The Forefront Journal publishes essays from the frontier of consumer and social crypto. This is a guest essay from Aleksija Vujicic, Part 2 of a series on phygital goods and fashion.

Phygital girl, phygital world, phygital… Stack? As we move from a fragmented physical world bookended by two digital experiences, to one continuous phygital experience, so too must the fashion and commerce industries learn to navigate them both seamlessly. More specifically, the phygital world will be enabled by a new phygital tech stack. As we explored what a hypothetical phygital world might look like in Part I of this essay, we began to see the various layers of this stack begin to shape up – but more specifically, they fall into the following categories:

Our Staud example begins with ordering a bag online – a seemingly simple process that, between purchases, shipping, disputes, returns, resale and more, is actually already quite complex in traditional commerce. Purchasing that bag becomes exponentially more convoluted in the phygital world, as both a digital and physical good must be accounted for at all times, remaining linked throughout the journey.

Phygital commerce transactions must facilitate digital to physical redemptions (and vice versa), handle disputes and returns, enable resale, and much more – ensuring the accurate sending and receiving of both NFTs to wallets and physical goods to individuals. Solaire, a protocol building in this space, has illustrated the problem clearly here:

This new retail infrastructure will span web2 and web3 – thus commerce protocols must as well, tokenizing both goods and the commitment to trade real world “Things” as NFTs — a solution that Boson Protocol is currently working on.  It is upon these protocols that the remainder of the phygital stack, from consumer platforms to marketplaces, will be built upon and integrated with.

To ‘mint’ the Staud bag on-chain, consumers will tap a Near-Field Communication (NFC) chip – the hardware predominantly used at present to bridge digital and physical products, worlds and experiences. Embedding an NFC Chip in the physical item is the first step to tokenizing the good, thereby accessing the benefits of the blockchain. The NFC chips themselves are a commodity, however companies like IYK, Kong, and others are building the smart contract platforms around the NFC chips that enable both the minting of the companion NFT, as well as the connections to POAPs, digital autographs and other digital experiences.

As the Staud bag attends events in NY, collects digital autographs and accumulates music playlists, this “context” creates a unique product identity. Much like we presently share our personal identities on social platforms like Instagram and TikTok, so too will the identities of our fashion items, makeup and more be shared on a social app in the future. These identities, which could include provenance, ownership, loyalty and rewards, physical experiences, music playlists and more, will live and be visually represented in an interactive and aesthetic way. On this hypothetical platform, consumers might:

1. Dress Their Avatar: Consumers could accessorize their avatars with their digital bag, thereafter exporting it to the Fortnite universe (for example).

2. Learn the Origin Story: With a tap, consumers could access their ‘Digital Product Passport’, showing the product’s supply chain history, and watch a video of the bag being made by a seamstress in Los Angeles.

3. Collect Loyalty Rewards: One could imagine a web3 community-engagement platform like TYB plugging into (or being exported out from) such an app, allowing consumers to engage in (and be rewarded for) community events, co-creation, social sharing and more. 

 Attending a Staud pop-up in New York and scanning your bag earns you 10% off your next order!

4. Engage with Friends: This consumer platform represents a new era of social media. People can interact with their friends, influencers, and celebrities through the things they own (and what they do in them) — via POAPs, photos, playlists, autographs, etc. Style influencers like Leandra Medine are already experimenting with this — albeit on a platform hastily pieced together due to current tech limitations.

5. Make Commerce Social Again: Imagine strolling down the street, when a girl compliments your bag and asks where it’s from. Normally, you would name the brand and continue on, leaving her to search on Net-a-Porter and purchase it on her own, while you receive no recognition nor attribution for your influence. Instead, she scans your bag, immediately pulling it and your profile up on the platform. She purchases it on the spot, and you receive a 5% revenue share in turn. She loves your style, and decides to follow you for future outfit inspo. This is the future of social commerce.

A single platform for one, or one platform for all? There are two distinct visions for this consumer UX — individual brand platforms or a universal multi-brand one. The difference is not dissimilar to the FWB app vs. Discord. Both models are likely to exist, differentiated by the class of fashion good they cater to — luxury or middle market.

1. Luxury: Luxury brands like Hermes trade at high multiples in large part due to Brand. Preserving the brand integrity is thereby paramount, and this is true for the phygital consumer UX as well. Hence, luxury brands might lean towards exclusive platforms, emphasizing their unique brand experience.

2. Middle Market: While brand continues to be important for all consumer goods, it may pale in comparison to the need for better distribution and customer acquisition (and thus lower CAC). For smaller fashion brands like Staud, a multiplayer platform would provide the distribution that social media platforms like Instagram and TikTok once promised.

   1. Exceptions: Massive middle-market brands like Nike or Zara might merit their own platforms due to their vast brand influence.

