After much deliberation, you have decided to put down a dime and add an extraordinary luxury item to your life. You’re not alone.
From fine jewelry to cosmetics, the luxury goods industry continue to dominate and break records for global sales revenue. So if the industry is already reaching new heights in almost every business sector, what is the point of adding blockchain-based non-fungible tokens (NFTs) to the mix?
One of the key drivers of this influx of attention to luxury goods is younger generations, with millennials and Gen Z shoppers expected to offset 60% of the luxury market by 2025. Similarly, the audience that makes up the majority of cryptocurrency investment and digital asset utilization is also younger. Many luxury brands are already taking note of this crossover appeal, with powerhouse brands like Balenciaga Y philipp plein adopting cryptography and other Web3 developments, such as NFT and Metaverse.
However, despite digital assets attracting attention through serious brand recognition and star power, many customers and businesses remain skeptical about these new and unpredictable technologies, especially now that the entire market is crashing. The NFT giants that dominated the boom period of cryptocurrencies have now fallen significantly out of favour. Flagship events like NFT.NYC have been dismissed as a hollow cash jack and the NFT exchange that once reigned, OpenSea, finds itself caught in a fraud and counterfeiting scandal.
With all that in mind, there is still a sustainable way forward. Digital assets and NFT technology can add to the luxury experience, but the approach to implementation should be used to enhance the product and experience, not replace them.
The current state of NFTs in luxury
Elite brands with resources to spare are venturing into Web3, though most of these interactions are eye-catching NFT Associations or incorporating crypto like payment method. Attempts at a more inventive collaboration like the inaugural Metaverse Fashion Week were ran into complaints about the awkward technology and open corporatization that casts a soft shadow over the entire event. The unsavory perception of NFTs also subjects multi-million dollar company brand-sanctioned NFT drops to being perceived as another way to squeeze cash.
If it seems like collectibles and half-hearted collaborations are all NFT has to offer the luxury industry, there are more substantive developments slipping under the radar. projects like Aura Blockchain Consortiumbacked by luxury conglomerates such as LVMH, Prada Group and Richemont, provide real utility in combating a Important problem in luxury items: counterfeits.
RFID tags and digital authentication have long been introduced to combat counterfeiting, but NFT technology is a viable resource for creating an immutable tracking tool from manufacture to purchase. In addition to allowing comprehensive guarantees of authenticity for your purchase, Aura allows brands to build a personal relationship with customers and extend the life cycle of the product.
Enhance future experiences
NFTs as an authenticity tool can greatly enhance the luxury consumption experience, especially in the resale and vintage markets. Interest in the popularity of vintage and second-hand luxury has increased rapidly, particularly among younger, more environmentally conscious shoppers. Imagine browsing online shipping stalwarts like The RealReal or Vestiaire Collective and making sure the pieces you’re buying are genuine through NFT authentication.
In the luxury production and supply chain, NFTs as tracking intermediaries can be incredibly beneficial for companies and designers. This expansion would be especially valuable to luxury goods companies that deal in jewelry and precious metals, which can be prone to takeover exploitation. In practice, suppliers could issue NFTs to prove that their precious materials, such as diamonds and gemstones, did not come from conflict zones or unregulated sources.
NFT-backed transparency in supply chains and material sourcing would not only appeal to brands but also customers, customers who heavily prioritize sustainability and superior quality when considering making a luxury purchase. Additionally, NFT technology can be tailored to ensure quality control, create an interactive customer experience that immerses them in a brand’s story, and VIP benefits for high-value buyers.
Going back to NFT collaborations, one way to develop fancy partnerships in the NFT art space would be to cultivate communities from the ground up. Mega brands like Gucci engage constantly with Web3-savvy audiences on Discord, cementing them as authentic players in the digital asset and NFT space.
Engaging with these communities in an authentic way and not as another untapped source of revenue will create more appeal for the brand as a whole, not just for future collaborations or launches. Unique NFT Cheats and Tricks No more the attention drivers they used to be and can make a company look like an impostor trying to siphon clicks and dollars away from bigger, more innovative projects.
As the luxury industry continues to venture into the blockchain, NFTs may be the perfect tool to further bridge these gaps. To ensure these bridges are built to last, brands must take a two-pronged approach: engaging meaningfully with communities and adapting technologies to enhance the product customers already love. Ultimately, NFTs should complement and act as a functional bonus to the product, legacy, and design that drive the brand, not the other way around.
Written by Eliaz Gabay, CEO of Yvel & Co-Founder of INFS.io