NFTs – non-fungible tokens – are a huge trend in the digital and gaming industries. But digital valuables are also on the rise in other sectors, such as luxury fashion and designer brands. Why is that? And how can manufacturers profitably benefit from this development?
What are NFTs anyway? Non-fungible tokens are graphic files whose certificates of authenticity are stored on the blockchain in a tamper-proof manner. While the trend was previously more popular in the art and gaming scenes, it’s now conquering the fashion industry, especially in the luxury segment. Gucci, Louis Vuitton, Tommy Hilfiger, Dolce & Gabbana, and Paco Rabanne now all have NFT collections in their ranges.
Unlike “traditional” NFTs, fashion and designer NFTs don’t usually consist of artwork, videos, or the like – they are very real virtual garments. For example, Nike has developed a virtual sneaker that can be customized with different skins featuring a variety of colors, prints, textures, and ornaments. Once purchased, owners can then have their digital shoes worn by their avatars in the metaverse, an emerging type of three-dimensional internet, or in video games and on online platforms.
NFTs particularly attractive for luxury brands
It’s no surprise that consumers are interesting in this virtual, one-of-a-kind fashion – with just a few clicks, they can not only own the limited-edition pieces but also easily show them off to the whole world on the web. Plus, digital clothing is usually priced lower than real-life haute couture. It’s a new kind of status symbol, which is precisely why it is very attractive for numerous luxury brands from a marketing perspective.
But why are luxury brands particularly interested in NFTs? Industries that have to contend with counterfeiting or whose target group was previously very limited are benefiting from the technology behind NFTs and the specific advantages it offers. For fashion and design labels, both are true. Authenticity is ensured by the unique way tokens are stored on the Ethereum blockchain. The origin and current owner of a digital garment can be proven beyond doubt at any time; counterfeiters of luxury items therefore no longer stand a chance.
Developing new target groups with NFTs
Beyond this, there are other promising marketing opportunities, and many companies are certain that the full potential of luxury NFTs has yet to be unleashed – due to the newness of the trend, there are also very few best practices in the industry so far. But luxury brands are already using NFTs to tap into new revenue streams, achieve stronger customer loyalty, and gain a modern image and new target groups.
While specially created virtual collectibles and rarities give customers a feeling of exclusivity, for example, digital marketing lowers the barriers to purchase. This completely novel way of accessing well-known luxury brands via an innovative, virtual sales channel opens up opportunities with entirely new customer groups. Shifting focus away from affluent fashionistas toward tech-savvy people, gamers, collectors, and crypto-investors: This type of expansion or change in a company’s target group rarely happens in today’s market. The trend is also supported, for example, by collaborations that luxury brands carry out with their NFTs in the gaming scene. For example, Balenciaga made four signature items from its collection available as skins and accessories in the online video game Fortnite – and these virtual garments are probably many players’ first point of contact with the brand.
From technical hype to a reliable source of revenue
Despite such pilot projects, the luxury NFT trend is still in its infancy. The market is developing rapidly, and analysts are also predicting enormous growth over the next few years. However, many luxury brands still lack a dedicated monetization strategy to generate long-term revenue from NFTs. Testing technological innovation is often still a higher priority than the specific business case.
In order to successfully turn luxury NFT business into a key source of revenue, designer brands should immediately start developing the appropriate strategies and commercialization approaches and building up know-how and resources to do so. You, too, can get started today!
To read more about how Simon-Kucher can unlock your growth in the metaverse and Web3, click here.
UNLOCKING THE METAVERSE & WEB3
Building sustainable growth in a digital world