Digital Collectibles Revolution: The Future of Luxury Brands
If you’ve been keeping an eye on the NFT market, you might have noticed a slowdown. These NFTs, commonly regarded as PFP, generative art, digital art, game item, metaverse land, etc., keep shrinking in market size and trading volume. Big names in the NFT space, like Machi Big Brother, have started to cash out some of their assets, signaling a potential shift in the market.
While the broader NFT market might be cooling down, there’s a specific sector that’s heating up: luxury fashion brands. From 2021 to 2023, these high-end brands have been dipping their toes into the NFT world, experimenting with different campaigns and mechanisms. In this article, we’re going to take a closer look at how these luxury fashion brands are navigating the NFT space. We’ll also delve into a recent digital collectibles collection launched by Louis Vuitton in June 2023. So, let’s dive into the world of luxury fashion NFTs!
Luxury Brands NFT Examples
1. Prada, Timecapsule NFTs
Prada launched the Timecapsule NFT collection in September 2022; a limited-edition physical item and gifted NFT will be presented on the first Thursday of each month, available for 24 hours. The Timecapsule drop has come to #42, where #43 will be on July 6th, 2023.
2. YSL, YSL BEAUTÉ NFT collections
YSL BEAUTÉ launched its first-ever NFT collection with 10,000 Golden Blocks in June 2022. Golden Block holders will get early access to the YSL fan tokens and the exclusive “Abuse Is Not Love” program partnered with music artists Agathe Mougin and Kittens for this release. The brand also launched the Beauty Night Blocks on January 2023. The NFTs were gifted to shoppers upon purchasing a Block Opium fragrance in France, the U.S., the U.K., and Australia. The NFT is a reward that includes a gift voucher, which also provides access to purchase a second tranche of NFTs
3. Dolce & Gabbana, Collezione Genesi
The Collezione Genesi was launched in September 2021 and sold for $5.7 million. The collection consisted of nine 1 of 1 NFT pieces. Five of the pieces were physical creations, designed and executed by Dolce & Gabbana, with virtual iterations by UNXD for the metaverse: two versions of The Dress from a Dream, in gold and silver, both with shimmering beads and crystal accents; The Glass Suit, an emerald-green men’s suit, similarly embellished; and two gold-plated and gem-studded silver crowns, called The Lion Crown and The Doge Crown.
4. Gucci, Aria
Aria is a short film NFT launched in May 2021. The NFT was then auctioned and sold at Christie’s for $25,000 in June 2021. The four-minute video was created and co-directed by Alessandro Michele, the brand’s creative director, together with photographer Floria Sigismondi.
The Strength of Luxury Brands NFT
1. “Phygital” NFT
Luxury brands are renowned for their high-quality physical products and their reputation for exclusivity. By launching digital versions of their physical goods, these brands can maintain their prestigious image while offering a more accessible option for their fans.
In a market where most NFT collections lack physical counterparts or offer low-quality tangible perks, luxury brands stand out. Their NFTs come with real-world value, making them more than digital collectibles.
Moreover, the digital versions of these physical items serve as a form of authentication. This not only enhances the value of the NFT but also adds a layer of security and trust, which is crucial in the digital world. You can find the examples I mentioned, like Prada and Dolce & Gabbana, adopting the “Phygital” approach.
2. Reputation and Connections
Luxury fashion brands have been around for decades, if not centuries, earning consumers’ trust worldwide, particularly the affluent ones. Their long-standing reputation in the market gives them a significant advantage when venturing into the NFT space.
Unlike purely web3 brands and projects, luxury brands are already trusted entities. Their history and reputation assure fans, supporters, and potential buyers of the quality and delivery of their NFT collections. This trust factor cannot be underestimated in the digital realm, where scams and frauds are not uncommon.
Moreover, luxury brands’ extensive connections with celebrities, artists, and other influential figures add another layer of appeal to their NFT collections. Holders of these NFTs can look forward to high-quality utilities such as exclusive events or collaborations with these celebrities and artists. The potential for such unique experiences further elevates the value of these NFTs, making them more than just digital collectibles.
Benefits of doing NFT for Luxury Brands
1. New Audiences
Luxury fashion brands, with their decades of history, have traditionally catered to an older, affluent demographic. By launching NFTs or initiating NFT-based campaigns, these brands can tap into a new demographic: the tech-savvy, digitally-inclined younger generation. This group values digital assets just as much as physical ones, or even more.
Moreover, NFT collections typically come with a lower price tag compared to traditional luxury goods. This lower entry point makes the brand more accessible to a broader audience, allowing more fans to own a piece of their desired brand.
2. New Stream of Income
Traditional luxury fashion brands have primarily relied on selling physical goods throughout their existence. However, the advent of digital collectibles has opened up a new avenue for revenue generation.
Take Nike, for instance. Since December 2021, the brand has raked in a staggering $185 million in NFT sales revenue, with a total NFT sales volume of $1.3 billion. This places Nike at the forefront of brands that have ventured into NFTs, earning eight times more revenue than the second-ranked brand, Dolce & Gabbana, which pulled in $23 million.
