Commercial Awareness Update: We Look at the Growth of NFTs and the Importance of Innovation

What’s been happening in the commercial world this week? Read on to find out!

A Look at Non-Fungible Tokens

This month, non-fungible tokens (NFTs) have made the headlines after artist Beeple sold a piece of digital art for £50m at Christie’s auction house. The digital artwork, comprised of 5,000 photos, was sold with a non-fungible token as verification of its authenticity and has made Beeple one of the top three most valuable living artists. For reference, Monet’s 1906 Nymphéas painting was sold for £38m in 2014.

So what is an NFT? Non-fungible tokens are a type of cryptographic asset. Each NFT has a unique digital signature which is recorded on a digital ledger, confirming the digital collectable is real. This use of blockchain technology therefore protects digital ownership. A piece of digital artwork can be copied and downloaded millions of times but only one entity can own the original. An NFT is essentially a digital deed of ownership.

Many digital objects can be turned into NFTs – tweets, videos and even memes. Recent NFT sales include:

• Yesterday, Twitter CEO Jack Dorsey sold his first tweet, ‘just setting up my twttr’ for £2.1m as an NFT
• Earlier this month, British street artist Banksy sold a piece of artwork to blockchain company Injective Protocol, who subsequently burnt and destroyed it in a live-streamed video. This work was sold as digital art through an NFT
• America’s National Basketball Association is selling NFTs in the form of video highlights of moments from games
• The ‘Nyan Cat’ flying Pop-Tart meme sold for $590,000 in February this year

Future NFT sales to look out for:

• Associated Press is planning to sell a depiction of the 2020 electoral college map as viewed from space as an NFT digital artwork
• Rock banks Kings of Leon will offer their NFT-holders access to limited-edition vinyls

So how can art collectors make money through NFTs? Much like any other speculative asset, buyers can hope the value will increase. Many collectors believe ownership status will become increasingly tokenised in the future. Some NFTs even have commission attached to the file, meaning the original owner will be paid a fraction every time there is a resale.

However, some analysts have warned that NFTs exist in a bubble and are a dangerous investment. Many have warned of illiquidity and fraud. The market could tank for a particular type of asset, leaving collectors considerably out of pocket. Furthermore, given anyone can create and sell something as an NFT, it takes a trained eye to work out what may or may not be worth investing in. Whilst it is impossible to forge an NFT, it is possible to mint an NFT out of another file and pass that off as your own in order to sell it. Lastly, if a company selling a particular type of asset goes out of business, the asset itself may cease to exist, leaving the NFT-owner, with a token to a file that doesn’t exist. Remember the double-edged sword of blockchain is that transactions are anonymous and irreversible. Therefore, it is important to do your research, work out of you think the NFT market is here to stay, or if you think it is a bubble that is too volatile to buy into.

Talking points: What do NFTs mean for intellectual property law? Does the NFT craze exist as a bubble or is it here to stay? Could homeownership be tokenised in this way?

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Thorntons vs Hotel Chocolat: The Importance of Innovation

This week, British chocolate brand Thorntons announced it would close all of its 61 stores, putting 600 jobs at risk. There a number of factors that have led to the chocolate retailer’s demise, with COVID-19 delivering the final blow. However, it is the brand’s failure to modernise and re-invent itself which has caused the most damage.

Thorntons was established in 1911 and majorly profited from the 1980s consumer boom becoming a staple of the high-street. By the passing of the millennium, Thorntons had more than 450 stores in Britain. Contrast this with the 61 stores still standing in 2020. In the interim, Britain has seen a ‘gentrification’ of consumer products with a large growth in ‘artisan’ makeovers. The coffee, beer and gin industries have all needed to reform. Consumer conversation has moved less from the experience of buying chocolate and more to the ethical sourcing of cocoa beans used in the products. Similarly, consumers are becoming more health-conscious and interested in ‘clean eating’. This could be why sales of dark chocolate in Britain have increased by 50% in the past 5 years.

Thorntons’ competitor Hotel Chocolat has so far managed to survive. From June 2018- June 2019, Hotel Chocolat reported a 14% surge in sales. It is not a surprise that this came after a campaign of ‘relentless innovation’, as described by company bosses. Key changes included the promotion and marketing of the company’s cocoa plantation in St Lucia. Hotel Chocolat has a clearly outlined ‘Engaged Ethics’ approach, which guarantees cocoa growers a fair price for products and encourages sustainability. Chief Executive Angus Thirlwell has encouraged a spate of new products including the brand’s 100% vegan milk ‘Nutmilk’, as well as cocoa-related products such as cocoa vodka and gin.

Therefore, by 2020, Thorntons was already struggling. Bosses have blamed the final straw on COVID-19 and the numerous lockdown restrictions, particularly those that hit during their key Easter and Christmas trading periods. Although online sales increased by 70% this year, real estate costs made it unviable for the business to continue. As such, Thorntons is joining the ever-increasing list of companies to abandon bricks and mortar for an exclusively online offering.

Talking points: Why has Hotel Chocolat survived? Are there any other industries that could be affected by the ‘artisan’ movement? Which other brands have recently announced all store closures?