How Web3 will transform Ecommerce

Can a DAO win in Ecommerce?

We are at the beginning stages of a huge innovation explosion in our economy. There are a number of technologies that are rapidly developing to drive massive changes through our economy. The metaverse is coming (probably not in the way Zuck expects) and I think in the next 10 years our digital worlds will consume more time than our physical worlds (it already does for Gen Glass). But the most interesting innovation for ecommerce companies is the blockchain. And I think digital coins, NFTs (which should be thought of as digital ownership), artificial intelligence (AI) and decentralized trust and authority are likely to completely remake the ecommerce space. Why ecommerce? Blockchain technologies are inherently built around financial transactions. So they will impact digital financial transactions over the next decade. And there is little reason to believe ecommerce will be left out (it might be easier to tackle than Wall Street).

I don’t believe we can accurately predict exactly what is going to happen. But I see a lot of innovation on the edges that is likely to bleed towards the center. So this post is publicly thinking through some ideas for how Web3 could transform ecommerce. I am not an expert, but deeply interested. Please send feedback – I want this to be a discussion to help everyone start to get their hands around Web3 before it is upon us. As you see below, a lot of these pieces are already becoming live in the marketplace.

I tried to go in order from most benign to most disruptive (completely subjective).

Accepting digital coins

The lowest level of ecommerce and Web3 connectivity will be around accepting digital coins like Bitcoin, Ethereum or Doge. This can happen now, although there is no easy way for companies to price in digital currencies or take payment in them. You need to build out the capability, which is an investment, and take on the risk of a very volatile form of payment. However, accepting digital money is still a unique differentiator that can get you some attention (lots of things start as gimmicks). I’m surprised that smaller companies don’t start accepting Bitcoin or Ethereum just for the press release (it’s worth a shot). And, building a Shopify or Magento plugin that shows live digital currency pricing and accepts payment in them, should be an instant winner. Want to challenge you CFO’s skills? Start accepting digital currencies and see how it impacts profitability.

More data, shared securely

One little discussed aspect of Web3 is that it enables customers to share sensitive or personal data without worrying about misuse of that data. And by doing so, it allows artificial intelligence tools to remake websites or marketing or even products to better fit the end users needs. At a minimum level, showing the customer items that are likely to fit their personality/demographics. But what if you could slightly adjust your product’s features in production to perfectly fit the customers needs? This is an AI problem: too complex for a human to deal with, but easily handled by a smart AI who has the data of the individual.

A simple thought experiment around this uses speakers. If I’m selling speakers to a 17 year old boy would I change the range of volume versus a 30 year old mom? Wait – you can’t know that unless you know the individual. Maybe the mom loves Megadeath and the teenager loves Chopin. The point is that an intelligent AI could adjust the features of a sku by personalizing them for the end users needs. Another added level of complexity to ecommerce (which continues to get more complex every day). This is still futuristic, but as more and more of our lives move online, our personal needs and expectations will follow. And companies will have to keep up.

Creating Digital Benefits for customers

This is a big area that can go a million directions. But there are few obvious options.

First, minting digital coins that confer benefits to the owners. A light way to test this is to create Ethereum or Solana coins that give the owner specific benefits. An obvious idea is that a Nordstrom coin might give you early access to Nordstrom’s famous sales events. Or allow you to buy the newest designer fashions before the general public. Because you can program benefits into Ethereum coins, this can go a million directions. My friend runs Linksoul and they have a famous charity golfing event once a year. Minting coins that give you access to the event could allow the customers to set the value of the coins.

A deeper direction is with NFT’s or non-fungible tokens. NFT’s are getting a lot of press as a mechanism to sell digital art. But the real value behind NFT’s is that they convey ownership online. Gucciand Louis Vuitton are already creating NFT’s. They allow you to own a digital artifact, whatever that may be. And companies can create and sell these digital artifacts. I think the innovation and potential of NFT’s is incredible and I’m still trying to think through how they impact ecommerce companies directly. But selling a digital version of your offline product seems like a fascinating test of the space. More on this below.

