Next year will be the 20-year anniversary of the first physical item being sold on the internet. It was a sale of English rock musician Sting’s Ten Summoner's Tales album, a CD paid for by credit card and delivered by the U.S. Postal Service.
Since then e-commerce has evolved into a space where anyone can start a store on Shopify, buy something off Instagram in just a few clicks or have their groceries delivered to them within half an hour. The rise of e-commerce has been an elaborate and highly successful exercise in using the internet to supercharge logistics. And it is only set to grow: The global e-commerce market size reached $16.6 trillion in 2022 and is projected to increase to $70.9 trillion by 2028.
So how will Web3, the next iteration of the internet, change e-commerce? Decentralized Commerce (DeCo or dCommerce) is a concept that is on the rise. The new field aspires to create more efficient commercial interactions by relying on blockchain-enabled peer-to-peer transactions and removing the need for intermediaries like e-commerce giants Amazon or Alibaba. In addition to even greater efficiency, some argue that Web3 also presents a huge opportunity to reimagine the visual and experiential aspects of the shopping journey to foster greater customer loyalty.
Let's have a look.
DeCo unlocks interesting possibilities for an industry that has been built around the concept of highly centralized conglomerates. Amazon, which is the poster child for Web2 e-commerce, has spent over two decades focusing on solving for logistics efficiency.
On the surface, decentralization of commerce may feel like a counter-intuitive move for incumbent players. Except it’s not.
For merchants who have long been paying dues to all sorts of intermediaries — from those of multinational wholesale retailers like Alibaba Group to payment processors like Stripe, to buy-now-pay-later (BNPL) financiers and beyond — Web3 creates an interesting opportunity to engage directly with the customers, replacing those intermediaries with programmable payments powered by code.
Blockchain tech can add value to merchants by increasing supply chain transparency, tackling issues of counterfeiting, improving customer engagement and experience, enhancing loyalty programs and managing payments. While this long list of end-to-end benefits currently lives in a utopian future, we are seeing early attempts by Web3 players at tackling the solutions.
Walmart, through its incubation arm Store No8, has partnered with Web3 accelerator and VC fund Outlier Ventures (OV) to launch the first-of-its-kind global accelerator program for projects aiming to improve global retail and commerce experience. Called Store Nº8 dCommerce Base Camp, the program will kick off in August 2023 and take a cohort of 10 startups through 12 weeks of coaching and mentoring across the areas of infrastructure, data solutions, immersive experiences and cross-section of AI and blockchain tech.
“For this Walmart collaboration we are specifically looking for projects that enhance the merchants’ experience,” says Hanan Nor, program manager for the dCommerce accelerator. “It is a blank space right now, and Web3 can unlock so many new opportunities and efficiencies for merchants through its various layers — from supply chain to customer loyalty and all the way to decentralized finance (DeFi),” she continued.
Nor then explained that data and growth solutions are core components of OV's program: "We will be looking at the concept of self-sovereign data and how it can empower users and merchants in the Web3 context”, says Nor referring to the shift in ownership structures of data and digital identities from corporations in Web2 to individuals in a Web3 environment.
One example of the way decentralized commerce infrastructure might work is Boson Protocol, who have been building in the space for the last five years. Boson is a commerce settlement layer for Web3, an open protocol to mediate commerce transactions. In practical terms, Boson is essentially a Shopify for Web3 (but make it decentralized).
The platform, which has recently come out of their closed Beta testing, allows anyone to tokenize a physical asset by creating a non-fungible token (NFT) and then trading that NFT as a primary or secondary sale. However, comparing Boson to Shopify really doesn’t do it justice, because the protocol is a lot more nuanced than that, and it contains both redemption and fulfillment infrastructure where alongside the normal ERC721 token that we all know and love, sits a module that manages the lifecycle of the NFT between the time that the token is bought to the time it is redeemed for a real-world asset.
In addition, Boson features dispute resolution and redemption guarantees. All of this elaborate backend is wrapped up in a simple and easy-to-use merchant interface that allows sellers to create their own Web3 stores, sell in the metaverse or create token-gated experiences for customers.
“The way that Web3 is growing, it is going to be about interoperability," said Holly Wood, director of business development at Boson Protocol. "At Boson, we are focused on integration — be it a widget, a software development kit (SDK) or integration with traditional Web2 e-com features."
Wood went on to explain that many of the conversations with retail brands still revolve around the ability to shift physical goods, even though the digital layer is important. Therefore, effectively solving for "digital twinning" remains critical.
In its Web2 evolution, the e-commerce experience has largely revolved around the functionality of connecting buyers to the right product. That includes searchability and the checkout experience, primarily. While all of these are important steps of the buyer journey, very little attention was paid to the design and experiential part of the process. But what if shopping could also provide a memorable visual experience, too?
