How much would you be willing to pay for a piece of clothing that can’t be worn in real life? Did you know that, on average, a user is willing to pay about 2,500€ for a designer bag in the virtual world?
The fashion industry, and especially luxury fashion, is going through a transformation driven by the new generations of customers whose demands and purchasing behaviors are completely different from the traditional ones. Therefore, triggered by the empowered consumer of today, we are witnesses to phenomena such as cult designers, the rejuvenation of some frontline brands, the proliferation of the second-hand market, and a unanimous commitment to sustainability and responsible practices.
But the biggest disruption experienced by the industry so far has been the emergence of the digital consumer who, taking advantage of the available technology, purchases and enjoys products in the online world, tirelessly seeking differentiation and authenticity. It is no news that fashion has always been, beyond its practical use, a form of individual expression. Each garment helps us build a story about ourselves, a personal brand. Within this personal brand, the use of exclusive garments, generally defined as those different or difficult to obtain, has always been very important. And this statement is valid in any dimension, both physical and virtual.
The first challenge we observe is: how can brands be able to guarantee the authenticity of their products in a virtual world? Spoiler, with the NFTs. But, going even further, what is the real potential of NFTs? Are NFT’s intended only to secure product authenticity or are they a new way to deliver an exclusive experience?
Social Media, Gaming and Fashion
The unprecedented growth of social media and gaming in recent years is changing the way we interact with each other. If a decade ago thinking about an avatar was something innovative, today many young people devote considerable effort to their digital profiles and customization. This trend has given rise to fashion in the digital world to be able to create looks and dress avatars with combinations and trendy garments.
It is estimated that, in the near future,TikTok, the social network of Generation Z, which currently has 800 million active users worldwide and more than 1 billion videos played per day, will allow its users to wear the clothes purchased digitally.
On the other hand, the State of Online Gaming 2021 report shows that the average weekly time spent playing online games is 8 hours and 27 minutes, having grown by 14% compared to 2020, and that even 25% of users spend more than 12 hours a week playing. Platforms such as Roblox, with more than 202 million monthly active users, or Fortnite, with more than 350 million registered users, of which 77% have already made at least one purchase in the game, are a great sample of the potential linked to the development of digital assets, not only in fashion.
Therefore it is not surprising that prestigious brands such as Nike, Gucci, Louis Vuitton and, recently, Balenciaga, not only create virtual products for consumers to share on Instagram, but actively collaborate with major gaming platforms to present and market limited editions, both in the physical and virtual world.
But what are NFTs, really?
In short, we could say that an NFT is a blockchain-based mechanism to ensure the authenticity of a digital asset. Here’s an explanatory example of the NFT: There is only one original of Leonardo da Vinci’s painting "Salvator Mundi", which was sold for $450.3 million in 2017 and, although there are countless copies that look practically the same as the original, none of them has the value of the former. NFT’s are responsible for ensuring the originality and therefore value of any digital (i.e., non-physical) product.
NFTs are today what Bitcoin was a decade ago and the numbers prove it: the sale of NFTs in 2021 increased from $1.3 billion in the second quarter to $10.7 billion in the third quarter. And this is just the beginning. According to a report done by The Business of Fashion, 50% of consumers are interested in acquiring some kind of digital asset over the next year, with its certificate of authenticity via NFTs', of course.
NFTs and luxury fashion
NFTs, further beyond ensuring the authenticity of a product, collection or limited edition, are a clear example of the disruption in the definition of the concept of exclusivity, currently linked to absolute luxury brands. With the available technology, any individual or brand can present their creations in the virtual world, become a success and monetize it through NEFT-certified products. A good example of this is the digital studio RTFKT, practically unknown in the sector, which, in collaboration with the crypto artist FEWOCiOUS, managed to sell virtual certified shoes worth 3.1 million dollars in just 7 minutes.
Although it may seem like an oxymoron, the virtual world and the NFTs promote inclusiveness in the category of absolute luxury, not only by redefining it but also by allowing unknown talents without a historic brand behind them to enter the market and compete with the great brands of the physical world.
The future of luxury fashion
As mentioned above, the big fashion brands have already tackled the digital challenge, creating virtual products in their app with which the user can take photos and show them off on social networks, collaborating with gaming platforms or even launching limited editions. But these actions do not answer the key question on "How can traditional luxury brands maintain their competitive position in this new context?"
Gucci, who is recognized as one of the great references of the industry, became the first international brand to put on sale an item of NFT, which coincidentally, was not a garment of fashion but a short video of four minutes inspired by one of its collections, displayed on the digital market for $25,000.
Therefore, the answer may come from the ability that luxury brands have to leverage this tradition, which makes them unique and that new virtual brands lack, and create a physical-virtual experience, exclusive and evidently certified by NFT’s, that transcends the product itself.
Precedents on this approach are found in Bored Ape Yacht Club, for example, which has been able to create a very exclusive community without the need to sell a specific product. The only thing that’s certain is that there is an exciting future in terms of the customer experience in this segment.