DTC x Web3 Begins
Web3 - as opposed to Web2 - will inevitably change how DTC brands attract and retain customers.
This first issue will explore:
What Web3 could mean for DTC brands
How they can leverage it to build communities that attract owners committed to (even hellbent on) their long-term success
What current brands are doing with Web3
What does Web3 mean for direct-to-consumer brands?
In practical terms, Web3 is the next generation of the internet powered by blockchain technology.
In ideological terms, Web3 is built on principles of decentralization, transparency, self-sovereignty, and ownership.
In this new era, the user owns their digital identity and data, instead of centralized companies like Facebook Meta.
For example: Playing by Web3 rules, you would own your IG handle/account and Instagram couldn’t shut it down for any reason. Right now, in Web2, your profile belongs to Instagram and they can do what they want with it.
You can also have true ownership over any other digital asset you make or buy - a photo, a song, an album, digital art, an essay, poetry - thanks to nifty inventions like NFTs (non-fungible tokens).
For example: You can take a photo of your dog, go to opensea.io, upload it, create the digital equivalent of a certificate of authenticity that proves you own that photo (aka mint it), and put it up for sale for any amount you want. And there’s a public ledger where everyone can see who owns your photo at any time so everyone agrees on who the real owner is. This is literally what Martha Stewart is doing with pictures of her farm.
Most NFTs are made for projects, not dog or farm photos, but I hope this illustrates the point.
This ownership aspect of Web3 will be key for brands (and the focus of this newsletter).
Blockchain technology unlocks the opportunity for brands to make new valuable digital assets that attract and retain customers.
Valuable = tangible benefits both in real life (exclusive access to experiences, unique products, discounts) and digitally (appreciating tokens, access to gated content).
But that’s not the full story.
The real opportunity for brands is to craft experiences so valuable and stories so compelling that customers want to commit to and meaningfully support the brand by buying and owning a digital asset made by the company - in the form of an NFT or a crypto coin (or both).
That sounds like a lot of work. Why would brands want to create these type of valuable assets and give them to customers?
In short, it can help them:
1. Turn passive consumers into active owners with skin the game.
2. Build true, long-lasting communities around their brand.
Making digital assets that customers can own, hold, and trade can give brands these benefits:
#1: Funding from true fans
Instead of doing a regular boring pre-sale with regular boring dollars, brands could raise money by selling NFTs that promise the delivery of product and additional benefits down the line, like Yerb did to raise funds for their first product run. They sold 47 NFTs and raised $7,700.
Poolsuite, the makers of Vacation, Inc, recently raised funds by selling an “Executive Member Card” NFT that gives holders future rewards such as early access to Poolsuite products, a future Poolsuite token, NFT-gated content and more. It sold 2500 NFTs and raised $2.6 million.
#2: Long-term loyalty from true fans
Anyone who buys an NFT or token from a brand is likely highly invested in its mission and is incentivized to continue supporting its success. The difference between raising money from fans in the traditional way (like with a Kickstarter or pre-orders) vs. with an NFT is that with NFTs, fans immediately get tangible value back: an asset they fully own and that can continue to appreciate (for example, Poolsuite’s Executive Member Card NFT started out at 0.2 ETH and now is worth 1.2 ETH). Owning an asset makes customers owners and owners have more skin in the game.
Metafactory does a great job at incentivizing long-term brand loyalty. In October 2021, they launched their $ROBOT token to reward creators and customers. As a customer, you get 42% back in $ROBOT every time you shop, and holding $ROBOT gives you the privilege to propose and vote on MetaFactory-branded product launches, uses and distribution of $ROBOT, brand partnerships, and more. You can also sell your $ROBOT whenever you want for ETH. This level of participation that $ROBOT holders get in Metafactory only incentivizes long-term loyalty. They’re not just consuming from the brand, but helping co-create it and earning a share of the value created.
#3: Actual community
Community is a buzzword in the DTC world, but it is often conflated with audience. The difference to me is simple: An audience listens to you, a community interacts. In Web3, there are better incentives to build true communities. By giving ownership to customers as early as possible, brands can attract a community made of loyal fans with skin in the game that connect over their love for the brand and are actively invested in its success. A strong community is easily one of the best differentiators a brand can earn right now to cut through the noise and build something that lasts.