“You’d think that by now we would have designed a much better experience, something that's maybe more personalized, something that is a little bit more engaging or compelling," said Bobby Kim (aka Bobby Hundreds), appearing on Polygon’s Twitter Space. Bobby is the founder of the streetwear brand The Hundreds who have been in the retail game for close to 20 years. This might explain why he chose to partner with Some.Place on the digital commerce side.
"Maybe there's more storytelling to be had, instead of just being about functionality and efficiency,” argued Kim. And what if he's right?
Founded by Lana Hopkins and Juliana Di Simone, Some.Place is a Web3 native brand that aims to revolutionize the customer journey through visually impactful, immersive social shopping experiences. “Commerce is inherently social," says Hopkins. "People want to be able to experience things together, and traditional two-dimensional websites don’t offer that."
For the last three years, the duo have been working on a platform that can create engaging three-dimensional shopping experiences where customers can interact with brands and with their friends. However, their ambitions do not stop at digital. Some.Place wants to bridge the digital and the physical shopping experiences.
An example of this immersive experience in the real world would be a QR code available in the physical stores which can be scanned by a customer to obtain additional information about the product, interact with the brand and mint a digital award (e.g. AR NFT) that would link to the brand’s loyalty program. Hopkins explains that the digital awards (NFTs) that a customer collects can then be linked to both digital and IRL events and experience activations.
The 3D website (and the mobile app) amplifies the physical experience, allowing people to have a more engaging experience when interacting with a product. The app also allows the customers to virtually try on the products and share the images with their friends. Some.Place is ambitiously tying together what traditionally would be separate pillars of commerce — the shopping app, the social media pages and the loyalty programs. “Shopping experience in the palm of your hand: immersive, social and rewarding,” is how Hopkins likes to describe it.
The Bobby Hundreds collaboration was a token-gated experience that created a virtual version of the Fairfax district, where The Hundreds store is located. “The goal was to demonstrate the aesthetic potential of what this experience could be and to test this on a select group of users,” says Hopkins, whose first startup was in the luxury leather goods business. That retail experience is something that really appealed to Bobby when he was looking for a business to collaborate with.
On the back of their successful collaboration with The Hundreds, which will serve as a proof of concept, Hopkins and Di Simone are now in talks with a number of soon-to-be-announced brands and retail partners, who will be using the Some.Place app for engagement and loyalty as an extension of their brick and mortar stores.
And while Hopkin’s current focus lies firmly in bridging the physical and digital realms, aesthetically Some.Place lends itself well to the gamified shopping experiences and VR headsets that will no doubt become increasingly popular as the Roblox generation of consumers grows up.
In the age of social media and infinite choices, attention has become our main currency. The amount of time that a customer spends interacting and engaging with a brand has become easier to measure but increasingly harder to maintain. If the world is to move towards decentralization, shifting the ownership structures of data, customer loyalty and retention will become vital for a brand’s survival.
“If you want to fight for attention you need to fight for loyalty, and in order to get loyalty you need to enhance engagement, and in order to enhance engagement you need to do things that enable co-creation with the community,” says Nor. She sees loyalty programs as one of the strongest use cases for Web3 technology in the context of commerce.
For brands, loyalty rewards in their Web3 iteration will have to span well beyond discounts and trying to lock customers in by relying on the sunk cost fallacy. If the transaction data ends up on the blockchain and the loyalty rewards become interoperable and tradeable, the brands’ bond with their customers will inevitably have to become more emotional and less transactional. This is where the co-creation, co-ownership and a sense of belonging to a community will become increasingly important. We saw the early ‘prototypes’ of that community engagement format with the PFP projects last year.
Hopkins highlights two key features that will form the foundations of a good loyalty program — one is the efficiency of the loyalty reward experiences, meaning utilising the transaction data and interoperability to make loyalty seamless regardless of whether you shop online or in store. And second is the less tangible — the engagement that will be attained through the entertaining and interesting ways that the brands interact with the consumer even when it comes to small things like notifications about new promotions.
There is no question about the size or the prize when it comes to e-commerce. As an industry that is only two decades old, it is not so much a question of disruption but rather of unlocking the next level. What we are seeing in the space now are bold experiments, both from incumbents and the newcomers, but a lot of the outcomes will depend on the ever-changing and evolving consumer behaviours and preferences.
Note: applications for dCommerce Base Camp close on 7th August 2023. To register for weekly Women Founder Office Hours with Hanan, follow the link in the tweet.
Read More: Tesla And Walmart Have Registered Web3 Domain Names—Here's What That Means
Liya Dashkina is a VC, contributor to a number of DAOs, Web3 consultant, chapter lead at the Australian DeFi Association and an advocate for women in Web3.
This article and all the information in it does not constitute financial advice. If you don’t want to invest money or time in Web3, you don’t have to. As always: Do your own research.
