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How Ecommerce Brands Can Prepare For The Web 3.0 “Sea Change”

how-ecommerce-brands-can-prepare-for-the-web-3.0-“sea-change”

As technological developments go, the web is still quite new —but just three short decades after it was invented, we’re already entering its third generation.

In Web 1.0, the World Wide Web was the biggest revolution since the printing press. Suddenly, anyone with an internet connection could publish their own static website.

Web 2.0 saw sophisticated platforms enter the fray—consumers could share online reviews, shopping links on social media, or even create their own web stores.

Now there’s Web 3.0, the next generation built on cryptocurrencies, blockchain technology, and decentralizing power.

How much more decentralized can Web 3.0 make the world of ecommerce? Let’s put it this way: these days, the consumer is royalty.

“As the web becomes decentralized,” says Tim Vanderhook, CEO of Viant Technology,

Large gatekeepers will not control marketers’ access. Instead, consumers will invite advertisers in.”

Calling Web 3.0 a “moment of reset between consumers and brands” and a “tremendous opportunity for brands to connect,” Vanderhook is optimistic about what recent advancements will do to change the relationships between businesses and customers.

But what will this impact look like in practical terms? Here’s how we believe the onset of Web 3.0 will change the face of ecommerce.

Table of contents

  1. What is Web3?
  2. How parts of Web3 will impact ecommerce
  3. How the blockchain will impact ecommerce
  4. How cryptocurrencies will impact ecommerce
  5. How NFTs will impact ecommerce
  6. How the metaverse will impact online shopping (AR, VR, and 3D)
  7. How dApps will impact ecommerce
  8. How machine learning will impact ecommerce
  9. The future of Web3 and ecommerce
  10. How Shopify can help

What is Web3?

Web 3.0, or Web3, is the next generation of internet technology. It includes the integration of cryptocurrencies and blockchain technology, decentralizing power away from platforms, and improving security, privacy, and scalability.

Generally, Web3 is made up of three specific components or innovations:

  • Blockchain: Blockchain is a decentralized public ledger, creating proof of ownership without compromising user privacy. Before blockchain technology, we relied on centralized database ledgers to verify ownership. Blockchain uses “chunks” of information, chain-linked together, to confirm ownership without centralized data.
  • Cryptocurrencies: “Crypto,” as it’s often known, puts digital money on the blockchain. This decentralizes financial ownership and adds security to online transactions and purchases without third parties.
  • NFTs: Non-fungible tokens are essentially digital blockchain “receipts.” They serve as the accounting of ownership for digital assets.

Taken piece by piece, it’s not immediately obvious how these technologies will revolutionize ecommerce and digital retail. But the impact of Web3 on the way consumers transact online could create lasting change in how retailers approach their customers online.

How parts of Web3 will impact ecommerce

Like every generation of the web, there is more than one innovation in Web3 that will change everything. Let’s look at the far-reaching effects that the latest innovations could have in the world of ecommerce:

How the blockchain will impact ecommerce

Blockchain technology has far-reaching implications in the world of ecommerce logistics. If centralized ledgers become a thing of the past, it removes the need for expensive third-party intermediaries.

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The chief impact on ecommerce here? Cost, especially for companies with complicated shipping needs.

According to DHL’s report, Blockchain in Logistics, logistics is the lifeblood of the modern world. “An estimated 90% of world trade [is] carried out by international shipping every year,” writes DHL. “According to one estimate from the World Economic Forum, reducing supply chain barriers to trade could increase global gross domestic product by nearly 5% and global trade by 15%.”

How do these benefits look in practice for ecommerce companies?  Take the wine trade, as PWC explains.  Should a consumer ever receive a bottle of bad wine, product tracing via the blockchain makes it possible to see who originally produced that bottle.

In short, blockchain technology adds accountability and security to logistics. According to PWC, there are cost savings from fewer duplicated tasks along the supply chain, leading to cost savings as well.

How cryptocurrencies will impact ecommerce

Accepting cryptocurrencies can give your new buyers more confidence in your ecommerce store. One study found 40% of buyers using cryptocurrency are buying from a company for the first time. And this shows up in average order values, where crypto buyers tend to purchase twice as much as credit card users.

