Web3 this, metaverse that; there’s a lot of talk at the moment about an excitingly ominous version of the internet that may or may not change the way we shop online forever. But what’s it all about? What is Web3, and what impact is it likely to have on the ecommerce industry?
This comprehensive introduction to Web3 ecommerce will answer those very questions. Let’s start with the basics.
- Token-gated commerce
- Supply chain improvements
- Loyalty programmes
- Cryptocurrency payments
- Customer experiences in the metaverse
- Community building
What is Web3?
It can be difficult to give a precise definition of Web3 because many of its technologies are still in their early stages of development, and it has a way to go to reach its full potential.
In simple terms, Web3 (or Web 3.0) is the third generation of the World Wide Web, following on from Web 1.0 and Web 2.0.
Web3 is built on decentralised applications that allow for more direct interactions between users. It also involves artificial intelligence, cryptocurrencies, token-based economies and blockchain technologies. If you’re new to these terms, Web3 can seem a little bit overwhelming.
Basically, Web3 seeks to remove the “centralised” data that is owned and controlled by “Big Tech” corporations, and empower users to own and control their own little pieces of the web, privately. That’s what blockchains are all about - storing data without the need to entrust another organisation to take care of it and keep it secure.
With Web3, data is owned by people themselves, information is free and open-source and transactions are anonymous. Or, at least, that’s the vision.
Web3 is a totally new imagining of how the World Wide Web works, which presents an abundance of new opportunities to individuals as well as ecommerce businesses.
What’s the difference between Web 1.0, 2.0 and 3.0?
In the most basic terms, Web 1.0 is “read only”, Web 2.0 is “read-write” and Web 3.0 is “read-write-own”. But what does that actually mean?
Web 1.0 was the first version of the World Wide Web. It consisted of a few clever people creating static web pages to share information with a large group of interested readers. It’s known now as “read only” because that’s basically all you could do: read. Oh, how far we've come since then.
Web 2.0 introduced a game-changing element of participation to the mix, creating the collaborative and interactive internet we know so well today. While Web 1.0 involved a small group creating content for a big group, Web 2.0 involves a large group creating even more content for an even bigger audience through social media, commenting, blogging, podcasting and more. It’s all about collaboration and participation, which is why it’s “read and write”.
Web 3.0 moves away from the centralised platforms that define Web 2.0 like Facebook, Twitter and Google. Instead, it embraces decentralisation, making data readily available and accessible to all. Individuals own their data, which is why it’s “read-write-own”.
How Web3 will impact ecommerce
When you first get your head into it, it may not be immediately clear how Web3 and its related technologies will impact the ecommerce industry. However, Web3’s core elements are likely to transform the way consumers act online, which will undoubtedly change how they shop too.
While some thought leaders in the tech space are sceptical of the impact Web3 will have on the general market, others believe it will be game-changing, offering totally new ways to market, sell, engage and interact online.
Co-founder and Managing Director at Underwaterpistol Gary Carruthers predicts that in the long term, Web3 is going to change the face of ecommerce. “It’s going to be massively transformative,” he says. “In certain instances, the changes will be subtle or even invisible (enhanced personalisation, reduced friction). In others, the landscape will be completely unrecognisable (immersive VR shopping environments)”.
According to Inc., in less than five years, NFTs and Web3 transactions will be commonplace in ecommerce storefronts. Brands that prepare for this transition and tailor their approach to a new, technologically-focussed audience will be able to capture a new market and maximise their success on Web3.
But first, let’s talk specifics. Below are the ways in which Web3 has the potential to transform key areas within ecommerce.
A key part of the Web3 revolution is NFTs (non-fungible tokens). As the name suggests, NFTs are non-fungible, which means unique and not interchangeable. A pound coin, for example, is fungible because you can switch one for another and it still holds the same value.
NFTs are unique tokens that connect a user’s account to a digital asset that’s recorded in a blockchain. What that digital asset actually is can vary, but you might have already heard about digital art and music NFTs being bought and sold for vast sums of money. The Bored Yacht Ape Club is one of the most popular examples, with its collection of 10,000 cartoon ape NFTs shooting up in value from $190 a piece to over $400,000.
Source: Yuga Labs
Today, there’s a lot of scepticism around NFTs, as well as a lack of understanding of their purpose. Liam Quinn, Technical Director at Vervaunt, explains that “There are definitely negative connotations when talking around NFTs, mostly caused by that bubble of hype where people lost a lot of money in buying/selling [them]. But that was only scratching the surface of what could be achieved with the use of NFT technology.”
