How Luxury Retailers Are Incorporating Non-Fungible Tokens into Collections
The groundbreaking fusion of technology and artistry paved the way for the awareness, adoption, and evolution of NFTs in luxury fashion. In the beginning, NFTs disrupted the industry by powering digital ownership of one-of-its-kind, head-turning fashion designs. Brands like Prada and Gucci caught wind of the movement and launched digital couture collections through NFTs. Some brands like Nike are even raking in millions in royalty revenue in secondary sales through NFTs.
But technically, the tokens aren’t just symbols of exclusivity and haute couture. They guarantee transparency in the supply chain, protect the creator’s works, and take counterfeiting head-on. NFTs have also empowered digital creators and brands to have direct engagement with their customers. By the way things are going, NFTs will continue the uptick in luxury fashion and are touted to notch $56 billion in this market by 2030.
Here are some of big reasons why luxury fashion houses are flowing with the NFT tide:
- Blockchain-backed Authenticity
Counterfeiting is and has been a pestilence for the fashion world for decades. The underlying technology of NFTs, Blockchain is an absolute powerhouse for immutability and offers an easy and transparent way to authenticate fashion products. Now, fashion brands are using NFTs to combat counterfeiting. As the technology grows more robust, the chances of NFTs vanquishing this problem become a lot higher.
When Gucci struck a partnership with Arianee to kick-start its NFT initiative, the fashion house ensured that all its NFTs were linked to physical products. This meant customers could verify the authenticity and provenance of their Gucci purchases. Obviously, this only adds value to the physical products, but more importantly sent Gucci’s brand trust on an upward graph.
- Phygital Experience
Portmanteau for physical and digital, “phygital” is a fast-evolving fashion industry concept. Did you know that NFTs allow brands to offer interactive experiences like Nike’s CryptoKicks? Nike linked NFTs to physical sneakers through CryptoKicks, getting customers to access exclusive virtual content, interacting with them in virtual environments, and trading/displaying virtual sneakers in the metaverse. The whole experience fostered a steel-tight connection between the brand and the consumer.
- Scarcity as a Collectible
When popular Swedish artist Ben Gorham tied the collaboration knot with luxury streetwear brand Off-White and created a series of NFTs called “Metaphores”, he had no idea how sought-after these collectibles were going to become.
One of the core attributes of NFTs is their ability to conjure up digital scarcity. In this case, Ben’s artworks were sold as unique NFTs because Off-White leveraged the scarcity factor to make limited-edition digital collectibles while driving up demand and perceived value.
- Virtual and Immersive Experiences
NFTs enable fashion brands to sell more than simple clothing – they allow these companies to sell immersive digital experiences that resonate with the target audience. As the world progressively (or exponentially) becomes more tech-savvy, fashion houses’ will foray into virtual worlds and the metaverse to connect with their customers.
Take fashion giant Louis Vuitton for instance. “LV in VR” shows the raw potential of NFTs in this bastion. Customers who have LV NFTs in their digital pockets get exclusive access to a virtual world where they can explore digital imprints of the company’s famous products, attend virtual fashion shows, and have engaging interactions with the brand.
- Loyalty Programs
The concept of customer loyalty is deep-rooted in customers, provided they have an incentive to be loyal. NFTs can really power this engine – by becoming the rewarding strategy for brands. Loyalty programs also drive repeat purchases and customer engagement, while providing a sense of community belonging for customers.
A classic example here is streetwear brand Supreme, which does limited drops and recently introduced an NFT loyalty program. The program offers the chance for customers who gather up several purchases to get their hands on an exclusive Supreme NFT, access to virtual events, and early product releases.
Legal and Regulatory Compliance of Fashion NFTs
As is the case with other NFTs, Fashion NFTs also face certain legal and regulatory hiccups. Copyright infringement is a major concern – since using copyrighted designs without the author’s or artists’ permission could lead to legal action.
If NFT creators don’t accurately represent their NFTs, they may face fraud or misrepresentation problems, but since the space is creative, these problems only arise if the matter is taken seriously by many.
The bane of the NFT world – taxation is another hurdle for NFT creators and traders, as these tokens are subject to capital gain tax. Although regulations surrounding this area are evolving constantly, fashion brands must keep a close eye on developments and always consult with their legal teams to navigate this landscape.
Threat to Authenticity / IP Violations
Another excruciatingly painful issue plaguing NFT Fashion is authenticity. All or most of these fashion houses carry trademarks and copyrights, and a recent surge in Intellectual Property (IP) violations has really rocked the industry.
We’re talking about digital assets that carry the trademarks of these big names but have no relationship with the brand. These unauthorized digital assets infringe IP rights, dilute the premium nature of the brand, and drive down the value of genuine fashion products.
Having said this, Fashion houses do carefully monitor outliers like this and take legal action immediately against NFT creators who exploit their brand equity. Hermès recently did this and came out on top – having sued NFT artist Mason Rothschild over his MetaBirkin NFT collection.
As NFTs continue to grow in acceptance and marketplace usage, fashion houses must be more vigilant than ever, as their creators and creations can really take the brand’s value to bigger scales. One way to do this is by proactively monitoring NFT marketplaces using advanced analytics tools that can curb and confront the fake listings and IP violations of popular brands. These tools can also share insights on scams like price inflation thereby brands can level up their game with NFTs.
