NFTs live on in Korea as retailers hang perks on the tokens

Industry

Published: 19 Jul. 2022, 16:54 Updated: 21 Jul. 2022, 13:09

NFTs live on in Korea as retailers hang perks on the tokens

Shinsegae Department Store's Puuvilla NFT [SHINSEGAE DEPARTMENT STORE]

Retailers are jumping into the non-fungible tokens (NFT) market to expand their digital presence and to attract and retain customers.

Despite the collapsing of the market for the tokens globally, the Korean NFTs are selling like digital hotcakes. The secret seems to be not in the NFTs themselves but in the perks that come with them.

Having an ursine theme seems to help as well.

Shinsegae Department Store introduced Puuvilla NFTs, selling 10,000 digital image NFTs based on the bear-like Puuvilla character. They were sold out as soon as they were released on June 11. The department store is the first to offer an NFT with its own character among all department stores in Korea, according to the retailer.

NFTs refer to block chain-based proof of digital asset ownership.

The Puuvilla NFTs were sold on Open Sea, the largest global NFT market.

"We also provided art NFTs in March, where customers could draw NFTs through our mobile applications," said a spokesperson for Shinsegae Department Store, who mentioned more NFT-related projects in the future.

Shinsegae Department Store opened its first NFT festival at its Centum City branch in Busan on July 15. [SHINSEGAE DEPARTMENT STORE]

Purchasers of the Puuvilla NFT are offered a number of benefits, including a lounge pass, valet parking passes and discount promotions depending on the ranking of the NFT.

Gmarket offered its Smile Miya Club NFT in June, where a total of 3,000 profile picture (PFP) NFTs of K-pop artist Sunmi were sold.

"The phenomenon of consumers purchasing NFTs sold by retailers is like the recent Pokemon bread hunt," said Lee Eun-hee, a consumer science professor at Inha University.

"People will enjoy the perks that follow after purchasing an NFT, just like how people went buying Pokemon bread to collect Pokemon stickers. This will lead consumers to purchase the product again."

Lotte Homeshopping opened an NFT marketplace called NFT SHOP in May and sold a 60-second video of 3-D Belly Gom NFTs, based on Lotte's Belly Gom bear character.

Marketing strategies involving NFTs have become prevalent globally.

Nike, the global athletic apparel brand, successfully sold an NFT sneaker for $134,000 in May after acquiring RTFKT, a fashion NFT startup in December 2021. Although consumers can only try on the sneakers virtually, they are eager to purchase them as they anticipate the value of the sneaker NFTs will rise.

RTFKT x Nike Dunk Genesis CRYPTOKICKS NFT is sold on OpenSea, a global NFT market. [SCREEN CAPTURE]

Adidas generated 27 billion won ($21 million) after selling 30,000 NFTs last year.

"Simply put, retailers are expanding their digital content business," said Hong Ki-hoon, a business professor at Hongik University.

"Although NFT marketing would not directly bring profit to domestic companies right now, it will definitely be a strategy for companies to earn more profits indirectly in the future."

The NFT market has grown rapidly and was valued at $14 billion in 2021, according to Jefferies. The global investment banking firm expects the value will increase to $80 billion by 2025.

With the expansion of NFT marketing, retailers are expecting to attract more young customers, as NFTs are mostly purchased by people in the so-called MZ generation.

"As the MZ generation are those who respond swiftly to changes, they will be leading the expansion of the NFT market," said Kim Seung-joo, a cybersecurity professor at Korea University.

People who have already purchased cryptocurrencies or were highly interested in the digital market are often drawn to the NFT market.

"I have bought Bitcoins before, so purchasing NFTs was quite natural for me as I spend a lot of time reading information from coin communities," said Kim Jae-hwan, a 25-year-old developer.

"I first started with generic art NFTs, then started looking into utility NFTs."

Exclusive memberships and chances to purchase new products before anyone else are some of the benefits that retailers provide for NFT purchasers. The future value of the NFT is one important factor, but the benefits that come with it are considered more significant for most retailers.

"What kind of utilities the companies provide to consumers upon purchasing NFTs will be the key for these companies to effectively market their products through NFTs," said Kim.

Despite the sudden boom in the NFT market and the craze of companies starting their NFT business, the NFT marketplace trading volume dropped 94 percent between January and June this year, according to The Block, a digital asset research firm.

The decline in the NFT market is seen primarily due to the fading crypto market.

Optimism remains, especially surrounding the marketing potential of the tokens.

"Many big companies in Korea are investing in NFTs and have recently announced their plans to invest in the NFT market," said Kim.

"Unlike cryptocurrencies like Bitcoin, NFTs have visual digital content. With the willingness of companies to expand their digital presences, it is highly likely that more companies will come up with more effective ways to use NFTs in the future."

BY CHO JUNG-WOO [cho.jungwoo1@joongang.co.kr]