This demonstrates the immense potential of NFTs as a revenue source. If a sportswear brand like Nike can achieve such success, imagine the possibilities for luxury fashion brands. They’re uniquely positioned to leverage their reputation and exclusivity in the digital realm, potentially unlocking a lucrative new income stream.
3. Fan Engagement and Loyalty
Engaging fans and fostering loyalty is challenging for brands, particularly regarding execution, methods diversity, and consistency. However, NFT technology has revolutionized this aspect, making setting up and executing campaigns easier, primarily because they’re digital.
NFT collections can be designed in many ways, from airdrops and token-gated communities to exclusive event access and eligibility for future NFT collections. This flexibility allows brands to tailor their approach to their audience, enhancing engagement.
Moreover, the nature of NFTs facilitates ongoing engagement. Fans who hold NFTs from a brand’s collection, regardless of the generation, can remain connected and engaged over time. This creates a sense of continuity, transforming campaigns from one-off events into ongoing interactions.
Additionally, the ease of setting up NFT collections empowers brands to create and manage their own engagement, marketing, or loyalty campaigns. This reduces their reliance on third-party service providers, giving them more control over their fan engagement strategies.
Louis Vuitton “VIA Treasure Trunk” Case Study
In June 2023, French Luxury house Louis Vuitton announced the launch of the “VIA Treasure Truck,” the virtual representation of its iconic travel trunk. The VIA Treasure Truck is designed as a Soulbound token(SBT) that prohibits users from transferring or selling them after the initial purchase, ensuring that only the selected people can access the VIA portal.
The VIA Treasure Trunk will grant holders the possibility to purchase exclusive products, whether digital or physical and access to privileged experiences. Louis Vuitton will endeavor to propose 2 to 3 drops per year for the next 3 years at least.
Here are some of the takeaways:
1. Non-transferable settings
In the past, nearly all NFT collections launched by luxury brands were transferable and sellable post-initial mint. This provided buyers with secondary market options, creating the potential for value appreciation of the NFTs. This prospect of profit attracted many to mint and purchase these NFTs, viewing them as investment opportunities ripe for speculation.
However, this approach has its pitfalls. Firstly, the lure of potential profits in the secondary market can attract a swarm of speculators. This could sideline genuine fans and collectors, preventing them from acquiring the NFTs as collectibles. Secondly, speculative activities could trigger a sell-off, causing a sharp drop in the price floor of the collection. This could lead to a significant decrease in floor prices, potentially damaging the brand’s image and shaking the confidence of NFT holders in the collection. This could even drive away true fans.
By prohibiting users from transferring or selling their NFTs after the initial purchase, brands can attract ‘diamond hands’ and true collectors. These are the target audience that luxury brands are keen to engage with. This approach can also help ensure the longevity and sustainability of the collection, making it a more appealing proposition for those who genuinely appreciate the brand and its offerings.
2. Mystery Box Mechanism
In contrast to traditional NFT collections, where the NFT itself is the final product, Louis Vuitton’s VIA Treasure Trunk takes a different approach. The NFT acts as a generator of digital collectibles rather than being the collectible itself. This mirrors the MNLTH collection by RTFKT, where the element of surprise adds a layer of intrigue and value to the NFT.
When holders purchase the VIA Treasure Trunk, they essentially buy access to all potential drops from Louis Vuitton. And since this access can’t be bought on the secondary market, it becomes a limited and fixed-cost entry point. This not only enhances the value of the NFT but also creates an exclusive and private experience for the select few who possess it.
The mystery box design also offers luxury brands more flexibility. They can offer new NFT perks in the form of future exclusive products without being constrained by the design of the initial collection. It’s akin to a membership pass, granting access to a club of future products. Moreover, since these exclusive products can be sold, the VIA Trunk essentially functions as a revenue generator, providing access to and resale of exclusive products.
In summary, this approach opens a new pathway for luxury brands to create their own NFT collections. They can periodically offer exclusive products as part of a loyalty collection without limiting future designs and styles. This innovative approach could potentially redefine how luxury brands engage with their customers in the digital realm.
Final Thoughts
It’s truly captivating and inspiring to witness the evolution of the high-end luxury fashion industry as it drills into the realm of NFTs. These brands are not merely following the traditional NFT style; they are pioneering their unique approach to leveraging NFT technology, launching genuine digital collectibles that transcend the typical, often utility-lacking NFTs that are primarily used for flipping.
While the performance of luxury fashion brands’ NFTs has varied in terms of sales and popularity, the future holds boundless potential. We eagerly anticipate the innovative surprises they will bring to the table. For now, initiatives like the Prada Timecapsule NFT continue to offer enticing perks, and Louis Vuitton’s VIA Trunks promise a stream of ongoing surprises.
In this ever-evolving digital landscape, these luxury brands are not just adapting but leading the way, redefining the intersection of fashion, luxury, and technology. As we continue to monitor these developments, one thing is clear: we’re witnessing the dawn of a new era in luxury fashion.
