NFTs have been the focus of attention in the luxury sector for some time now. And for good reason too! This technology offers undeniable advantages for brands seeking to build loyalty among their community and guarantee the authenticity and exclusivity of their products.
What is an NFT?
An NFT (Non Fungible Token) can be defined as a digital signature associated with a physical or virtual object guaranteeing its authenticity. Operating on a blockchain, this type of token has the distinctive feature of being unique and indivisible.
Entirely defined by its creator, a non-fungible token also has a proof of origin, which enables to easily verify the identity of its creator. Moreover, it is indestructible as long as its history is kept in the blockchain in an unlimited manner.
It was not long before the particularities of this new technology grabbed the attention of certain activity sectors, like art, video games as well as the luxury industry.
What makes NFTs interesting for luxury brands?
Gucci, Christian Dior, Givenchy, Guerlain… In recent times, NFT projects have multiplied among the major players of the luxury sector, be it virtual dresses and sports shoes or non-fungible tokens for charitable organisations. But how do we explain this phenomenon?
NFTs have emerged as a formidable tool for product authentication in the luxury market. The non-fungible token, a virtual identity card of a physical object, is a totally inviolable certificate of authenticity.
Each fashion item, jewel or handbag is thus linked to an NFT certificate, through a QR code or a chip. Some groups, like the watchmaker Breitling, now have their customers scan a code to download the digital passport of the product they have just bought.
Other companies are also using the NFT technology to track the loaning of their collector’s pieces or fashion show items. Yves Saint Laurent, for example, has been able to optimise product tracking between stores and their headquarters. This has helped to significantly reduce losses and damage.
<ahref=”https://euipo.europa.eu/ohimportal/fr/web/observatory/report-on-trade-in-fakes” target=”_blank”>According to the EUIPO, the sale of counterfeit products represented €412 billion in 2019, i.e. 2.5% of the global trade. Among the types of goods that are seized most frequently are shoes, clothing, leather goods and even cosmetics. Luxury goods are thus the prime targets for counterfeiting and the growth of the second-hand market has only magnified the phenomenon.
However, the players of the luxury industry have quickly understood the potential of NFTs when it comes to fighting counterfeiting. For example, while reselling a second-hand product, the buyer only needs to scan a code or a chip to verify the authenticity of the piece.
Obtaining new sources of revenue
While the traceability of NFTs offers numerous advantages in the sphere of luxury, non-fungible tokens are also real value generators.
In fact, virtual objects can be even more profitable than physical ones. For example, Gucci caused a sensation when it sold a virtual bag for a little over $4,000, while its physical version cost no more than $2,450. This is what we call pure speculation, and the brand’s reputation combined with the rarity of the NFT is at play in full swing.
Luxury and the metaverse
NFTs cannot be separated from another fast-developing technology: the metaverse. For the uninitiated, it is a sort of Second Life in an augmented and modern version, boosted by the technologies available today, which are much more powerful and accomplished than those deployed in the ancestor Second Life. In fact, luxury brands can now create and build loyalty among communities in this virtual universe, where non-fungible tokens replace physical objects.
In real life, buying a Louis Vuitton bag or a pair of Christian Dior shoes is a way to express one’s sense of belonging to a community. This kind of product is a strong social marker by virtue of its expensive, refined and grand nature. The same holds true in the metaverse, where rarity and authenticity of an NFT play the same role.
In terms of customer experience, the metaverse is also a way for brands to maintain and strengthen their connection with consumers. Dom Pérignon, a famous champagne brand owned by the LVMH group, has, for example, distinguished itself by selling, in preview, 100 exclusive bottles in a virtual space in the form of NFT. At the same time, each buyer also received an actual bottle of champagne at home.
Moreover, conferences, parties, concerts and other events are multiplying in the metaverse. The boundary between the physical and the virtual worlds is thus becoming increasingly porous, opening the way to numerous opportunities: soon, Fashion Week could very well take place in a metaverse and participants could go there…. with their avatar… without ever leaving their home!
From product authentication to the fight against counterfeiting along with the generation of new revenues, NFTs are now at the very core of the strategy of the players of the luxury industry. It is a technology whose potential is just beginning to be tapped and which suggests numerous innovative applications in the near future.