Should eCommerce Brands Worry About the Noise Around Web3?
How can the decentralized web in the form of Web3 impact the eCommerce industry? Also referred to as Web 3.0, Web3 has been capturing the audience’s attention in recent times. The search queries for the keyword, “Web3” peaked in December 2021, up 20 times from a year before.
Juan Benet of Protocol Labs refers to the Web3 as a “software framework that reimagines web applications in a way that dilutes authority, verifies identity and intent, and builds a better, more sustainable set of tools for everyone to share and use.”
How will Web3 transform the eCommerce domain?
Over the next 5 years, eCommerce stores are likely to see more transactions using Web3 and non-fungible tokens (NFTs). Consumers will use technologies like Blockchain and distributed applications (dApps) to make online purchases.
Let us deep dive into how Web3 will impact eCommerce. Keep reading.
What is Web3?
Effectively, Web3 has evolved from Web 2.0 or what was known as the “read and write” version of the Internet. With Web 2.0, online users could consume more content and even create and publish their content. This led to the proliferation of social media companies like Facebook and Twitter, which also had complete control over their user’s personal information.
Eventually, this created concerns about data privacy and monopolization, which then led to the emergence of the Web3 (or the “Read/Write/Own” version of the Internet). Gavin Wood, who officially coined the “Web3” term in 2014, believes that this decentralized technology will “bust technology monopolies like Google and Facebook.”
Web3 users can now “govern” their data and become stakeholders, instead of just being consumers. Brian Brooks of Bitfury explains that “what happens on the decentralized Internet is decided by the users” as against being decided by the likes of Twitter and Facebook.
How will Web3 transform the world of eCommerce? Let us discuss next.
How will Web3 impact eCommerce?
Considering the level of global interest in Web3, eCommerce retailers must try to understand how it can impact their business in the future. The idea of the decentralized web could potentially open new forms of doing eCommerce business. On its part, blockchain technology can provide online shoppers with both convenience and a sense of control over their shopping transactions.
Here is a look at 5 eCommerce areas that could be impacted by Web3:
1. Brand loyalty programs
Traditionally, eCommerce brands have rewarded their loyal customers through the brand loyalty program, which typically earns their consumers “reward points” for every dollar that they spend. Consumers can, in turn, accumulate and redeem their points for making purchases or availing of discounts.
In the world of Web3, eCommerce brands could design their loyalty programs around non-fungible tokens (NFTs) that offer potentially more monetary value to consumers. Here are some ways NFT-based tokens can transform loyalty programs:
- Consumers can purchase NFTs directly from the blockchain, without any intervention from the eCommerce brand.
- With their predefined value, NFTs can be redeemed by consumers to buy any eCommerce store product, making them more valuable than reward points.
- eCommerce marketing campaigns can also offer new consumers free NFTs to be used in their first purchase.
2. Digital currency payments
Beyond rewarding high-value customers with NFTs, the use of blockchain technology in eCommerce platforms could also witness a rise in the use of cryptocurrencies (or digital currencies). While Web 2.0 payments were based on the “trust” of centralized authorities & security protocols, the Web3 framework differs by assuming that no individual or central authority is trustworthy enough, thus verifying the “user intent” every time.
Cryptocurrencies decentralize money, just as Web 3.0 decentralizes all applications. To paraphrase the words of Dr. Gavin Wood, Web3 assumes “trust, but will have the truth.” On its part, eCommerce companies of the future could allow their consumers to purchase items in exchange for digital coins like Bitcoin or Ethereum. It would be interesting to see eCommerce sites built using Shopify or Magento plugins displaying the “live price” of digital currencies and accepting crypto payments.
3. Data security
Among the top concerns with Web 2.0, online users were genuinely cognizant about the way large technology companies harvested their data.
How does the decentralized approach of Web3 impact data security or cybersecurity? With its foundation in blockchains, Web3 is leveraged for trust verification and includes data privacy and protection. Additionally, Web3 allows customers to share their personal information without being concerned about data misuse.
eCommerce sites can also use customer data (along with artificial intelligence or AI tools) to promote products that are better suited to their individual needs.
At a minimum use case, AI tools in Web3 can display products that are most likely to fit customer tastes and needs. What about customizing the product during production to fit consumer needs? That can easily be managed using Smart AI technology with unrestricted access to consumer data. Intelligent AI can be used to even personalize SKU features for individual consumers.
In a recent webinar, Kristi VanderBosch of Oliver U.S argues that “in the face of blockchains, CRM tools used by marketers today could become obsolete.” The reference is to the “new” way in which customers will identify themselves and their data will be shared. The good news for retail brands is that customer relationships in Web3 could become more direct and personalized.
5. Virtual eCommerce
With the Web3 evolution, future shoppers could see themselves wearing Prada apparel in the “virtual reality” of the metaverse. Virtual eCommerce is the mode of eCommerce brands selling a digital version of their products to consumers. For instance, Gucci has a virtual collection on the Roblox platform. Digital-first retail brand, Pacsun has designed its own NFT, which will start bidding at $500 on the online marketplace, Open Sea.
While most NFTs on Web3 will start as “marketing gimmicks,” real-world items are most likely to include digital NFTs over the next decade. In the Web3 realm, NFTs may begin with high-end retail brands, and then become commonplace in the downmarket.
With more consumers wanting to gain control over the Internet and their data, Web3 will continue to innovate and transform the face of the eCommerce industry. To stay competitive, eCommerce platforms will need to evolve towards accepting cryptocurrencies and NFTs as a legitimate form of payment.
At Ignitiv, we have constantly looked to help our eCommerce clients innovate and offer new experiences to their consumers. As an able technology partner, our expertise can deliver the best of technology tools and consulting strategies for your digital transformation journey.
Need a technology partner to grow your business? Contact us now.