How brands can enter and win in the world of NFTs

Last year, a JPG file of a work by the digital artist ‘Beeple’ sold for USD69 million at Christie’s auction house. Then, a simulated 3D image of a yacht in a computer game sold for $650,000. In the first quarter of 2021, NFT sales reached $2 billion.

 But, this year, after a series of hacks, mishaps and market volatility, sales of NFTs appear to be flatlining. “Is this the beginning of the end of NFTs?” asked the Wall Street Journal.

 I don’t think so.. there is a wealth of opportunity beyond inflated JPGs with very little utility in the physical world. I recommend businesses look beyond the falling price of crypto and search for the value that NFTs can still offer brands. While ‘pump-and-dump’ projects may not survive, NFTs projects with real world value offer legacy businesses many opportunities. This is a great moment to re-think how to use assets and partnerships to create a community of loyal customers and opportunities for new revenue streams.

Why should brands be considering NFTs?

 Don’t make the mistake of thinking NFTs are reserved for celebrities, luxury brands or pure Web3 brands. Established brands (large or small) also have important opportunities to harness NFTs. Like any innovation project, established brands have the advantage of using their community, brand salience and trust, digital and physical ecosystems, and capital and capabilities to deliver on an NFT roadmap.

How can brands get involved?

 NFTs can offer opportunities to engage with and reward customers in new and exciting ways, from community building and rewards, to authentication – and even as a vehicle to interact in a purely digital environment. Here are some of the key ways brands can start to think about creating NFTs with real world utility for their customers:

1.    Collectibles – For a lot of brands, the first step into NFTs is creating exclusive digital assets that become collectibles due to their scarcity and rarity. Not every sector lends itself to collectibles, but we’re seeing a rising trend in:

• Sport – Waves of NFTs are being released to give fans access to sports stars and exclusive events, in the process creating new collectables and digital memorabilia. According to Deloitte, between 4-5 million sports fans globally will have purchased or been gifted an NFT sports collectable by the end of this year. Examples include: the Australian Open (AO) minting AO Art Ball NFTs linked to live match data, allowing fans the opportunity to own a piece of the AO; and Fan Controlled Football minting 35,500 NFTs, granting buyers decision-making powers to help govern the teams.    
• Fashion – With a finger on the pulse of culture, fashion brands are experimenting with collectible digital assets. Gucci’s sneaker NFTs can be worn by a digital avatar. Overpriced is selling scannable real-life hoodies that allow owners to show off their NFTs. In Paris this year, fashion week afforded the opportunity to buy tokens that allowed users to view exclusive fashion. In the Venice fashion week, D&G’s 9-piece NFT collection auctioned for USD5.56 million. Buyers received not only the NFT but the physical versions of the items and exclusive access to D&G events. Similarly, Adidas is offering NFT buyers access to digital and physical products and experiences.
• For purpose – Other brands are selling collectible NFTs for charitable purposes. In March this year, Stella Artois released ‘The Drop Artois’ NFT collection on World Water Day. While Mac donated the entire purchase price from primary sales of its NFT collection to a fund to support young people impacted by HIV and Aids.

Who should consider this?

·    Brands with loyal customers who already collect their items

·    Brands looking for ways to support their purpose

What’s the value?

·    Create new revenue streams

·    Attract a new audience to your brand

·    Test the waters around customer’s receptiveness to NFTs

·    Create a social impact

2.    Records of authenticity/identity. Because NFTs provide transaction records on the blockchain, they can prove history of ownership and map out the flow of interaction within a supply chain. This means brands can use NFTs for:

