Retail Leaders at Shoptalk Hopeful About Future of NFTs, Metaverse: Cowen

Retail executives expect a lot of experimentation and investment in Web 3.0, said analyst John Kernan, giving a consensus from the conference that “those not participating are at risk of losing out in a very important form of engagement.” Early adopter Nike created NFTs for use in Nikeland, a virtual game on the Roblox platform, and Adidas partnered with Bored Ape Yacht Club, “the most valuable NFT community out there,” he noted.

Generation Z consumers are engaging in the metaverse, a "many billions, potentially trillion-dollar opportunity long-term,” though “very decentralized” in the early stages, Kernan said. NFTs are a resale opportunity for apparel brands, which in the physical world have been left out of the secondary market. Mentioning brands Jordan, Nike and Adidas, he said, currently there are “no economics for the IP owners in resale,” but on the blockchain in Web 3.0, “there’s going to be a constant stream of royalties as those NFTs are distinguishable through blockchain technology, and very unique.”

Modern brands are catering to Gen Z consumers whom Kernan described as “aspirational and authentic.” Brands that don’t connect with them on that level “have generally not been winning with them.” He also referenced a “contradiction at times” among Gen Z consumers who “talk up [environmental, social, and corporate governance] quite a bit, yet we still see certain concepts that really aren’t aligned with ESG.” Kernan cited the popularity of Chinese fast-fashion e-commerce giant Shein, with a $200 billion valuation, that produces high volumes of inexpensive clothing.

Kernan predicted a lot of shopping innovation coming from China on the technology and consumption sides. China is making “huge strides in innovation” in livestreaming, one-on-one commerce and “super apps,” and those trends are “something to watch,” he said. “A lot of disruption,” rising forms of engagement and the next generation of consumers are creating “new and exciting markets,” he said.

Several retailers at Shoptalk discussed livestreaming and live shoppable video, said analyst John Blackledge; both are “on the rise and scaling within the creator ecosystem.” They offer better targeting across certain demographics, have lower return rates and good product placement opportunities, offer two-way communication between customer and retailer, and show better engagement with new product launches, he said.

Though livestreaming is “a big deal in Asia,” payment is a “friction point,” said analyst Oliver Chen. He called the NFT “brilliant because there’s limitless possibilities.” A “wallet” is required for the NFT ecosystem and while OpenSea is the leading marketplace now, more will thrive, and the market will see “competition and segmentation,” Chen said.

Today, speculators, tech lovers, collectors and the community are buying NFTs, Chen said, with “the two Cs” -- collectors and community -- creating a “big opportunity for retail,” he said. Cowen thinks collectors and community can “increase customer lifetime value and decrease churn.” Gamification goes along with the NFT ecosystems, he said, something he expects more retailers to engage in. At Shoptalk, Cowen gave out a proof of attendance NFT to audience members.

Commenting on the labor shortage, Chen credited Walmart for its efforts to look in-house for talent and to promote from within. Walmart’s strategy of promotions and “aggressive” starting wages of $24 per hour, up from $15, is “a positive in terms of embracing talent,” he said.

Blackledge cited Instacart CEO Fidji Simo’s projection that online grocery delivery will grow 20%-30% annually, reaching 30% penetration of the $1.4 trillion U.S. grocery and consumables market within five years. Cowen’s data shows the number of online grocery shoppers has doubled since the start of the pandemic, and growth is expected to continue. At the conference, Uber and DoorDash discussed expanding delivery outside of restaurants and delivering “anything from local retailers” to consumers “in an hour or two, or in some cases, with instant commerce, in 15 or 20 minutes," he said. With Amazon also investing heavily in fulfillment for fast delivery, “a lot of dollars are going into this space” and the consumer should benefit, he said.

Blackledge noted comments from a YouTube executive saying 89% of consumers trust creators and influencers; for YouTube, that’s 2 billion viewers monthly. Livestreaming offers another way for influencers to monetize, which is “exciting for e-commerce players.” The livestreaming e-commerce market in China has grown quickly to $150 billion, said Chen: Some companies are seeing double or tripe average order values, and conversion rates for some are trending above 25% vs. 1% for typical e-commerce experiences.

Livestreaming has its “friction points,” Chen said, citing payments and the checkout process. Livestreaming is very different from the typical influencer video on TikTok, for example, he said. “A lot of people who are good influencers might be horrible livestream professionals,” Chen said: “Just because you have a big following doesn’t mean you’re good at livestreaming because the format is so different.” Still, Cowen expects the appeal of short-form video to rise, mirroring the growth of TikTok’s popularity.

In brick-and-mortar stores, too, selling is becoming media-driven, Chen said, citing Nordstrom and Saks Fifth Avenue as stores encouraging salespeople to do livestreaming. He called it a “reinvention of talent” where the store becomes a “theater” for selling.

Noting furniture had a sales bump during on work-at-home trends, analyst Max Rakhlenko credited a “huge rise of online furniture platforms” and 3D tools for giving physical retailers a way to keep up with e-commerce. “It’s tough for people to want to spend thousands of dollars on a couch that they haven’t seen before and they’re not sure how it fits in their home,” he said. Williams-Sonoma and RH are among the retailers that invested heavily in the tools, which are going to “raise the bar for omnichannel retailing” for home furnishings companies, he said.

Cowen analysts were largely sanguine about the near-term prospects for the retail industry, with March sales at a high single-digit increase after a strong March 2021 propelled by $500 billion in stimulus money. “There’s a tremendous amount of liquidity in the system,” and the job market is strong, Kernan said. “Yes, there’s a lot of inflation, but wages are also growing pretty rapidly, too.”

Rakhlenko noted that in addition to inflation, interest rates are creeping higher. He noted cautionary comments by RH CEO Gary Friedman on an earnings call last week comparing today’s economy and the Great Recession. “I think the future might be a little more risky than what we’re seeing right now,” Rakhlenko said.