NFTs and the Metaverse in Retail
NFTs (or non-fungible tokens), defined by Vogue Business as “cryptographic assets on blockchain with unique identification codes and metadata that distinguish them from each other,” are an aspect of digital currency and ownership that are making themselves more known in retail.
What Is an NFT?
Forbes explains that “an NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.” First established in 2014, NFTs have seen a spike in popularity after becoming a popular way to purchase digital artwork. What sets NFTs apart from other digital creations is that they have unique identifying codes that create digital scarcity, whereas typical digital creations tend to have infinite supply.
Are NFTs Cryptocurrency?
While NFTs are created using the same type of programming as cryptocurrency, they are not a form of cryptocurrency. Cryptocurrencies are able to be traded for each other, whereas NFTs cannot be exchanged for each other or be equal to one another. However, NFTs are on a blockchain, like cryptocurrencies.
NFTs in Retail
The first fashion NFT was created by The Fabricant and sold in 2019 for $9,500. Gucci became the first luxury fashion retailer to enter the market with their Aria film that sold for $25,000 in 2021. Subscribers to Vogue Business have access to their “NFT Tracker,” which they update weekly to include the latest NFTs in the fashion and beauty industries.
Many brands are breaking into the metaverse. PacSun participated in a metaverse shopping festival through ComplexLand 3.0 in May, where shoppers could buy PacSun products for their avatars. PacSun even auctioned off an NFT in ComplexLand’s virtual gallery. In June, eBay acquired KnownOrigin, an NFT marketplace. eBay had started allowing NFT sales on its own site in 2021, but by acquiring a marketplace, eBay can control this process much more than they could before.
Proponents on NFTs in retail believe that NFTs can bring value to brands by allowing them to connect with their communities, reach a broader and younger audience, and increase sales. However, NFTs are still risky, like all investments. Liquidity is an issue, and prices are entirely dependent on demand, so not all people will be able to resell an NFT for more than they purchased it for. The market can be very volatile with investments like these.
Shopify and NFTs
Shopify was the first e-commerce platform to allow merchants to sell NFTs. Shopify’s CEO and President have both purchased NFTs, and they were featured in Shopify’s ‘Future of Commerce’ report. Currently, Shopify Plus merchants can sign up for the NFT beta program where they can mint and sell NFTs on blockchains through Shopify partner apps.
So, are NFTs the future of investing?
It’s hard to tell. Right now, there are still many unknowns when it comes to NFTs. Value is difficult to predict, and this means it is probably not the best investment for the average person. You can buy them for the art instead of as an investment, but banking solely on making money off of your purchase is extremely risky. However, if you’re still interested, there are plenty of resources to help you research and make a decision regarding investment in NFTs. We are very interested to see if NFTs continue to become mainstream for the retail industry or if they are just a short-term trend.
By Morgan Crandall
Works Used During Research:
Chan, Aileen. “6 Ways Retail Brands Can Benefit from NFTs and the Metaverse.” Verdant NFT, Verdant NFT, 14 Apr. 2022, https://www.verdantnft.com/all-articles/6-ways-retail-brands-can-benefit-from-nft-and-metaverse.
Conti, Robyn. “What Is an NFT? Non-Fungible Tokens Explained.” Forbes, Forbes Magazine, 19 July 2022, https://www.forbes.com/advisor/investing/cryptocurrency/nft-non-fungible-token/.
DeNicola, Louis. “What to Know about Non-Fungible Tokens (Nfts) - Unique Digital Assets Built on Blockchain Technology.” Business Insider, Business Insider, 12 July 2022, https://www.businessinsider.com/personal-finance/nft-meaning.
McDowell, Maghan. “The Vogue Business NFT Tracker.” Vogue Business, 31 May 2022, https://www.voguebusiness.com/technology/the-vogue-business-nft-tracker.
Shakir, Umar. “EBay Now Has an Established NFT Marketplace at Its Bidding.” The Verge, The Verge, 22 June 2022, https://www.theverge.com/2022/6/22/23178699/ebay-acquires-knownorigin-nft-marketplace.
Walk-Morris, Tatiana. “Pacsun Opens Metaverse Store, Auctions Nfts.” Retail Dive, 26 May 2022, https://www.retaildive.com/news/pacsun-opens-metaverse-store-auctions-nfts/624444/.
Wedderkop, Freyja. “NFTs in e-Commerce: We Make Websites.” We Make Websites | Shopify Plus Agency, 16 Feb. 2022, https://wemakewebsites.com/blog/get-to-grips-with-nfts-in-e-commerce/.