As interest in cryptocurrencies and NFTs surge, fashion and luxury brands have an opportunity to invest in the future. Even a few short years ago, the thought of spending money on virtual clothes was likely unthinkable for most of us. Now, fashion is looking for ways to embrace and monetize high tech, and some brands are prioritizing NFTs as a marketing tool and a way to expand their revenue streams.
Currently, I’m advising a potential start-up that is focused on NFTs and education. So, that got me thinking, especially with the latest buzz around NFTs and blockchain, what about fashion? Can it be used in fashion? What are the implications? And if I were advising fashion and luxury brands, what would my advice be?
First, let’s consider what an NFT is.
NFT stands for non-fungible token. NFTs are one-of-a-kind digital assets using blockchain technology.
Blockchain provides a digital recording of a transaction that is verifiable and unalterable. While most of us relate blockchain technology to cryptocurrency (such as bitcoin or dogecoin), each bitcoin or dogecoin isn’t unique – one can be interchanged with another. On the other hand, each NFT contains extra information that makes each one unique. So when you buy an NFT, you’re buying a bit of individualized computer code that references media (an image, a work of art) that is hosted elsewhere on the internet.
This makes it possible for digital content to have distinctive ownership. But you actually don’t own it. You are buying de facto ownership. It is paradoxical, just like fashion.
In general, consumer behavior and consumption are motivated by the desire for an experience, to feel good, or to gain status. Much of fashion signals some form of status within a group, status being what the collective perceives as valuable. With fashion’s luxury brands, the purchase, use, and display of luxury fashion is a means of gaining social status. And of course, since luxury fashion = high status = social affluence, with that comes more authority, power, and prestige. And this is similar to NFTs—status is what’s motivating the consumer behavior. It’s presumably what motivates a buyer to purchase a piece of digital art for $69 million, as happened a month ago when Christie’s auctioned off an NFT by the artist Beeple for that amount.
At the moment, it seems that NFTs are mostly PR driven, and aimed at the members of Gen Z, which is a target market luxury brands cannot ignore. My advice would be to do something about NFTs, because if you aren’t, someone else in your industry or niche may do it before you do. Stay true to who you are as a brand, but you can start exploring ways to incorporate NFTs into your business.
We already know that luxury brands have teamed up with video games. For example, Louis Vuitton created skins for League of Legends, and the Gucci x North Face collaboration was available in Pokémon Go. So, that’s already being done, but what about the future? There are other possible uses for NFTs in the fashion industry:
1. Collector’s item: similar to owning an art piece, the consumer would own the digital rights to a particular design or other fashion-related item. Owning a one-of-a-kind digital designer item may well appeal to consumers across the fashion spectrum, not just those who already possess a closet full of luxury fashion. And the possibilities are endless—a designer’s original sketch, an image of the first sample prototype pinned on the dressmaker’s mannequin, a series of drawings showing the evolution from first pencil sketch to fully realized color drawing, and so on. Teaming up with an auction house to market these NFTs is one relatively easy way for brands to engage in this technology.
2. Blending physical with digital: Nike and Gucci have sent actual sneakers to the purchasers of NFTs. For the short term, this could be a clever way to incorporate NFTs into your business. And this combination of physical and digital satisfies the desire of fashion consumers to possess and use the physical product for its intended purpose, rather than as a novelty digital status symbol.
3. Authenticity and the war against counterfeit: while blockchain technology wasn’t initiated to support NFTs, this technology may allow fashion and luxury brands to advance when it comes to counterfeits. We used to have barcodes and print branded leaflets to demonstrate brand authenticity. Similarly, blockchain can help verify authenticity and ownership and prevent the sale of counterfeit goods, particularly in the luxury fashion realm. In fact, Louis Vuitton has already developed a platform using blockchain technology, allowing consumers to trace and verify authenticity of its luxury products.
What are the concerns around NFTs?
- NFTs consume a great deal of energy. While it would be reasonable to suppose that NFTs would be environmentally sound—they’re digital, after all—they use the same technology as cryptocurrency. And cryptocurrencies use a tremendous amount of energy, so much so that the impact on the climate is a very real concern. In fact, Ethereum, a blockchain that hosts NFTs, uses nearly as much energy in a year as the entire country of Denmark.
- Is it a fad? While a brand may rush to capture market share by incorporating NFTs into its strategy, NFTs may never take off in the fashion world. As with any fad, there may be a great deal of attention and energy expended on it in the short term, with the potential for it to lapse and quickly die off. And investing in a fad also means committing to and adapting a follow-up strategy for that time when the fad loses its popularity.
- The application of NFTs to fashion can be confusing, with many details still to be ironed out. This would include the need for a very well-defined marketing strategy given the fact that, at this time, only a particular consumer group (mainly the younger generation) is embracing NFTs. Moreover, fashion is about physical products. Most of any of us want to try on, touch, wear, and carry our purchases. Working within these constraints presents challenges.
What’s the final verdict on NFTs? Do it, but do it smartly – in smaller steps, and in accordance with your business strategy.