Could NFTs revolutionize the world of merchandising and curb counterfeiting?
Non-fungible tokens differ from traditional tokens in some main characteristics such as not being interchangeable and having a unique identification code.
This is precisely why the price of each NFT is unrelated to that of all other NFTs, even if they are apparently identical.
The applications of these blockchain-based tools can be diverse, but what gives most value to this technology is the ability to be able to certify ownership of an asset. The asset in question does not have to be a virtually usable asset, quite the contrary.
The most virtuous applications are those that make NFTs into digital twins of goods and services that are also usable off-line and off-chain. In addition, they represent the easiest and fastest means of indisputably certifying ownership of something without using traditional legal instruments that would not be necessary on some occasions.
NFT and merchandising: stop counterfeiting
As mentioned earlier, NFTs would allow the certification of ownership of something without the need to employ legal instruments. There are several sporting entities that have launched their only-digital merchandising through the use of NFTs, such as Juventus and Fiorentina.
These kinds of initiatives have introduced a new item in the revenues of the clubs involved and have fostered revenue differentiation. In addition, the purchase of NFT merchandise is often linked to special memberships, preemptions in the purchase of tickets to major matches, as well as exclusive concessions and discounts. NFTs, however, are not only connected with the sale of exclusively digital merchandise, as demonstrated by the project of Italian startup Genuino.
The latter, in addition to launching a collection of NFTs portraying Fiorentina jerseys, has patented a system whereby each “physical” jersey has a respective patch applied and linked to an NFT certifying originality. In doing so, the NFT becomes the digital twin, the certificate of ownership and the certificate of originality of the physical object. Transferring the corresponding NFT would be equivalent to transferring ownership of the object as well. The International Consumer Electronics Show deemed this project among the best in the world by inviting the Tuscan company to its event. The inalterability and immutability inherent in blockchain are expressed in concrete through the ID code and creator always visible in NFT marketplaces.
What benefits for companies and their customers?
As we have mentioned, certifying merchandise by issuing a certificate of originality registered on blockchain certainly increases the perceived value. Being put also in the position of being able to easily prove ownership of a good and easily keep proof of that ownership also conveys to fans a sense of scarcity and uniqueness of the goods. This leads them to view that purchase as a potential investment as well.
Add to this the ability to deliver exclusive services to fans who hold certain NFTs, and the customer experience becomes comprehensive, immersive, and is a crucial boost to fan engagement. In addition, secondary marketplaces could be created where merchandise can be sold and purchased in the form of NFTs. Companies, with a clause inserted in the NFT’s Smart Contract, could earn fees with each resale. Finally, by taking advantage of the interoperability of the blockchain, the pool of potential buyers could increase tremendously by leveraging the showcase of third-party marketplaces.
Interoperability will depend heavily on the blockchain used to create NFTs, a choice that must be made ex ante to take advantage of the future opportunities given by this technology as well.
From sponsors, these initiatives are also welcomed, they increase the ROI of sponsorship and the visibility of their brand reaches an even larger audience. To recap, the value of merchandising would increase because of the ability to prove ownership by fans and because counterfeiters would be cut out of the market. Companies would be able to increase revenues by taking advantage of the “leavened value” through the use of a rather inexpensive tool and through commissions from secondary sales, and they would also be able to implement new fan engagement solutions.
Utilization would benefit both clubs and fans as well as related sponsors. Through these campaigns, increased visibility to sponsors would be ensured as well as the potential entry of others, which would allow the initiative to be funded. In cases of a licensing agreement, the Smart Contracts inherent in NFTs would allow the agreed-upon percentages to be defined and distributed instantaneously. This would lead to a reduction in time and intermediation automatically reflecting on costs as well, which would be reduced.
The obstacles to overcome
Although the goodness of these innovative tools is evident, there are barriers to the spread of this new approach to merchandising. Most fans, because of media reports regarding NFTs, view this technology with skepticism. Many believe that anything to do with blockchain is destined for high volatility, has only virtual use, and may be a bubble ready to burst.
For this reason, the potential customers of NFT merchandising would be reduced to a niche compared to what traditional merchandising sales flanked perhaps by conventional online marketing and advertising tools can achieve. At first, this kind of merchandising, certified by NFTs, may be offered to niches of fans. Precisely for this reason, at least at first, goods and services released through NFT campaigns will have to be particularly exclusive and limited. Later, as the spending power of the younger generation grows, and as the blockchain in its entirety grows in notoriety and credibility, it is likely that the pool of potential customers will expand.
At that point, even more conventional merchandise can be distributed with the support of non-fungible tokens.