Are consumer brands entering a new era of strategy and marketing with web3?

As cryptocurrencies like Bitcoin and Ethereum peak towards an all-time high, debates are still ongoing on the actual use of web3 and blockchain technology—may it be a form of monetisation, the future of organising, or just a get-rich-quick scheme? But amid this debate, many companies are already testing various ways to create value, from increasing brand awareness to experimenting with new product ownership models using web3 tools. What the world might be seeing, as a result, is a new era of consolidation for web3 within brands, leaps in technological advancements, and a new approach to corporate strategy and consumer loyalty from retail brands.

Early adopters of web3 tools, especially consumer brands, use them to chart customer journeys and participate in customer communities more accurately. Although at face level, these realisations may seem at odds with diehard web3 principles like decentralisation and self-sovereignty, the fact is that most brands and consumers don’t seem to want or care about this anyway. Understanding consumer behaviour with effective advertising can help build companies’ brands and power transparency around supply production and distribution boosting, corporate governance and sustainability credentials.

This article will examine how high-profile brands can deliver immediate business value by utilising different approaches to web3 as they look at decentralised ownership and hybrid and virtual products to amplify and diversify their digital footprint.

Many brands are creating their own web3 products, often in partnership with established producers of platforms for virtual assets. Samsung (KS:005930) Singapore recently announced a collaboration with the web3 entertainment ecosystem Imaginary Ones, which introduces merchandise, gaming, and products into the Imaginary Ones’ virtual ecosystem.

A well-known designer clothing brand launched virtual winter sportswear that avatars could try on in stores and the virtual world in December 2021. With projects like this, companies retain complete control over the assets they create, including how they look and work in virtual environments and digital wallets. These experiments attract the attention of younger audiences and yield valuable insights into their behaviour.

The downside of selling digital products is their limited availability outside the platforms of origin. Virtual properties built by fashion brands only exist within these ecosystems. The lack of interoperability stands to be an obstacle to customer adoption for most retail brands.

“I strongly believe Web3 has a huge potential to change the world because it is still being shaped. We want to ensure that we create a positive space for everyone, bringing together gaming, merchandise, and content to create the Imaginary World and uniting experiences in both the metaverse and in real life, where users play, interact, and build together,” says says Clement Chia, co-founder of Imaginary Ones.

The second way is hybrid products, where companies use web3 to enrich their real-world products with digital information. Here’s how it works: once the product is recorded on the blockchain, it includes its origin, supply, production, and design, and the information is immutable. Thus, the physical item becomes a collectable because of its uniqueness and authenticity, which can also prevent counterfeiting, something that has traditionally been difficult for most retail brands.

For example, Honda (NYSE:HMC) Motors recently announced a partnership with Darewise and its blockchain-based game, Life Beyond, to launch a line of its vehicles in Life Beyond’s virtual world soon, which isn’t available otherwise. Community-created spirits brand Degen Distillery also provides its users priority access to real-life events and guest lists through its NFTs and exclusive holder-only available drops through its partners such as Scotland’s BrewDog and more. Companies can even record attendance at virtual or real-world events on the blockchain, as Adidas (OTC:ADDYY) has done, and reward people with preferential access to new products and sales.

Verifiable information on products, origins, and community building are some of the benefits that brands accrue from the hybrid approach. However, there have been talks about the energy and environmental impact of creating tokens and recording information on the blockchain.

On the other hand, the distributed ownership strategy is about having multiple customers sharing ownership of something on the blockchain. While it’s rare to see traditional brands currently using this approach, many digital-first companies are. Distributed ownership has the potential to change how product value is created and shared, which is what makes it essential for brands and marketers to understand it as technology evolves and experimentation continues.

There are a few scenarios for how this type of governance could play out for legacy brands. For example, if a consumer wanted to invest in a luxury brand that sells a rare piece of jewellery, they could purchase a small share through platforms that offer such services. They can then return if they sell their share or the group of owners collectively decide to treat the jewellery as an investment to be later resold at a profit. Fractional ownership platforms are one such example.

As 2024 unfolds, brands are increasingly studying and experimenting with the opportunities and challenges while refining their approaches. And while the technology behind all these web3 approaches remains nascent, the early experiments are already turning into ongoing business strategies.