Not all fashion brands should use NFTs. NFTs, Ethereum, DAOs, and all of the terms that relate to web3 speak to one concept: to decentralize the trusted third parties (TTP). While there are many possible TTPs in the fashion industry, we’ll use three examples to demonstrate how NFTs can be used to extract more of the value that they create for the consumer retail industry:
- Decentralize social media to own the communication channel with customers
- Decentralize eCommerce to eliminate payment fees and returns
- Decentralize brand direction by empowering the community to make decisions
Decentralize Social Media
Retail brands spend countless hours meticulously creating content and engaging their fanbase across social media platforms. While social media has enabled a new form of connecting with customers, we've learned that Facebook, Twitter and YouTube can change their algorithms to reduce the reach of branded content.
So how might a retail brand own a social channel without the use of social platforms like Facebook?
Non-Fungible Tokens, or NFTs for short, offer a way to directly communicate with fans. Using a platform like Discord, brands can token-gate channels to a) validate that they are speaking to customers who have already bought products and b) moderate conversations between brand and consumer without worrying that an algorithm change in the future will stifle communication with consumers.
Instead of posting Listicles (articles that rank a list of people, places or things for a given topic) and publishing that on web2 social media platforms, brand managers can create a token-curated registry to enable NFT holders to post content & upvote posts similar to a Reddit thread.
Decentralize eCommerce Payments
Many retailers are using ecommerce platforms like Shopify or WooCommerce to power their online stores, payment processors often eat into an online retailer’s margin. On average, a payment processor like Stripe, PayPal or Shopify charges 2.9% + $0.30 per transaction. With eCommerce revenue topping over $759 billion USD in 2020, retailers would be able to save upwards of $22 billion in processing fees by accepting cryptocurrencies like Bitcoin or Ethereum as payment.
Shopify has already announced that they will allow merchants to sell NFTs directly through their stores, so the future is already here.
For stores with high returns, retailers can also issue NFTs to consumers who return an item due to poor fit to keep track of their custom size. Son of a Tailor, a clothing company that specializes in custom fits, has launched an "NFT Shirt" to mint over 100,000 non-fungible sizes.
Decentralize Brand Direction
For the brands that really want to harness the wisdom of their community, a fashion brand can launch a crowdsourced capsule collection. A retailer could use fungible tokens (ERC-20) to have customers who hold governance tokens to propose and vote on proposals. Tools like Snapshot enable communities to organize and record votes on the blockchain.
Web3 technology will enable consumers to have a new type of relationship with brands -- one of ownership with economic upside and direct participation in the brand's future direction. Much like what we saw during the earliest years of Social Media, or web2, brands that adopt and experiment with web3 tools, platforms and ways of working will win in the fast growing web3 ecosystem.