It can be difficult to get your head around people spending huge sums of money on a digital piece of art that anyone can save to their desktop and appreciate anyway. But it’s not about that. It’s about the ownership, and the fact that NFTs hold (variable) value, just like currencies. It’s an investment. This is what presents opportunities for ecommerce.
Using token-gating, ecommerce brands can restrict access to part of their online stores or collections to people who own certain NFTs, treating them as a sort of VIP card. It’s also possible to introduce more complex tiering to this concept.
Chris Elsheikhi, Senior Vice President of Revenue at Novel, explains that “you can award different NFTs to certain customer segments based on things like how much they spend with you and how much time they spend on your website. From there, you can begin to build in products and marketing initiatives based on the NFT level to drive engagement and increase the lifetime value of the customer.”
NFTs can offer customers early access to new product launches, reward customers for their loyalty and create exclusive communities that ultimately drive retention.
As for the bad rap NFTs often get at the moment, Liam Quinn from Vervaunt believes it might not persist for much longer. “I think the stigma [around NFTs] will quietly die away when the conversation is a broader one around digital assets and more focused on the innovations delivered and not the application of the technology.”
Supply chain improvements
On Web 2.0, the supply chain is complex, spread across multiple different stages and geographical locations. This makes it difficult to manage and vulnerable to external turbulence, as made evident through the extensive supply chain issues during the Covid-19 pandemic.
Web3 has the possibility to innovate supply chain management, introducing a highly-secure alternative that seamlessly connects all its participants. How? Blockchain technology.
Blockchain technology introduces open record keeping and increased transparency that allows ecommerce brands and users to trace every step of a product’s production and shipping journey. This improves security and reduces labour in logistics too.
According to Akash Takyar, CEO of LeewayHertz, the goal of Web3 is “to increase the transparency of the supply chain and logistics, enhance the traceability of activities involving multiple parties in the supply chain, remove manual labour from triggering and recording supply chain transactions, and improve the security of sensitive supply chain data.”
For ecommerce brands, Web3-based supply chain management offers a more reliable, robust and financially viable alternative to the current somewhat precarious status quo.
Web3 and its related technologies present a wide range of exciting opportunities for ecommerce businesses, such as the transformation of the way we approach loyalty programmes.
In particular, NFTs can be utilised as rewards that can be earned in the same way you’d earn points in a traditional loyalty programme. This will be an appealing option to brands because it will help boost their retention efforts and build loyalty to their brands, which is more important than ever in today’s difficult financial environment.
NFTs are effective as loyalty rewards for two key reasons. Firstly, they’re more practical. The tokens can be earned and spent on the blockchain, giving customers the freedom to use them as they see fit, without the need for interaction with the company itself.
As Chris Elsheikhi from Novel explains, “an NFT can be transferred between people and the record of ownership is crystal clear to see on the blockchain. It’s instantaneous and there’s no admin required”.
Secondly, earning NFTs instead of vague “points” can make the reward more valuable because if that NFT is in limited supply and it becomes more sought after, its value can actually increase. This NFT can then be bought and sold on the blockchain. There’s an additional bonus to ecommerce brands here too.
Chris from Novel explains that “every time the NFT gets resold, the original owner (in this case the brand) will get a cut as well, so it becomes another opportunity for the business to create value through the membership programme.”
NFTs offer valuable and versatile rewards for loyalty programmes that could revolutionise customer retention efforts.
Cryptocurrencies are a key part of Web3, and its emergence promises to make crypto payments commonplace. In particular, we’re expecting to see a new trend of buying products in webshops through decentralised applications (dApps).
Accepting cryptocurrencies can give ecommerce brands access to a new, potentially profitable demographic who value transparency in their transactions.
A study from Bitcoin provider BitPay found that 40% of customers who pay with cryptocurrencies are buying from that company for the first time, and the amount they spend is double that of customers who pay with regular credit cards.
On top of that, receiving payments in crypto is less expensive than cards because there are no fraud-related checks or charges.
Shifting to accept cryptocurrencies isn’t a difficult move, with multiple integrations allowing you to do so on platforms like Shopify and BigCommerce. However, cryptocurrencies can present a barrier to people interacting with Web3 tech, largely due to nervousness or scepticism around delving into the crypto space
Liam Quinn from Vervaunt believes that cryptocurrencies are “definitely a blocker to [Web3] being more widely adopted, both in terms of actual usability and also in confidence of its stability and security”. However, while cryptocurrencies and Web3 are currently closely interlinked, this may not always be the case.
As Liam explains, “In time, the use of blockchain technology won’t have such tight dependencies on crypto, meaning the underlying technology of innovations could be blockchain without the end user knowing or caring.” This may present opportunities for brands to explore Web3 ecommerce experiences without a reliance on users engaging with cryptocurrencies.
