The internet was once thought to be the domain of discount items, but Luxury brands are now cashing in on the convenience of selling products outside of the traditional brick-and-mortar stores. And while some of these brands continue to struggle in keeping up with digital innovation, another phenomenon is taking the industry by storm – non-fungible tokens (NFTs).
For awhile now, digital technology has transformed luxury goods by opening a unique avenue to sell these expensive items. But NFTs are different from other transformations because they will most likely impact the market in a way that has never been seen before. In this post, we’ll discuss how luxury brands can take advantage of NFTs.
The Difference Between Crypto and NFTs
COVID-19 may very well have been a silver lining for NFTs, as the pandemic forced brands to think differently about digital assets, most notably those backed by blockchains. But while the mention of blockchain usually conjures up Bitcoin and Ethereum, NFTs are the new poster child of digital assets. They are unique because they're "non-fungible,” which means that every piece of NFT is afforded with a digital hash, making it utterly distinctive from any other NFT.
NFTs’ value is also set by the market demand. This translates into gaining digital scarcity, which naturally increases its value. This concept of "scarcity" is one of the principles that allows the luxury market to thrive. For instance, manufacturers of luxury handbags use the scarcity of their most coveted, limited edition line to sell for shockingly high prices. So, even if one leather bag functions, feels, and looks the same as another, scarcity makes one more expensive. It's the same principle from which NFTs follow.
How Can NFTs Disrupt The Luxury Market?
The potential impact can begin with the creation of a digital passport of a particular luxury item. Instead of marketing and conventionally selling a product, the manufacturer or owner puts an NFT label on it.
For example, a limited edition luxury watch could be tracked using an NFT, alongside its physical version. So, aside from getting the actual product, the buyer also obtains a digital ledger for the watch. This NFT will tell the owner the history of the item as a kind of record through the ages. By creating an NFT, it creates the feeling of supreme ownership of the item. The most notable example is Jacob & Co's NFT luxury watch that sold for $100,000 in an auction. That's quite the feat, especially since the starting bid was a measly $1,000.
NFTS and Fakes
Knock offs of luxury items have always been a huge issue. However, NFTs can also help prevent the spread of fake items sold as luxury products. The digital record of a luxurious item affords a whole new level of authenticity and legitimacy. The global market for fake luxury goods is, unfortunately, currently at $4 trillion.
In response, NFTs may be a good solution for authenticating and tracking high-end products. For example, this is how Nike could safeguarded some of its most valuable sneakers - the original Air Jordans. In addition to getting a physical pair of Nike shoes, customers concurrently get a digital version of the product stored in their virtual wallet.
Another potential industry that this could benefit is the jewellery industry which, due to the value of the merchandise, is full of fakes, forgeries, and stolen goods.
If an NFT is created alongside the jewellery, the information could be used to authenticate the item. Data can include the history, manufacturer, previous owners, and many other can go a long way to ensure these items are authentic.
Luxury Items as Art?
The link between art and NFTs is well-documented, and there's hope the luxury market will create a similar buzz. In art, NFTs are used to afford royalties to the artist credited with the piece. People are very passionate about luxurious brands like Porsche, Rolex, and Prade. These brands could turn images or videos of their products into digital images and sell them as NFTs. There is already a market out there for physical artworks of luxury items. Digital can’t be far behind.
NFTs in Sports
Did you know that luxury brands are setting their sights on esports? It may sound surprising to some people, but there's a billion-dollar market out there to take advantage of. But how does this unlikely pair relate to NFTs?
Esports is an industry with an estimated revenue of over a billion dollars, so luxury brands such as Marc Jacobs, Louis Vuitton, and Gilette Venus cashed in on the trend. These brands collaborated with esports giants, i.e., Nintendo and League of Legends, by offering players the chance to shop for luxury products along with digital passports. The buyers create game characters with unique characteristics and outfits and then resell them as NFTs for unbelievable price tags.
Conclusion
With all the buzz going on, NFTs are here to stay. Luxury brands may not be the first to take advantage of this "phenomenon," but the industry quickly makes up for the lost time. These brands believe that NFTs afford the best solution to reach more prospective customers and target them in a wide array of environments and markets.
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