The web3 industry has heretofore approached marketplaces with a ‘one size fits all’ mentality, building based on function (NFTs), rather than form (whatever that NFT represents). This is the era of OpenSea, Zora, etc. Kyle Samani has previously argued that marketplaces should be optimized around the type of content they host, and this is no different for phygital goods.

While heretofore we have referenced web2 marketplace Net-A-Porter, the reality is that the future major fashion and beauty marketplaces must be built to support the buying and selling of phygital goods on crypto rails.

The front-end of these marketplaces may look web2 in nature, with intent-based search and social discovery tools, while the back-end would be distinctly web3 in nature, with infrastructure like phygital commerce protocols, minting capabilities, crypto payment rails, token-gating and more.

Much like the Staud example, future fashion and beauty brands will be 'phygitally-native', utilizing NFC chips from inception and crafting GTM, advertising and social strategies for a bridged physical-digital world. By seamlessly transitioning between IRL and URL, these brands can better incentivize and track consumer behaviors, offering more sophisticated rewards in return. Expect these brands to operate on commerce protocols, sell on phygital marketplaces, and pop up on next-gen social commerce platforms. Brands like Kiki, 9dcc, Sol3mates, and Cult & Rain are paving the way.

There are a plethora of companies building in this space. Many can be seen in the market map below:

The Staud example is chalk-full of new consumer behavior. Companies innovating in this space must guide users through an entirely new market, with new consumer behaviors, commerce journeys, and more. Whenever pioneering a new product and behaviour, it is important to own the entire consumer journey for smoothness and engagement. Shopify CEO Tobi Lütke echoes this, saying “the vertical facet of our business is the most significant, and aids in customer acquisition.” In this instance, controlling the consumer journey requires vertically-integrating and going full-stack from the NFC chip to the marketplace, and even the brand itself.

In the future, many fashion experiences will look like our hypothetical experience with Staud. However, there is a long way to go between the present and this ideal future. Ultimately, the phygital fashion space is still incredibly nascent, with a long road full of educating both consumers and brands on both the benefits and new behaviors that a phygital good can give rise to. Streamlining the adoption process will require a vertically-integrated company that can create a seamless consumer experience, and rapidly iterate and improve upon its offerings based on consumer feedback — ultimately fostering adoption, building trust, and driving the phygital space (ph)orward.

The Forefront Journal publishes essays from the frontier of consumer and social crypto. This is a guest essay from Aleksija Vujicic, Part 2 of a series on phygital goods and fashion.

Phygital girl, phygital world, phygital… Stack? As we move from a fragmented physical world bookended by two digital experiences, to one continuous phygital experience, so too must the fashion and commerce industries learn to navigate them both seamlessly. More specifically, the phygital world will be enabled by a new phygital tech stack. As we explored what a hypothetical phygital world might look like in Part I of this essay, we began to see the various layers of this stack begin to shape up – but more specifically, they fall into the following categories:

Our Staud example begins with ordering a bag online – a seemingly simple process that, between purchases, shipping, disputes, returns, resale and more, is actually already quite complex in traditional commerce. Purchasing that bag becomes exponentially more convoluted in the phygital world, as both a digital and physical good must be accounted for at all times, remaining linked throughout the journey.

Phygital commerce transactions must facilitate digital to physical redemptions (and vice versa), handle disputes and returns, enable resale, and much more – ensuring the accurate sending and receiving of both NFTs to wallets and physical goods to individuals. Solaire, a protocol building in this space, has illustrated the problem clearly here:

This new retail infrastructure will span web2 and web3 – thus commerce protocols must as well, tokenizing both goods and the commitment to trade real world “Things” as NFTs — a solution that Boson Protocol is currently working on.  It is upon these protocols that the remainder of the phygital stack, from consumer platforms to marketplaces, will be built upon and integrated with.

To ‘mint’ the Staud bag on-chain, consumers will tap a Near-Field Communication (NFC) chip – the hardware predominantly used at present to bridge digital and physical products, worlds and experiences. Embedding an NFC Chip in the physical item is the first step to tokenizing the good, thereby accessing the benefits of the blockchain. The NFC chips themselves are a commodity, however companies like IYK, Kong, and others are building the smart contract platforms around the NFC chips that enable both the minting of the companion NFT, as well as the connections to POAPs, digital autographs and other digital experiences.

As the Staud bag attends events in NY, collects digital autographs and accumulates music playlists, this “context” creates a unique product identity. Much like we presently share our personal identities on social platforms like Instagram and TikTok, so too will the identities of our fashion items, makeup and more be shared on a social app in the future. These identities, which could include provenance, ownership, loyalty and rewards, physical experiences, music playlists and more, will live and be visually represented in an interactive and aesthetic way. On this hypothetical platform, consumers might:

1. Dress Their Avatar: Consumers could accessorize their avatars with their digital bag, thereafter exporting it to the Fortnite universe (for example).