Leisure Project is a great example of an upcoming DTC brand creating community from the very beginning (before they even launch the product) by leveraging Web3 culture and technology. They’re “building the world's first co-created beverage brand” and will release an NFT for early adopters in the next few months. They’re committed to putting their community first and heavily rewarding its members.
Owning and holding digital assets gives these benefits to customers:
#1: Exclusivity
With a higher level of commitment comes a higher level of reward. Just like with regular NFT projects, owners of brands’ NFTs can get access to truly exclusive perks - like early access to future releases, access to limited-edition products, exclusive merch, voting power, private content, first access to valuable information, access to special IRL and virtual events, and more.
Poolsuite, the company who created Vacation sunscreen, is starting to do this with their recently released executive member card.
#2: Impact
If the NFT grants holders rights to vote on certain decisions (like new products, new flavors, partnerships, events, investments, etc), it means customers get to have a more direct impact on the direction brands take. Metafactory does this with their $ROBOT token.
#3: Ownership
Once you own a token or a coin on the blockchain, no company can take it away from you. They can erase your points in a rewards program but they can’t erase your NFT. It’s yours forever, until you decide to sell it.
#4: Financial upside
You can’t sell your reward points or your loyalty tier from a brand (ex. there’s no way to sell your Starbucks rewards), but you can sell your NFT. If a brand’s NFT or token increases in value, your asset appreciates, and you can hold on to it or sell it.
How DTC brands are dabbling with Web3
There are 4 ways I see DTC and Web3 coming together right now:
Web2 DTC brands experimenting with Web3 PR & Marketing
Web2 DTC brands leveraging Web3 features for their customers
Web3-first DTC brands
Web3 projects launching DTC brands
#1: Web2 DTC brands experimenting with Web3 PR & marketing
Brands in this category are doing PR campaigns with NFTs, but not leveraging any Web3 technology in their business yet.
KEEPS: Fixing a Cryptopunk’s hairline
In December 2021, Keeps, a brand of hair loss treatment for men, sponsored Cryptopunk #6457.
It created a hair serum NFT and “applied it” to a Cryptopunk with stringy hair, resulting in a new Keeps Punk with a full head of hair. This process was all done on the Ethereum blockchain.
Keeps is the first brand to sponsor an NFT like brands sponsor athletes and celebrities.
Could sponsoring a blue chip NFT become the Web3 version of influencer marketing?
FRANK’S RED HOT: Scan bones, earn Bonecoin
Hot sauce is getting into NFTs too. Frank’s Red Hot gave away an “edible NFT” (a real digital NFT + an edible replica) for a Superbowl marketing campaign.
To participate, you had to eat chicken wings and scan a picture of the bones here so you could earn Bonecoin - a fake cryptocurrency (“a chicken wing-based currency that has nothing to do with real money”).
Whoever earned the most Bonecoins won the edible NFT at the end of the Superbowl.
Bonecoin was not a real cryptocurrency (it was just a point system), but their NFT is real.
This brand play was similar to what big brands are doing (ex. Tacobell, Pringles) - just making NFTs with their product on it.
PERFY: Making NFTs with and for their community
Perfy - a brand of functional soda - created NFTs of their cans with their customers’ favorite NFT art on them (mainly Doodles):
Customers sent Perfy their favorite NFT art and Perfy incorporated them into NFTs of their cans.
This is a more community-oriented way to play around with Web3 marketing - the brand is talking with customers and using art they already love to make something new.
#2: Web2 DTC brands leveraging Web3 features
Brands in this category are starting to use some Web3 features for their customers, not just as a brand plays.
Poolsuite: Executive member card
Like I mentioned above, Poolsuite (maker of Vacation, Inc), created an Executive Member Card NFT that gives holders early access to Vacation products, as well as:
Early access to all future Poolsuite projects
Early access to a future Poolsuite token
A gated website experience. In their words, “a bespoke version of Poolsuite’s website & app including a custom “Members Only” theme, extra features and an exclusive “Ritz Foyer” playlist.”