It’s not surprising, as cryptocurrencies tend to spark fast adoption among users. Once people start using cryptocurrency, about 25% say they’ll purchase goods or services within seven days.

In other words, new users are highly trusting of cryptocurrencies and their security benefits. When ecommerce and retail companies accept crypto payments, they can expect to see increased purchases from these early adopters.

Additionally, cryptocurrencies make it easier to introduce buy now, pay later features. Digital wallets can also reduce buyer friction, making larger purchases easier. McKinsey notes that most respondents using digital wallets have already loaded multiple cards to that wallet.

As consumer trust in these technologies increases, customers are happy to use crypto-based financing to make bigger purchases, meaning ecommerce companies can offer more Web3-based features that make consumers comfortable with spending more. “Of the respondents who used BNPL,” writes McKinsey, “29 percent report that without this financing option they would have made a smaller purchase or not purchased at all.”

Cryptocurrency and “buy now, pay later” (BNPL) financing indicate that these topics have moved further into the mainstream for the American Consumer.

McKinsey

How NFTs will impact ecommerce

Although rooted in the same technology, the impact of NFTs on ecommerce and online shopping could have different effects. NFTs are essentially modern-day customer avatars. Just as a passport might connect a person to a country, NFTs create individual investment and identity when a consumer interacts with a specific brand.

Digital ownership possible through tokenization gives consumers the feeling of owning a piece of the pie. Says Blake Menezes, head of CPG Consulting:

 

Web3 is flipping the typical consumer-brand relationship on its head by giving more ownership to consumers of the things that they purchase: both physical and digital.”

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This is particularly powerful with millennials and Gen Z. Think of NFTs as the millennial/Gen Z version of the classic loyalty card.

For example, Citizen M’s new virtual hotel in The Sandbox wasn’t sold on the idea of the virtual hotel alone. Its success came through 2,000 NFT sales, with each providing redeemable rewards at Citizen M’s real-world accommodations.

 

Entering Web3 doesn’t have to be a cash grab; it gives you an opportunity to create deepened loyalty with your customers and ownership of their digital collectibles or assets related to your brands.

—Blake Menezes, Head of CPG Consulting

Another strategy for using NFTs is tokengating.  This refers to creating access to part of your online store—such as a specific collection—but restricting it to owners of a particular NFT.

That’s what Adidas did when it paired up with Bored Ape Yacht Club. They created an NFT collection titled Into the Metaverse. Ownership of these NFTs opened access to four additional (and exclusive) physical products—at no additional cost.

Tokengated commerce is useful for boosting brand loyalty, creating a sense of exclusivity for the most engaged consumers. But you can also use it to create unique product selections with other brands or offer unique physical product pairings when customers buy NFTs.

After all, there’s a reason NFTs are a favorite with the fashion world. They’re redefining how brands create excitement and exclusivity in a Web3 world.

How the metaverse will impact online shopping (AR, VR, and 3D)

When Queenie Wong of CNET explored the Alo Yoga store and the available fashion items in their metaverse store, it was ostensibly to shop. But the experience proved to be about more than adding items to her cart.

“In Alo Sanctuary, Roblox users can earn [items like] a virtual jacket after completing five days of meditation. Shopping never felt more serene,” wrote Wong. “Or cheap.”

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The fully immersive shopping experience highlights something that would have been impossible in Web 2.0.  And while buying virtual Gucci bags is gratifying at first, it’s only a matter of time before these metaverse buyers turn into real-life customers.

“As part of Web3, the metaverse will continue to blur the lines between digital and physical consumption,” says Taylor Holiday, CEO of Common Thread Collective. “For my kids’ generation, that line doesn’t even exist.”

IBM agrees. “With AR/VR and high-fidelity 3D graphics,” writes Alejandro Pint, IBM’s Blockchain Campaign Manager, “the user interface of the digital web will merge with the physical world. The boundaries between physical and digital will blur as we expand the ability to render physical objects in the digital realm and digital objects in the physical world.”

 

Ecommerce companies that carved out for themselves and support that space, that make themselves native to it, are setting themselves up for long-term success as well as short-term marginal gains—which matter so much right now. They’re de-risking, diversifying, and future-proofing themselves.

