- Shopify has been exploring uses for NFTs, blockchain, AR, and VR.
- Analysts say it’s another way the company can help merchants be where they want to be.
- The company has hinted that a lot more is on the way.
Shopify may be an early innovator in the developing space of Web3 and the metaverse, even as debate continues over the role that these emerging technologies may play in commerce.
Shopify’s most decisive Web3 move yet was its late 2021 beta launch of an NFT program. But it’s also growing its dedicated blockchain team and exploring more uses for augmented and virtual reality, signaling a strong interest in how these technologies can be used to help merchants.
In a video posted to his personal YouTube channel in November, Harley Finkelstein, Shopify’s president, said he had been asked a lot about what commerce would look like in the metaverse.
“I actually think that is the wrong way, the wrong framing of it,” Finkelstein said. “I think the future of retail, the future of commerce, is going to happen everywhere, on every surface area. That may be online, in the metaverse, in AR or VR. It may be offline at a beautiful boutique or a great farmers market.”
“It’ll happen across every single place, both online and offline, where humans and consumers spend their time,” he added.
It may be too early to know how big of a factor non-fungible tokens, the blockchain, VR, and the metaverse may be in the future of e-commerce. But analysts say that Shopify needs to be wherever merchants are, even if analysts are skeptical about the revenue potential these emerging technologies offer the company in the short term.
“I think you’re going to have to look out five years or even 10 years before you start seeing more meaningful revenue,” said Dan Romanoff, a Morningstar analyst. “But from an investor standpoint, Shopify is seen as a growth company, so to the extent they’re looking out longer term and thinking about revenue drivers for the long term, that’s something that investors are definitely going to support.”
The engine that sells
Shopify’s new NFT beta program allows merchants to mint and sell their own NFTs using blockchains such as ethereum, polygon, near, and flow. Unlike many other NFT marketplaces, merchants don’t need to accept cryptocurrency as payment. They can also accept payments via Shopify Payments, Shop Pay, or debit or credit cards. Shopify accepts crypto payments through a handful of alternative payment processors, including Coinbase Commerce.
The NFT program is only available to Shopify Plus customers in the US. The Chicago Bulls were early adopters of Shopify’s NFT-selling capabilities, as was Paul Budnitz of the product and entertainment company Superplastic.
During Shopify’s fourth-quarter earnings call on February 16, Finkelstein described the NFT program as a way that the company was innovating on behalf of its merchants and “enhancing their ability to sell in new and creative ways.”
“Shopify is just sort of there to be the engine that sells it, just like they are there to be the engine that sells you Allbirds shoes or whatever traditional physical product you’d want to buy,” Romanoff said.
There was a lot of interest in the NFT program among Shopify merchants, said Ben Murray, who ran a Shopify consulting agency called Media Carry. Some of his clients were exploring how to blend the digital and physical, using NFTs to create excitement around physical products and reward loyal customers, he said.
“If you want to build hype and interest around a limited collection, maybe of a thousand units or something, I think it’s a great way to tokenize that collection and have exclusive access for the first thousand people that are interested, that want to buy the product,” Murray said.
Finkelstein and Tobi Lütke, Shopify’s CEO and founder, have signaled their interest in NFTs in a more personal way, too.
Both recently changed their Twitter avatars to NFTs. Finkelstein’s is an Adam Bomb Squad NFT, while Lütke’s comes from CryptoPunks. Shopify’s corporate Twitter account also has a Doodles NFT as an avatar. Shopify powered an in-person pop-up for the brand at SXSW on March 12-14, where guests could explore an art installment themed like the Doodles’ NFTs and buy physical merchandise, including T-shirts and stickers.
Lütke also joined Coinbase’s board of directors in January, signaling a commitment to cryptocurrency and the blockchain.
”The concepts of decentralized finance and entrepreneurship exemplify the promise of Web3 where opportunity exists for the many, not the few,” Lütke said in a press release about his appointment to the board.
Still, NFTs are an emerging technology with unknown potential.
“I think there’s more we don’t know than we know, but it’s interesting how quickly brands and retailers are jumping on the bandwagon,” said Colin Sebastian, an analyst at Baird.
Overall NFT sales hit almost $25 billion in 2021, Reuters reported in January, citing data from DappRadar.
“I think what Shopify recognizes is that digital goods are already a very large market,” Sebastian said. “Their customers are basically saying: ‘We want an NFT strategy. If people want to engage with us, both in the physical world and the digital world, we want to be there.'”
‘We’re going beyond NFT drops’
Getting into NFTs does require some blockchain expertise. Shopify already has a team dedicated to the blockchain, and it’s hiring a tech lead developer for that team.
In the job listing, Shopify said: “We’re going beyond NFT drops, into a world where web2 and web3 native tools help merchants, app developers and agencies create something new. We’re bringing the established world of physical commerce into the new world of crypto-native community, to help merchants and buyers play the infinite game of commerce. We love Ethereum, but we are also strongly committed to building in a way that lets merchants and app developers use many different blockchains to accept payments, sell NFTs, and power web3 applications.”
The listing also said that Shopify’s blockchain team was “strategically important” and growing.
Shopify is also growing its AR and VR efforts.
Shopify acquired the team behind Primer, an AR home-design startup, last June and subsequently integrated its AR shopping features into the Shop app. The company is also hiring an engineer specializing in AR and 3D. The job description said the company was working toward making AR experiences available for merchants who sell through its Shop app.
“The power AR has for merchants is that it allows customers to preview what something would look like in their space or on their body as though they were actually in front of that product in a store,” Daniel Beauchamp, the principal engineer for VR and AR at Shopify, said in a Shopify blog post about the company’s use of AR.
Beauchamp frequently shares updates on his VR and AR work on his personal Twitter account. In a widely shared thread in September, he discussed how that work had extended into Shopify’s internal practices with his development of a game called Shopify Party, which employees could play together while continuing to work remotely.
For the most part, though, Shopify’s work in VR and AR has focused on empowering merchants.
Shopify has allowed its merchants to integrate AR selling experiences in their storefronts since 2018. The technology is intended to create a more realistic, interactive depiction of a merchant’s products so as to increase conversion rates and keep returns low. Allbirds, Magnolia, and Instant Pot are among the brands already incorporating Shopify’s AR services.
Shopify has also filed a handful of AR-related patents, including a body-measurement system that makes use of augmented-reality sessions to recommend the right sizes of clothing.
”Our vision is, more and more AR is going to start taking over parts of the commerce journey, where at first it starts with just the product viewing, then maybe product discovery, the product payment,” Beauchamp said on the “Creating Zeal Podcast” in 2018. “The whole journey could then eventually be all in AR.”
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