2. Learn the Origin Story: With a tap, consumers could access their ‘Digital Product Passport’, showing the product’s supply chain history, and watch a video of the bag being made by a seamstress in Los Angeles.

3. Collect Loyalty Rewards: One could imagine a web3 community-engagement platform like TYB plugging into (or being exported out from) such an app, allowing consumers to engage in (and be rewarded for) community events, co-creation, social sharing and more. 

 Attending a Staud pop-up in New York and scanning your bag earns you 10% off your next order!

4. Engage with Friends: This consumer platform represents a new era of social media. People can interact with their friends, influencers, and celebrities through the things they own (and what they do in them) — via POAPs, photos, playlists, autographs, etc. Style influencers like Leandra Medine are already experimenting with this — albeit on a platform hastily pieced together due to current tech limitations.

5. Make Commerce Social Again: Imagine strolling down the street, when a girl compliments your bag and asks where it’s from. Normally, you would name the brand and continue on, leaving her to search on Net-a-Porter and purchase it on her own, while you receive no recognition nor attribution for your influence. Instead, she scans your bag, immediately pulling it and your profile up on the platform. She purchases it on the spot, and you receive a 5% revenue share in turn. She loves your style, and decides to follow you for future outfit inspo. This is the future of social commerce.

A single platform for one, or one platform for all? There are two distinct visions for this consumer UX — individual brand platforms or a universal multi-brand one. The difference is not dissimilar to the FWB app vs. Discord. Both models are likely to exist, differentiated by the class of fashion good they cater to — luxury or middle market.

1. Luxury: Luxury brands like Hermes trade at high multiples in large part due to Brand. Preserving the brand integrity is thereby paramount, and this is true for the phygital consumer UX as well. Hence, luxury brands might lean towards exclusive platforms, emphasizing their unique brand experience.

2. Middle Market: While brand continues to be important for all consumer goods, it may pale in comparison to the need for better distribution and customer acquisition (and thus lower CAC). For smaller fashion brands like Staud, a multiplayer platform would provide the distribution that social media platforms like Instagram and TikTok once promised.

   1. Exceptions: Massive middle-market brands like Nike or Zara might merit their own platforms due to their vast brand influence.

The web3 industry has heretofore approached marketplaces with a ‘one size fits all’ mentality, building based on function (NFTs), rather than form (whatever that NFT represents). This is the era of OpenSea, Zora, etc. Kyle Samani has previously argued that marketplaces should be optimized around the type of content they host, and this is no different for phygital goods.

While heretofore we have referenced web2 marketplace Net-A-Porter, the reality is that the future major fashion and beauty marketplaces must be built to support the buying and selling of phygital goods on crypto rails.

The front-end of these marketplaces may look web2 in nature, with intent-based search and social discovery tools, while the back-end would be distinctly web3 in nature, with infrastructure like phygital commerce protocols, minting capabilities, crypto payment rails, token-gating and more.

Much like the Staud example, future fashion and beauty brands will be 'phygitally-native', utilizing NFC chips from inception and crafting GTM, advertising and social strategies for a bridged physical-digital world. By seamlessly transitioning between IRL and URL, these brands can better incentivize and track consumer behaviors, offering more sophisticated rewards in return. Expect these brands to operate on commerce protocols, sell on phygital marketplaces, and pop up on next-gen social commerce platforms. Brands like Kiki, 9dcc, Sol3mates, and Cult & Rain are paving the way.

There are a plethora of companies building in this space. Many can be seen in the market map below:

The Staud example is chalk-full of new consumer behavior. Companies innovating in this space must guide users through an entirely new market, with new consumer behaviors, commerce journeys, and more. Whenever pioneering a new product and behaviour, it is important to own the entire consumer journey for smoothness and engagement. Shopify CEO Tobi Lütke echoes this, saying “the vertical facet of our business is the most significant, and aids in customer acquisition.” In this instance, controlling the consumer journey requires vertically-integrating and going full-stack from the NFC chip to the marketplace, and even the brand itself.

In the future, many fashion experiences will look like our hypothetical experience with Staud. However, there is a long way to go between the present and this ideal future. Ultimately, the phygital fashion space is still incredibly nascent, with a long road full of educating both consumers and brands on both the benefits and new behaviors that a phygital good can give rise to. Streamlining the adoption process will require a vertically-integrated company that can create a seamless consumer experience, and rapidly iterate and improve upon its offerings based on consumer feedback — ultimately fostering adoption, building trust, and driving the phygital space (ph)orward.