—Taylor Holiday, CEO of Common Thread Collective

Metaverse and its associated technologies (augmented reality, virtual reality, and 3D interaction) are also more personal. This makes them ideal for building a sense of community.

Social proof is already at the core of ecommerce, as seen in the importance of Amazon reviews and other online product reviews,” notes Forbes.  “In the metaverse, brands will be able to take social proof beyond just a star review by building engaging communities that allow customers to engage with the brand itself and other fans of the brand.“

There’s also something innately fun about the metaverse. This makes it an ideal landscape for gamifying your ecommerce presence.

Add it all up and the immersion effect can equal more ecommerce sales. According to the book Navigating the Multiverse, “We believe gamified shopping experiences lead to more transactions. When you put a ‘why’ behind a purchase, there tends to be more.”

But what does engaging your consumers on the multiverse look like in practice? Consider adding strategies like virtual showrooms, which let prospective buyers navigate your collections at their own pace.

You can also add product customization and previewing to let customers try out a product with their customer avatar. Alternatively, you can create 3D videos to help customers preview products in action.

  • Virtual showrooms. Virtual showrooms let prospective buyers navigate your collections at their pace.
  • Product customization and previewing. Let buyers “preview” an item with their customer avatar, or watch a 3D video of the product in action.

How dApps will impact ecommerce

dApps are decentralized applications—Apps 3.0, if you will. These use blockchain technology and peer-to-peer networks to let people download apps without a  “middleman” platform.

You may already be familiar with the benefits of building your own app. But dApps offer some specific benefits to ecommerce in Web3:

  • Decentralization improves security, which helps you build trust when selling big-ticket items via an app.
  • Faster payment processing: for example, if using cryptocurrency, you may remove the need for bank clearances on major purchases.
  • More consumer investment. In other words, people using the dApp have a say in how the app develops over time.

dApps are promoting decentralization of ecommerce, which brings the benefits of Web3 to your  mobile sales. According to Inc., the self-executing code of dApps also promises all sorts of benefits for ecommerce stores, including “a reduction in product returns, chargeback fees, and credit card fraud.”

How AI/Machine learning will impact ecommerce

Web3 is shifting more power into the hands of consumers. But there’s no reason ecommerce brands can’t continue to learn all about their buying preferences in new ways.

The key is in using AI to make the most of what you learn.

AI can identify patterns in your ecommerce data to help build new campaigns. Simultaneously, it can yield insights that improve conversions.

This means you can use your own first-party data to learn more about customers. AI can also work through several media, including web analytics and surveys, to drum up insights your team might have missed.

According to Harvard Business Review, AI is already having an impact. It can yield insights on enhancing product features or help you optimize your internal business operations. The result is a store with new ideas for introducing future products and freeing up workers to focus less on automated tasks.

Bots are also becoming increasingly sophisticated. They can filter product sizes and consumer preferences, and even sync community recommendations to serve as a sort of “personal shopper” for customers.

In other words, AI and machine learning are helping store-friendly Web3 bots to better serve as concierges, making it easier for small, boutique shops to offer their services at scale.

The future of Web3

Web3 promises far-reaching impacts on the way ecommerce works in the future. But let’s get specific about what those impacts will look like—and how they’ll factor into the particulars of selling products online:

Tokengated commerce for retail

Thanks to dApps and NFTs, consumers will likely feel they “own” part of a brand when it’s decentralized. As Forbes notes, “The value of an NFT isn’t just in the asset, it’s also in what the buyer gets from the asset—and that is where you can start to build brand loyalty.”

As an example, Forbes points to Bored Ape Yacht Club and its NFT-gated exclusive communities. In the future, retailers can succeed by giving loyal customers digital ownership with customer avatars and tokengated commerce.

DTC industries like CPG (consumer packaged goods)

If Web3 brings decentralization, then companies that can cultivate individual relationships with customers will prosper. Forbes believes CPG companies “are now realizing that investing in DTC models … helps them to build direct relationships with customers,” using this investment to “remain relevant.”