Future merch
This is the best example I’ve seen of a brand using NFTs for loyalty and retention. It gives members true exclusivity and ownership over a token that has already increased in value.
YES PLZ Coffee: Collab with Bored Breakfast Club
Yes PLZ Coffee, a coffee subscription brand, is supplying the coffee blends for the NFT project Bored Breakfast Club.
Bored Breakfast Club is an NFT-powered coffee subscription. They made the NFTs but needed the coffee. Yes PLZ provides the coffee and gets exposure to Web3. Win-win.
By partnering with an NFT project, they can gain brand awareness in the Web3 space (on top of increasing sales) without having to do the heavy lifting of integrating blockchain technology on their website just yet.
Patrón: Non-fungible Tequila
Patrón is not exactly a shiny new DTC brand, but it jumped into Web3 by creating a “one-of-a-kind, exclusive 100% Extra Añejo tequila” and making it available only through an NFT purchase in Blockbar - a marketplace for NFTs of high-end spirits (which represent a redeemable bottle).
There are only 150 NFTs of this Tequila - each one redeemable for a bottle of the real stuff.
#3: Web3-first DTC brands
Brands in this category are Web3 native - they are raising money with NFTs, gating content and experiences with NFTs, building communities in discord, taking cryptocurrency payments, rewarding early adoption, and truly prioritizing community.
It could be the next-gen of DTC.
Satoshi Studio: Sneakers on the blockchain
Satoshi Studio is a brand of high-end sneakers that gives customers a ‘digital passport’ for their shoes.
Every pair of handmade sneakers you buy has a QR code engraved on a stainless steel label that you can scan to claim your ownership over your pair of sneakers.
This certificate of ownership is managed by the Arianee Protocol, an Ethereum-based project designed to prove and secure the authenticity of luxury goods.
The point of giving your sneakers a ‘digital passport’ is transparency (you can see information about the suppliers, materials and origin of your sneakers), ownership (you can transfer or sell your ownership over your sneakers at any point), and authenticity (you can easily prove the sneakers belong to you when it comes to reselling or trading).
Think of it like DTC collectibles - a use case for luxury goods.
Metafactory: Community-created metaverse goods
Metafactory is the world's first community owned and operated ‘digiphysical goods’ marketplace.
Any artist can pitch a design for a hoodie, hat, shirt, blanket, etc, and sell it on the platform. All someone has to do is apply and if their idea is chosen, Metafactory takes care of all production costs, packaging, shipping and promotions.
Similar to Society 6, but make it Web3.
The community not only creates, but gets rewarded. Anyone who participates in Metafactory - as a designer, buyer, ambassador or curator - can earn and use $ROBOT, Metafactory’s governance token (a crypto token that gives people voting power).
Creators receive $ROBOT based on the success of their product(s), buyers are rewarded with $ROBOT for their patronage, and the community earns $ROBOT by helping to curate the marketplace.
This is much better than regular reward points because…
$ROBOT gives you voting power (proportional to how much you hold)
Your $ROBOT tokens can increase in value
You can sell and trade your $ROBOT any time
This business model empowers the community to co-create value (hoodies, sweatshirts, shirts, trunks, puzzles, even a poker set), rewards participants in proportion to their contribution with $ROBOT, and gives the most valuable participants a voice.
Dcent: NFT-gated lifestyle goods
Similar to Metafactory, Dcent is a marketplace for crypto swag and goods, but its approach is a bit different:
It’s not community-powered
It provides every customer the option to authenticate their purchase on the Polygon chain:
“Each UnLtd. Collection item can be self-certified for authenticity using our newfangled UnLtd. Authenticator. Simply snap a pic in, on or with your item when it arrives and post it to social media. Then navigate to the UnLtd. Authenticator and input the post link and your order number. Once it’s reviewed you’ll be issued an UnLtd. Authenticity NFT on the Polygon blockchain at NO COST to you!”