NFTs are an innovative way for ecommerce businesses to create lasting relationships with their customers, build loyal communities around their brand and generate additional revenue from already interested parties.
As we’ve already mentioned, brands can restrict access to their content/products to people who own a certain NFT (through token-gating). Whether those people have earned that NFT through a loyalty programme or bought it specifically to gain access to content, everyone who owns such an NFT has demonstrated a unique interest in the brand. This creates an exciting marketing opportunity for businesses.
Web3 has major potential to “help build and market to your active community members,” explains Katie Hoesley, Senior Developer Relations Advocate at BigCommerce. “For example, someone who buys an NFT from you is a really specific and dedicated community member for your brand, and you can use that info to market to them directly and more accurately.”
By marketing to loyal customers who own specific NFTs, you can tap into an established customer base who are already interested in what you have to offer. This presents an opportunity for brands to maximise the lifetime value of those groups, rewarding customers for their loyalty but also generating additional revenue.
Customer experiences in the metaverse
A big part of the Web3 revolution is the metaverse, an immersive virtual world in which users can explore, play, shop and interact with others from the comfort of their homes. It’s a tricky concept to get your head around but some - including Mark Zuckerburg - claim it’s the future of the internet.
The metaverse is introducing new ideas to the way ecommerce brands do business and interact with their customers. Various forward-thinking companies have already started exploring the digital world.
At the end of 2021, Nike opened “Nikeland”, a micro metaverse in which users can play games as well as try on Nike’s virtual products. Since its launch, Nikeland has attracted millions of visitors from across the globe who interact with celebrity visitors (and each other) and invest in virtual Nike products, which Nike pushes as having the same value as their real-life counterparts.
Earlier this year, H&M opened its first digital showroom in the metaverse, dubbed as “an extension of physical showrooms located all over the world.” H&M Group are pushing the idea of virtual fashion being an extension of our physical selves, explaining that “the possibilities of self-expression that come with virtual fashion are endless.”
Both Nike and H&M’s expansions into the metaverse space are defined by a rethinking of the value of virtual assets. They, and others, hope that the metaverse will eventually become an alternative universe in which people exist, earning and spending virtual currencies, interacting with others and, crucially, valuing virtual products in the same way they value physical ones.
According to Mark Zuckerberg, this alternative virtual world could be commonplace within 10 years.
How ecommerce brands can capitalise on the emergence of Web3
There are lots of ways ecommerce brands can capitalise on the emergence of Web3. However, according to Dylan Laseur, Co-Founder of Flatline Agency, it’s important to identify specific ways that Web3 technologies can enhance your customer journey first.
“There's a lot of opportunities there, but the most important thing is that it's used for a specific use case,” Dylan explains.
“I've seen a lot of brands launching [in the Web3 space] purely for marketing purposes, which is of course nice for sales, but you need a specific use case to make the most of the technology.”
When it comes to making the decision about whether or not to embrace Web3, according to Chris Elsheikhi from Novel, brands need to ask themselves:
“Is there a challenge in my business that can be solved right now using this technology? Can I engage my customer base much more effectively using this technology? Can I acquire more customers using this technology? Can I open up new growth channels?”.
Web3 technologies are innovative, diverse and - crucially - a work in progress. There are infinite ways ecommerce brands can embrace them to enhance their business models, but it’s crucial to note that these technologies are most effective when they’re built around a specific idea. Creating a new metaverse just for the sake of it is highly unlikely to be a worthwhile investment.
Certain verticals lend themselves really well to Web3, and the use cases you’ll see in the news are often the more flashy examples of impressive VR experiences.
But Web3 isn’t just about that. It also presents opportunities to enhance the customer journey in more subtle ways that will add a lot to merchants’ bottom lines, such as by reducing friction at the checkout, enhancing loyalty schemes or token-gating.
Web3 is a broad new technology and the possibilities it offers to transform and improve the ecommerce experience are almost endless.
There are advantages to adopting Web3 technologies sooner rather than later, too. Dylan Laseur from Flatline Agency points out, “Getting into a space early means you’re used to it, you know what it can achieve and also you can identify certain possibilities.”
“What happened in the NFT art scene was that people made tremendous amounts of money from simple campaigns purely because they combined early adoption and a good idea with some creative strength.”
Web3 is still incredibly new, and it’s still evolving. For ambitious brands with a drive to innovate, now is the time to explore it.
And for the naysayers who think Web3 is just a load of rubbish that would never be relevant to their brand’s customer base, heed Gary Carruthers from Underwaterpistol’s advice:
“Know your audience, and understand that it’s a living and breathing thing that changes over time. Don’t close your mind to innovation just because you think it’s stupid.”
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