Tariff flux pushes brands to bet big on digital merch

As more and more businesses are impacted by tariff volatility, some executives, like Ridhima Kahn, vice president of business development at Dapper Labs, are viewing the assault on the cost of physical goods as another use case for digital markets powered by blockchain to shine.

“I’m seeing a lot of brands rethinking where revenue and fan engagement come from,” Kahn said during an exclusive interview with Cointelegraph. “A lot of franchises, like the ones we work with — NBA, NFL, Disney — have already had years of success with digital collection, and we’re seeing a lot of brands express interest in digital collectibles as a way to engage with fan bases at a time when physical costs are riskier and unknown.”

Propelling brands to take a deeper look at digital merch is the desire to better understand fandom. Flow now has tradable highlights like a “LeBron Dunk” or a “Steph Curry 3-Pointer” that live inside the NBA app and has commemorative NFTs tied to NFL game highlights in NFL All Day.

But with Super Bowl ticket stubs and other digital mementos powered by blockchain, digital goods are proving they can unlock deeper in real life (IRL) fan experiences, courtside or on the field.

“When you look at the amount of time folks are spending online or in digital environments, it’s only increasing,” Kahn said. “That’s really motivating brands to identify where their fans are spending time and where they can reach them where they’re at. It’s also a great way to engage a more global fan base simultaneously, versus in a more limiting, geo-targeted way, which caters more toward the global fan bases that want to engage with these brands.”

Digital as a go-to-market strategy

Because fan bases have become more globalized, the online experience just happens to offer a faster, more accessible environment for digital goods, particularly collectibles, versus the current marketplace for physical goods that’s being hampered by enigmatic tariffs.

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“Average NFT sales are up 7% quarter-over-quarter, with NFL All Day and NBA Top Shot delivering $2.5 million and $5.6 million, respectively,” Kahn said. “We’re also seeing total value locked (TVL) at an all-time high of $44.4 million on Flow, led by protocols like KittyPunch and other markets that offer next-gen investing and trading opportunities — a trend that’s signaling a broadening use case for blockchain and crypto beyond just NFTs.”

Helping broaden the blockchain use case is the recently enhanced onramping and offramping technology that’s permeated throughout the industry, enabling a smoother user experience for those getting started in crypto and the world of digital commodities than what was available three years earlier.

Per Kahn:

A lot of blockchain companies are realizing the number of users they can have is capped if they don’t enhance the user experience. We’re seeing the enhanced user experience as a core driver of adoption, and from a regulatory standpoint, the positive moment for blockchain is also really exciting.

Less fear, more utility 

As more defined blockchain regulation is established, companies that might have initially been skeptical of blockchain are now taking it more seriously because regulators are taking it more seriously, helping boost confidence in the tech, especially among well-known brands.

“IP-backed collections are winning,” Kahn said. “Upon Flow’s recent integration with OpenSea, NBA Top Shot was ranked among OpenSea’s top-five trending collections for four consecutive weeks. We go deep into specific fan bases to understand user behavior, and we A/B test our experiences, meaning the products we ultimately put out to market for fans are very well-vetted to ensure they’re actually what fans want.”

Kahn and Dapper Labs CEO Roham Gharegozlou took a group of VIP collectors during the NBA’s in-season tournament to dinner and openly solicited their opinions on what they wanted to see more of on the platform. It’s the kind of swift, efficient, real-life research and development (R&D) that can more easily impact the end product, because the end product is digital.

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“We take those insights back to our product team, and we embed those insights into our product to ensure we’re creating the best fan experience, agnostic of the technology we’re using to get there,” Kahn said. “It’s about what the fans want, and we leverage blockchain technology to deliver the fan experiences people might not be able to get elsewhere.”

Elsewhere being the physical goods market.

“The technology in our products really fades into the background, and what’s left is a collectible that feels meaningful, shareable and valuable,” Kahn said. “Digital collectibles unlock layers of engagement that physical goods cannot: They can be personalized, connected to real-world access, or used to reward loyalty for years and years to come. They’re also remixable, lightweight and global from day one.”

But Khan doesn’t believe the physical goods market is going to go by the wayside anytime soon.

I don’t think brands are turning their backs on merchandise. It’s more about expanding the playbook and looking to one of the few revenue streams immune to the volatility of physical goods as a way to engage with fans further.

Outside of the internet, sports and media fans are limited to where they are physically when it comes to purchasing a physical good and where they can take that physical good. But Kahn believes the next evolution of fandom is mobile.

“We love the concept of being able to take your most prized possessions with you on your phone, wherever you are,” Kahn said. “Being limited to trading in a physical environment isn’t nearly as fun as being able to trade wherever you are with people all across the world.”

Moving forward, Kahn believes brands will continue to expand their playbooks by engaging more with fans in digital spaces.

“Consumers are also going to be more willing to adopt new ways to engage with brands in digital spaces if the value proposition is there,” Kahn said. “If we’re able to continue to offer utility to fans for what they do in a digital space — and what they do in a digital space benefits them in a physical world — that’s going to be the recipe for success.”

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