It has NFT-gated goods. Dcent is partnering with NFT projects to create limited-edition physical goods featuring the art of those projects, and you can only buy them if you hold an NFT from the project. For example, you can only buy an item from the Crypto Geisha collection if you hold a Crypto Geisha in your wallet.
While Dcent doesn’t have its own governance token like $ROBOT, it created a 5kelet0n Key - an NFT worth 1 ETH that gives holders access to every new collab drop without having to hold the art from the specific projects.
It also works like a membership program - it gives holders special access to rewards and 15% off every purchase as long as you hold it.
This membership functionality is similar to Poolsuite’s executive member card.
Cult & Rain: Luxury fashion meets NFT roadmaps
Continuing with the digiphysical theme, Cult & Rain is a new Web3-native luxury fashion brand that offers digital goods and their physical equivalents.
They’re starting their brand with an NFT-powered pre-sale that has a roadmap that looks identical to one from a regular NFT project: you unlock different perks at every mint milestone.
But this time you also get real-life benefits (and a pair of sneakers).
Their first releases will be 4 different models of sneakers: TITAN, ATLAS, VEGA, ORION. To get them, you have to mint (at 0.5 ETH) or buy an NFT of the sneakers. Then you get shipped a physical replica of your NFT.
Holding this NFT also gives you IRL perks down the line, like:
Store discounts
VIP access to events and pop-ups
Expedited shipping
This model of 1 NFT = 1 physical redeemable + membership perks is also what Blockbar is doing with luxury alcohol brands and seems like a brilliant solution for limited-edition drops.
Coming soon 👀
So far, it’s mostly been apparel and footwear brands leading the way in Web3, but there are new brands launching soon in other areas:
Leisure Project
Leisure Project, mentioned above, is “the world’s first co-created beverage brand”.
This spring, it will launch 3 flavors of their hydration beverage, kicking off pre-orders by selling NFTs (called Leisure Creatures).
When you buy a Leisure Creature, you get first access to their 3 flavors along with other benefits: NFT-gated online shop, employee pricing, a voice in the community, and more.
Yet another example of NFT-powered exclusivity.
To create hype before the launch, they’re doing something clever: letting people design their own Leisure Creature as part of a contest to win free NFTs and early access. To participate, fans just have to design their own Leisure Creature, share it on social media, and the community votes on the best designs.
Yerb
This Yerba Mate beverage brand did a pre-sale in March 2021 by selling an NFT. Like Leisure Project, it will start with 3 flavors.
Flowers for society
This German sneaker brand or “footwear metaverse for collectors, sneaker heads and the NFT community” did a pre-sale for their first drop last year.
Instead of having to purchase an NFT, people bought the sneakers and will then be gifted a custom NFT.
GMGN Cereal
GMGN Supply is a DAO aiming to build 100 community-based CPG brands. They’re starting with a brand called GMGN Cereal - which OffLimits is providing the cereal for.
#4: Web3 projects starting DTC brands
This budding category is made of NFT projects creating products for their holders. Not products incorporating Web3, but Web3 incorporating IRL goods.
Bored Breakfast Club: Coffee Subscription
Bored Breakfast Club, mentioned earlier, is “Web3’s first NFT coffee subscription”.
It’s simple: You buy one of their NFTs and then you can claim your coffee blend, supplied by Yes PLZ Coffee.
Crypto Cannabis Club: Premium Weed
Crypto Cannabis Club partnered with CampNova to launch a collection of premier sativa, indica and hybrid flowers for token holders, yet to be released.
Promising trends
Every brand experimenting with Web3 is doing it in their own way, but these use cases could gain more adoption in the next few years:
Doing pre-sales (and/or bootstrapping) by selling NFTs, like Cult & Rain.
Powering membership programs with NFTs, like Poolsuite.
Powering reward programs with tokens instead of points, like Metafactory does with $ROBOT.
Involving the community in decision-making in a meaningful way, like Leisure Projects aims to do.
Collaborating with NFT projects to create exclusive digiphysical goods, like Dcent.
Certifying the authenticity of your purchase for collectible items, like Blockbar or Satoshi Studio.