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.
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