• Ticketing – NTFs can be created as a unique record for a sports event or concert ticket, for the first time allowing organisers to control and take a cut of ticket resales. NFT tickets can also open the door to a new dimension of events, like the Coachella Keys Collection which offer lifetime festival passes to owners and give token holders VIP access to virtual events as Coachella takes the brand into the metaverse.
• Proof of authenticity – In peer-to-peer transactions, NFTs can prove that a luxury item is the real deal, eliminating the need for a paper certificate of authenticity, which can be lost or destroyed. Nike has already patented a method to verify the authenticity of sneakers using an NFT system called CryptoKicks. Bacardi’s premium tequila, Patrón, is selling NFTs as proof of authenticity. The NFTs confer ownership rights and the right to redeem the corresponding numbered bottle of the exclusive Chairman’s Reserve (only 150 bottles in existence).
• Supply chain transparency – Luxury brands, cars and pharmaceutical products can use NFTs as part of supply chain tracking so consumers can trust they’re getting quality materials. For example, Prada, Richemont, and LVMH, have partnered up to create the “Aura” blockchain group, offering customers the ability to trace the origins of raw materials used to create their purchases, search for a specific item within a particular store – not to mention view trading activities in the used market.

Who should consider this?

·    Luxury brands at risk of counterfeits

·    Brands not getting a cut of their products being sold on secondary market

·    Brands under the microscope for sustainability of their supply chain practices

What’s the value?

·    Get a cut of the secondary market

·    Prove the sustainability of the business

·    Reduce susceptibility to counterfeits and the diluting of your brand name

3.    Communities

The success of an NFT is often not determined by its floor price, but rather by the community that’s built around it. Harnessing this idea, brands are using NFTs to increase the privileges, feel-good factor and ownership of those who belong to a brand community. Brands should explore the NFT twist on:

• Exclusivity – Last year, Clinique gave VIP customers their own NFTs, as did cosmetics brand Nars. Archie Comics is launching its first NFT collection inspired by The Chilling Adventures of Sabrina. ‘Archieverse: Eclipse’ will feature 66,666 NFT characters, giving comic fans the power to create future storylines for the franchise. Owners of Eclipse NFTs will be able to submit storylines for their owned characters and, if selected, will receive credits in the upcoming comics.
• Membership – NFTs reduce friction in the membership experience, allowing members to unlock perks via a wallet, which the brand can then push content into. A prominent New York restaurant is offering an exclusive NFT membership, offering access to private spaces and guaranteed reservations – even a tiny slice of ownership in the restaurant.
• Assets – NFTs can offer new value to consumers who want to be compensated for their loyalty. The NTP project, Bored Breakfast Club, has partnered with a craft coffee company to create the first blockchain-based coffee membership, which ships free coffee worldwide to Bored Breakfast Club NFT holders. In other twist, Louis Vuitton, has launched its own mobile game where winners are rewarded with rare collectible NFTs that can be flipped for profit.
• Engagement – Brands are setting up digital real estate in the metaverse, allowing consumers new experiences to play, work, connect or buy.  Sotheby’s recently announced its own metaverse gallery for curated virtual art, housed in Decentraland. Between June 2021 and March 2022, more than 2,000 of Accenture’s employees in Australia and New Zealand were introduced to their colleagues virtually in the company’s metaverse. Meanwhile, Fortnite players can now purchase digital outfits inspired by real-life Balenciaga pieces from its metaverse boutique.

Who should consider this?

·    Brands with a strong community

·    Brands in a competitive environment and want to drive customer loyalty

·    Brands using digital engagement to drive physical purchase

  What’s the value?

·    Increase customer retention and acquisition

·    Guaranteed revenue via membership/subscriptions

·    New revenue streams

Where do we start?

Every brand should at least consider whether it needs an NFT strategy. We recommend:

1.    Defining the objective. Do you want to diversify revenue, attract new customers, build brand awareness, create new ways to engage or improve customer retention?

2.    Understanding your customers. What are they are interested in beyond your brand?

3.    Deciding how NFTs can help you achieve your objective and meet customers’ needs. Is there utility for those who are buying?

4.    Looking at your asset/capabilities as well as broader ecosystem of current and/or potential partners.

5.    Taking a phased approach where you can experiment, test and learn, and see what works.

6.    Starting small. Test the waters. See if your audience engages before investing in buying digital land in Decentraland for stores or building your own NFT minting capabilities.

Finally, don’t begin until you’re equipped to execute and manage the strategy. This is not a ‘set and forget’ move but an extension of your marketing and community management. The NFT space is new, evolving and messy. Don’t be afraid to get your hands dirty!