Phil Bird
How has the pandemic affected online marketplaces?
The pandemic completely redefined how businesses operate. With a fluctuating economy and people working from home, it comes as no surprise that people have turned to the digital world for security and convenience. Driven by consumers’ needs, businesses and markets have gone through digital transformation at breakneck speed. The growth of digital has been a trend since long before the pandemic of course, but never to this extent, with a McKinsey report finding that the pandemic accelerated digital transformation by seven years.
The shift to digital meant that businesses had to adapt. Auction houses, unable to carry out business as usual, found themselves needing to radically transform their online presence. Throughout the pandemic, NovaFori worked with various marketplaces, including auction houses, to develop their online platforms and upscale functionality.
By revolutionising traditional means of selling, the acceleration of digital transformation has further uncovered the power of digital infrastructure. As more businesses adapt to digital marketplace technology, an exciting variety of possibilities will open up for global trade. This is just the beginning.
What do you think the future of digital marketplaces will look like?
Many leading auction houses have embraced digital transformation for its accessibility. Instead of needing to travel to an auction house, customers can bid from across the world, exponentially increasing the number of customers marketplaces are able to reach, and enabling geo-restrictions to ensure cross-border trade implications are accounted for. This has made transacting easier for many industries. The recent NFT (non-fungible token) boom has displayed the potential of blockchain technology, and has taken online marketplaces by storm, becoming a part of popular culture through figures such as Bored Ape NFTs.
In fact, the main industry that has taken advantage of online marketplaces is fine art. Online art sales reached $6.8 billion in the first half of 2021, tapping into customers who had never purchased or been exposed to online art before. Through digital migration, online art is now more lucrative than ever, bridging the market between physical art and digital art as NFTs. NFT art sales made up a respectable $3.5 billion in the first three-quarters of 2021, attracting a new generation of investors. In turn, auction houses have adopted this transition, offering NFTs on their online auction platform.
What is the appeal of NFTs?
On paper, comparing NFTs with physical art, they are essentially both assets for investment with aesthetic value. However, NFTs have the benefit of being on the blockchain, making them secure assets that can be traded efficiently on decentralised platforms, whereas physical art lacks that same transparency and security. By tokenising art, creatives have breathed new life into digital art, allowing consumers to be able to display their NFTs across the internet and establish ownership and authenticity over their assets.
By taking the initiative to sell NFTs, auction houses are recognising their cultural and technological importance. The second-most expensive NFT of all time, Beeple’s “The First 5000 Days”, was sold via online auction in March 2021, combining digital pictures designed by the creator over thirteen years. The scale of the art is unprecedented in time and size, yet it would not have been possible to create a physical piece of the same extent. Beeple’s use of 3D modelling and technology is extraordinary, and by making history with its eye-watering sum, it has legitimised NFTs and the technology behind them.
Do you believe NFTs are here to stay?
Critics have claimed that NFTs are yet another bubble waiting to burst after the initial fanfare dies out. However, few acknowledge the digital infrastructure behind NFTs, such as the progressiveness of Beeple’s art and the smart contracts that allow digital artists royalty rights when their art is resold.
The network around NFTs is continuing to expand: digital transformation, consumer interest, and investment are all rapidly growing. As more people purchase NFTs and we move to an increasingly digitised world, the value of NFTs will be consolidated. There is a growing market for people who want to create, and own, NFTs with the ability to distribute them on a decentralised platform. With the metaverse looming, there is an incredible amount of untapped potential. Examples include being able to display NFTs on social media, as Meta plans to do, taking over a gaming industry that is already populated with the trading of cosmetic items, and as we are already seeing, the opportunity for digital art platforms. NFTs are infinitely more accessible than physical art, and it would be no surprise if the lines between them begin to blur, with 2021 seeing the rise of physical NFT galleries.
The market for NFTs is growing, and as long as NFTs continue to innovate and push the boundaries of traditional art and trade, they will become an important part of our digital ecosystem.
By Phil Bird, Executive Director at NovaFori.