Omnichannel marketing and personalization

Customers clearly enjoy interacting with brands on multiple channels. Omnichannel marketing boosts customer retention, offering 90% higher retention rates than single-channel marketing.

But it’s the personalization that may define Web3 for consumers. Enhanced AI cross-referenced with customer avatars will mean enhanced personalization for consumers. Web3 means higher-quality personalization will be available at scale.

This, too, could lead to long-term retention rates. After all, consumers prefer brands that “know” them. Said Lori Stout, VP of Marketing for Punchh/PAR Technology:

 

If I put on my consumer hat, I want to be understood by the brands that I use. … I love to be treated like a VIP when I shop with restaurants, and I love that they know me.”

Customer acquisition

“As the web becomes decentralized, gatekeepers will not control marketers’ access. Instead, consumers will invite advertisers in,” said Viant’s Tim Vanderhook to Women’s Wear Daily.

In other words, Web3 will feel less like advertising and more like teamwork. Vanderhook sees new channels for future customers, such as streaming audio and in-game advertising, as becoming points of acquisition that weren’t as prominent in Web 2.0.

Online and B2B payments

We’ve previously noted the top B2B trends to watch. But perhaps most relevant is how B2B ecommerce is slowly changing to feel more like the B2C experience.

With Shopify Plus, for example, you can use traditional B2B strategies (like custom pricing options) alongside more traditionally B2C features (like personalizing buying experiences). As Web3 decentralizes the way people interact with brands, expect the lines between B2B and B2C purchasing to continue to blur.

The supply chain

Shipping, logistics, and the supply chain all came to the forefront with the COVID-19 pandemic. Blockchain technology promises to innovate by adding transparency to the supply chain and potentially lowering the cost of logistics, according to PWC.

Supply chain tracking via the blockchain is already in use with IBM and Walmart, for example. IBM’s Food Trust uses a shared food system record to build supply chain transparency. Through this transparency, Walmart can track food freshness for consumers to a precise degree.

Consumer expectations and consumer engagement

As consumers get used to NFT and crypto-based incentives, their expectations may continue to grow. Many games already offer NFT and crypto incentives to encourage platform participation. And as Forbes notes, UniX is a platform that lets gamers earn points toward scholarships simply by engaging with virtual games.

As time goes on, more non-gaming brands are getting in on it. Louis Vuitton, for example, launched a mobile game (Louis: The Game) with collectible NFTs as an incentive to play. As Forbes says, “the new generation of gameplay industry grants ownership to players and rewards them for their time and engagement spent in games.”

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How brands should prepare

Given what we’re expecting with Web3, what can brands do to prepare for these shifting sands?

  • Add tokengated commerce. The first step is to capture the enthusiasm for all things blockchain and NFT. Tokengated commerce provides an immediate link between these technologies and ecommerce, giving customers a reason to not only buy your NFT, but to invest more loyalty in your brand.
  • Expand Metaverse experiences. If you’ve built an in-person retail experience, you know the impact this can have on buying behaviors. Expect the same in the Metaverse. If you can build Metaverse experiences—such as customizable product previewing to go along with customer avatars—you’ll give consumers a new reason to engage with your Web3 presence.
  • Gamify the shopping experience. As with Louis: The Game, engaging a younger audience simply means dipping your toes in that end of the pool. Use NFTs to “unlock” parts of your shopping experience, making it much more like a game and generating buzz without it feeling like traditional advertising.
  • Accept cryptocurrency payment. Accepting cryptocurrency shows statistical benefits in creating large order values—at least among crypto enthusiasts. It also helps you build trust with new customers, thanks to their confidence in the underlying security of using crypto transactions.

How Shopify can help

Through tokengating commerce app partners and blockchain app partners, and even Shopify’s beta NFT selling system, there’s no reason to wait until Web3 is the dominant strategy of ecommerce. Get ahead of the times by building a blockchain strategy with a Plus service partner: it’s better to be an early adopter than scrambling to catch up.

In many respects, Web3 is already here. It simply may not be the dominant consumer experience quite yet. The only question is: is your shop prepared for how Web 3.0 will change ecommerce? If not, there’s no time like the present to get started.

This originally appeared on Shopify Plus and is made available here to cast a wider net of discovery.

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