to evolve in terms of how people can interact with it through an easy hardware interface, protected by effective security policies and country-based regulations. But these organizations don’t want to miss the on-chain bus: they understand the importance of jumping in early, anticipating technology and regulations that will open up NFTs to broader adoption. Walmart, for one, has applied for three trademarks — Verse to Home, Verse to Curb and Verse to Store — that will serve as sales channels in the metaverse.
Early movers view the metaverse as a vast economic opportunity that will pave the way for new products and services in the digital realm. Over time, it will become an independent and important channel for retailers and consumer products companies. Promotions will have a greater impact as brands provide more immersive experiences. A product will be able to dance in front of your eyes, to tell its story from sustainable sourcing to packaging to distribution.
As adoption increases, however, so will the planning challenges. If I want to buy a physical version of an NFT accessory, how should the merchant plan for demand? As physical stores decline in importance, how should organizations devise their networks and distribution strategies? What will merchandise planning look like?
When it comes to the supply chain, blockchain technology is being deployed to capture the journey and state of a product from supplier to consumer. In the future, customer-facing organizations will need to think about how they can take their products and services to digital avatars who live in an interoperable on-chain world.
Today, the NFT space is filled with stories of digital art pieces selling for huge amounts of money. Skeptics might view the phenomenon as closer to the tulip mania of the 17th century than to art connoisseurs snapping up the next Van Gogh. Such doubts seem justified when one reads about a gray square going for more than a million dollars.
Yet NFT’s property as a unique digital identifier — one that can be bought and sold in a trustless manner and a decentralized environment — will propel it beyond the subjective space of art and toward anything that can be traded in the merged economy of the physical and digital world. Shoes, jackets and armbands were what my avatar needed to start the trek. Next, my needs might be digital water and food; pizza and chips are already available. It’s going to be interesting to see buyers and sellers navigate the challenges of executing this vision, and making it all come alive.
Vaibhav Srivastava is an enterprise solution architect in demand and supply planning and S&OP with Blue Yonder.