Article originally published in Bilan
At New York Fashion Week in February 2023, a recurring question emerged: was the union of Web3 and luxury no longer in fashion?
Some believe that this year’s Fashion Week marked the end of a long-standing trend, as fewer non-fungible tokens (NFT) were released, and virtual reality fashion shows were in decline. However, there are still those that are celebrating fashion’s burgeoning presence in the metaverse and the unveiling of digitally enhanced collections that showcase an unprecedented level of artistry and quality.
The contrasting viewpoints in this ongoing debate reflect the hope and the apprehension that Web3 evokes within the luxury sector, which is considered one of the most profitable areas for investments, akin to the gaming industry.
A favorable climate for Web3 tools
The development of Web3 applications has successfully repositioned the luxury sector within the value chain of the fashion industry. Today, it paves the way for the retail sector and achieves significant commercial successes.
Investment and marketing strategies in Web3 often share similarities. Rolex’s foray into Web3 is a perfect example: the renowned watchmaker announced its intention last November to create virtual artifacts in the form of NFTs. The versatility of these NFTs allow them to fulfill various roles within the luxury landscape. From serving as certificates of authenticity to becoming coveted digital collectibles, their potential extends even further, with the possibility of facilitating peer-to-peer online auction services.
The tokenization of luxury goods (that is, duplicating them in Web3 or creating them through NFTs) is a frequently explored path in the sector, and has proven profitable on numerous occasions.
In November 2022, Burberry partnered with Minecraft, aligning the brand’s iconic check pattern with the game’s aesthetic universe. This project is estimated to have generated an ROI of approximately $5.2 million USD.
Brands are thus establishing connections with younger clientele. By acquiring a token, a connection is forged, laying the foundation for future interactions. This paves the way for potential real-world purchases as these customers’ spending power increases.
Customer loyalty emerges as a pivotal factor in this landscape. To cultivate it, the luxury sector has harnessed the diverse arsenal of commercial tools provided by Web3. This includes bolstering the authenticity of traded items, enabling traceability, personalization, enhancing customer relations, and creating distinctive collections that provide exclusive sales rights.
Web3 doubts and challenges
The challenges faced by the union of luxury and Web3 are not so much from the luxury sector, but rather from Web3 itself. Investments in this sector are primarily concentrated in two areas: the metaverse and NFTs, both of which have experienced notable failures.
A “crypto winter” set in following the highly publicized crash of FTX, which frightened retail companies. Additionally, Meta’s retreat from its investments in the metaverse has discouraged many from taking their first steps into this realm.
Certainly, the luxury sector grapples with its own set of apprehensions, primarily driven by the lack of regulatory frameworks in Web3. These concerns revolve around safeguarding reputation and intellectual property rights. The critical question arises: What if tokens representing esteemed brands become associated with violent, explicit, or illegal activities? Furthermore, a challenge remains in preserving the integrity of intellectual property tied to unique designs, exemplified by Hermès’ legal battle against the unauthorized sale of a collection inspired by one of its iconic accessories.
A post-advertising world where new customer relationships are built
The profitability of Web3 investments lies not in the tools themselves; it resides in their applications. Within the luxury realm, a distinct advantage emerges: authentic designs are inherently borne out of creativity and opulence. Consequently, these creations not only possess tangible value and are tradable assets but also assume the role of being their own advertisement.
Web3 provides an ideal ecosystem for nurturing the new digital consumption patterns, fueled by a growing appetite for engagement, individuality, and direct participation. The luxury sector, renowned for its prowess in advertising, has already transitioned into a post-advertising era. This paradigm shift foreshadows a future where retail communication transcends the confines of one-sided advertising that sees advertisers reaching out to the public.
Moreover, Web3 empowers the luxury industry by bringing together like-minded individuals, bound by shared affinities and passions, into online communities. An illustrative case is seen in the collaboration between watchmaker Hublot and renowned Japanese artist Takashi Murakami, resulting in a collection of 13 watches accompanied by NFT versions. This innovative fusion created an immersive environment where connoisseurs convene, interact, and even negotiate their access to these sought-after tokens.
This radical evolution is still in its infancy, and in this regard, the luxury industry will undoubtedly continue to be at the forefront of exploration.
Written by: Mathieu Ragetly, Digital Marketing and Experience EVP and Web3 Program Director