Smart Contracts on the Blockchain

Do you know who has been undervalued for the last fifty years? Creators. Creators have relied on corporations to help them distribute their creativity. The blockchain allows for creators to continue financially benefiting from their work into the future. We’ve heard of NFT art where the creator receives 10% of the sale price each time the item is sold. This is enabled by Smart Contracts (typically on the Ethereum network). In ecommerce we can utilize smart contracts to pay contractors or designers/creators by their output. And maybe by the success of their output. A great handbag designer could work for several companies at a time and get a commission rather than straight monetary compensation.

This small example is one of the reasons that the blockchain is likely to impact every part of our lives. Can supply chain management be done more effectively through a blockchain approach? Yes, because you can trust the smart contract versus having to trust the manufacturer. I dropped this in here to be a reminder that these trends won’t just affect our interaction with end users. It’s likely to impact how we hire and pay employees, how we order goods, and generally how we run our businesses as well.

Virtual ecommerce (vcommerce?)

Although I have this lower on my list (very disruptive), this is one area that is already moving fast. It started in the gaming world like a lot of digital ideas. Fortnight, if you haven’t played, is a first person shooter game that is free. Free. They make money in vcommerce: selling clothes that you can buy for the digital Fortnight version of yourself. Gucci is selling digital items in Roblox. Axie Infinity takes this a step further by building out an entire economy around the blockchain. It is a virtual ecommerce company that also makes cool content (the game is the content).

If the Ready Player One version of the metaverse does come about, will people want to wear Prada shirts in virtual reality? Yes, they will. And Prada will have to enable this by creating the clothes and selling the digital versions (NFT’s) for use in the metaverse. What if Augmented Reality (AR) glasses finally hit mainstream? Will people want a shirt that they can customize/change in AR? Yes, they will. Software continues to eat the world and we will continue to see a softening barrier between the digital world and IRL. And our products more and more will have to live in both and be developed like a program while being created in a factory.

NFT’s also enable authentication of one-of-a-kind items. I believe this will start with high end luxury manufacturers, but quickly move downmarket. If you can prove that you have a unique Rolex watch using an NFT, what would it be worth? And what would a person pay to own it? These are likely to start as gimmicks, but I think over the next 10 years most real world items will start including a digital NFT at least to verify authenticity. PacSun is already creating NFT’s.

DAO Creators

What if you could buy into a company, help control the direction of your work and benefit from that effort financially? Decentralized Autonomous Organizations (DAOs) are growing as a way to manage what it is essentially a company with organizing principles and engaged employees – that have no single leadership function. I posted as the picture on this article the Big Green DAO’s organizational schematic. If you created an organization that requires creatively hitting the zeitgeist of a culture in order to be successful, this might be the way to do it.

Imagine allowing anyone in the DAO to vote on the next design of a product. Or the features that should be included. In a large enough DAO, you could reach consensus on which items you create have value and which don’t. I’m a believer that true breakthrough design often happens outside of a committee, but you could also design a DAO that allows members to vote on the creative talent hired to develop the next big thing. This could be tested easily with a cool tshirt DAO. Members suggest designs and the whole membership votes on them. Winning designs pay off for the overall group and a little more for the creator.

Will DAO be a force in ecommerce companies in the future? I think if we keep seeing nonprofit DAO’s do well, someone will try it.

Try something on the blockchain

One of my core beliefs is that ecommerce companies have gotten too complacent. They rely on designs that everyone else uses. And they don’t try things that aren’t clearly ROI positive. But the world is shifting rapidly and you need to start trying things. At a minimum, start accepting Bitcoin and see what happens. Do a deep dive into Web3 for your career if you won’t for your company. Come up with ideas that would shake the industry. This is how you innovate successfully. How could you bring forward the next 10 years of evolution in ecommerce? By figuring out how to create a new Shopify on the Ethereum network. The big players will never have the courage to do this until it’s proven to work. But you can do it now.

If you have more than 10 years left in your ecommerce career, these trends will remake your job in ways we haven’t realized yet. But you have to experiment to be ready for the change.

PS - By the way, if you are experienced developing blockchain technologies, I'd like talk to you. Hit me up on LinkedIn.

Jay Allen
Digital believer. Started an ecommerce website in 1997 and been focusing on digital marketing ever since. B2C, DTC, B2B, I've done it all from building campaigns and up.
Atlanta, GA