This new trend in tech is more than a fad. It’s a major shift in the digital economy that will likely be here to stay. Everyone from celebrities to brands is talking about their NFTs. It is a digital asset that is virtually impossible to hack. A new tool has been added to the luxury fashion industry.
This new trend in tech is more than a fad. It’s a major shift in the digital economy that will likely be here to stay. Everyone from celebrities to brands is talking about their NFTs. It is a digital asset that is virtually impossible to hack. A new tool has been added to the luxury fashion industry.
In a recent headline 2021 from a well-known fashion business, eZine, it reads: “Gucci is selling $12 (virtual) sneakers.” This sets the stage for the creation of additional digital products that complement their physical counterparts and feeds the current frenzy about NFTs.
The NFT phenomenon opens up new revenue channels, creates brand affinity with new consumer segments, and keepsakes to crypto art collectors. As such, it is not a passing fashion but a seismic change in digital economics that will likely be here to stay.
What is an NFT?
No need to read a lot to get up to speed if you are unfamiliar with these call letters. Here is a quick read:
*NFT stands for Non-Fungible Tokens. “NFT” refers to the tokens that are used as a proxy for the agreed-upon price of the digital twin item being purchased and which do not fluctuate. Currency speculation is not an issue with this currency, as it is for standard currencies like the US dollar or yuan.
Each token is stamped with a digital signature that cannot be altered. They also act as digital certificates.
The blockchain allows for transparency in terms of ownership and source.
This appeals to those who value authenticity, transparency, and provenance in their quest for sustainability, most notably luxury brands.
What is the value of?
The value of NFTs is based on the same psychological consumption drivers as those found in non-virtual collectibles.
*Just like baseball cards, which are often traded at a higher price, or sneakers, driven by “sneakerheads,” move the cost up multiple times, there is a crowd culture that sells digital twin NFT items.
*The original creators/owners of the original retain their trademarks, copyrights, or design patents to the original. In fact, they can collect royalties on all subsequent resale transactions. Selling and integrating a physical product with its digital twin can generate additional revenue for brands.
This, along with the fact that NFTs can be converted from digital files and issued (“stamped”) in sets of ten or 100 or more, creating “limited editions” or numbered copies both protects and generates added value while allowing the market price to drive by the demand of those who want to own a piece of the uniqueness and be a part. These are two key values that distinguish luxury brands.
What is the strategy of luxury?
Luxury brands are innovators in the virtual world, where gaming, memes, crowd culture, art, fashion, and technology meet. Some of these luxury brands are now embracing NFTs as they emerge from the same milieu.
*The value drivers for NFTs mirror luxury’s enviable resiliency: innovation, rarity, provenance, scarcity, and authenticity.
* Initially, luxury brands will not see NFTs in terms of revenue but rather as a way to build brand loyalty and cultural leadership.
*As such, luxury brands will manage the accessibility/availability fulcrum and apply this brand management strategy to NFTs. Selective access and limited editions ensure that, even if luxury customers bring their NFT bag into a gaming platform one day, the value will remain and likely increase.
What is the “grand entrance” of luxury?
Launched in 2013 by LVMH and the Aura Consortium. This groundbreaking collaboration between competing luxury brands uses a blockchain to protect their brand values and business value from counterfeits.
*LVMH Prada Cartier Bulgari Richemont and Bulgari are among the brands that have already adopted this platform.
*Consumers can access brand profiles via the platform.
The current market buzz states that “it’s only a question of time” before luxury brands start to enter the NFT sector. Gucci is reportedly leading the way, with five other luxury brands poised behind. The Aura Consortium provides a staging area to allow for a relatively smooth transition from their current platform.
What ethical challenges are there?
Sustainability is a part of luxury as a business and culture. Luxury is a culture that values heritage, craftsmanship, and rarity. It also refuses to accept fashion’s inherent waste and obsolescence. Here’s the problem:
The average NFT uses the same amount of energy as driving 500 miles on a gas-powered US car.
This generates more than 200 kg of carbon dioxide.
*The use of blockchain, the platform required to “store” NFTs, adds to the excess carbon footprint.
*at unimaginable levels.
The added use of energy does not reduce the efficiency but rather increases it.
These realities will be included in the ethical challenge of luxury.
