Retail

Are NFT projects now over for retailers?


Last year, non-fungible tokens craze picked up steam and many brands wanted to get in on the action. For the uninitiated, NFTs are defined as digital tokens connected to digital goods such as art or music. 

Though the NFT industry made headlines for generating billions in trading volume, the once-hot NFT market appears to have cooled. NFT trading volume reportedly reached $24.7 billion in 2022 and $11.7 billion in 2021, according to Decrypt and The Motley Fool, respectively. However, a report from Dune Analytics found that NFT trading volume plunged from $17 billion in January to $466 million in September, according to MarketWatch. Citing data from DappRadar, Bloomberg reported earlier this month that the NFT trading volume dropped 81% between January 2022 and July 2023, and other reporting indicates many may now be worthless. 

It’s also unclear how many NFT transactions are genuine. A 2022 report from Chainalysis reportedly found that wash trading, a financial fraud in which consumers sell assets to themselves for a higher price to artificially inflate the asset value, drove $44 billion in sales in 2021.

Still, retailers and brands have ventured into the space to attract shoppers interested in digital goods. Nike reportedly generated more than $185 million from its NFT releases. Many retailers and brands, including Tiffany, Macy’s, Gap and Puma, have jumped on the NFT bandwagon. 

In an October 2022 Forrester report, the Cambridge-based research and advisory firm predicted that NFT projects released from this year on will no longer be considered innovative. 

Instead, going forward, NFTs will be a tool for retailers to attract customers seeking exclusive experiences and incentives, said Martha Bennett, vice president and principal analyst at Forrester

Given the fluctuating and possibly overblown value of NFTs, is it worth it for brands to invest in them as part of their marketing strategy? Experts told Retail Dive that the industry may rebound again, but brands must proceed with caution. Additionally, brands and retailers must be aware of scams associated with the space and connect their NFTs with enticing perks to make the tokens worth possessing. 

When NFTs go wrong

Following in the footsteps of other brands and retailers, MeUndies was one of the many companies that decided to experiment with non-fungible tokens. But after the brand experienced swift social media backlash, it quickly retreated from the space.  

In a statement posted on March 9, 2022, on Reddit, MeUndies explained why it canceled its collaboration with Bored Ape Yacht Club, an NFT project involving 10,000 illustrations of personified apes. The company said it “just didn’t do the work we should have to make such an impactful decision” and cited concerns about the cryptocurrency and NFT industry’s environmental impact.

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“Since our announcement, we’ve spent time researching and educating ourselves on the NFT space, and most importantly, listening to our community,” the intimates brand wrote on Reddit. “We’re not immune to making mistakes, and we own this one.”

MeUndies didn’t respond to Retail Dive’s request for comment. 

For retailers and brands continuing with their NFT experiments, these projects will only be a fit for a small pool of affluent customers familiar with the NFT industry. 

Kim Grauer, director of research at Chainalysis, a cryptocurrency investigation and compliance firm, said she surmises that the overall bear market is the main driver behind the NFT market drop. Chainalysis’ research has identified many NFT purchases where buyers are rushing to resell their tokens for a markup, but the bear market likely played a role in curtailing that speculation, she said. 

Forrester’s Bennett said that such tokens would be most appealing to a small subset of younger, wealthy cryptocurrency holders who have the funds to spend on NFTs and are interested in digital assets or have become wealthy through technology. The firm’s March 2022 survey found that 72% of U.S. respondents said they have never owned an NFT and aren’t planning to do so. 



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