What Does It Take For A Luxury Brand to Start A New Storefront In A World Where NFTs Are Hot?
Created on April 19, 2021
Luxury brands pivot on the concept of scarcity of rare and exclusive items. Luxury brands flock towards any buzzworthy trend that promises scarcity and try to turn it into a selling opportunity. The latest of these trends is NFTs (non-fungible tokens) which are unique digital assets such as images, video files, audio files, sports cards, or fashion items. NFTs have grown in popularity over the past year, partly due to influence from celebrities such as Grimes and Elon Musk.
BIf downloading an image is like buying a reproduction of Picasso’s painting, then owning an NFT is like having the original Picasso belong to you. This digital scarcity of rare products will alter the nature of scarcity in the physical world, bringing a convergence of luxury and NFTs. What could follow would be a revolutionizing of the luxury market.
Trends in Luxury Branding and NFTs
So far, the luxury industry hasn’t settled on the best way to use NFTs. This is because they are entirely digital, and some luxury products such as fashion are physical. Most luxury fashion brands have been using them for marketing purposes currently. However, they hold potential for future applications such as authentication and tracking of high-end fashion.
According to Decrypt, the value of the NFT market was approximately $100 million last summer. Barely into the first quarter of 2021, the market is already worth $250 million. And it continues to blow up as Auction House Christie’s has been auctioning its first collection of entirely-digital artwork. This artwork was created by Mike Winkelmann, who is well-known. In December 2020, he sold one of his artworks as an NFT for $6.6 million.
In March 2021, Asian crypto art marketplace BCA organized its’ first physical exhibition of digital art. This exhibition also featured works by Winkelmann and other crypto-artists. This exhibition was meant to showcase China’s pivotal role in helping NFTS get more recognition in the luxury world. And where art is, luxury follows.
Advantages of using NFTs in luxury branding
- Scarcity and Uniqueness: The business model of luxury is scarcity and rarity. NFTs have a unique digital identity, making them scarce, a critical ingredient in luxury branding
- Provenance and utility: A big problem that the luxury market faces are counterfeiting. NFTS will be able to address this market need as verification of authenticity and ownership will be possible.
- Permanence: NFTs give luxury items permanence. Luxury is meant to be timeless and has a long-term appreciation. Soon people will be handing over digital items to their children in a similar fashion as jewelry.
Drawbacks of Using NFTs in luxury branding.
- Storage: Digital assets are great for tracking transactions but terrible at storage for items of any size. This means that owners of NFTs might run into issues when an underlying digital asset is deleted from its hosting platform.
- Theft of luxury assets: Exclusive ownership of an NFT might not prevent third parties from copying a digital asset linked to an NFT if they can access it. NFTs could, however, make tracking of authorized access more effective
- The Double-Spend Problem: Under copyright laws, unique digital media assets bought and sold on the market are not recognized. This is because media items are treated as fungible. As NFTs grow in popularity, this might change.
The fundamental concepts of NFT blend well with that of luxury brands. Both are bent on being exclusive, rare, scarce, and timeless. This convergence creates a chance for luxury brands to revolutionize their markets, though there might be a few bottlenecks in the quest to do that.
As we approach the second generation of the internet, it’s important that enterprises and tech companies embrace modern technology. IoT,AI, and Blockchain technology will with without a doubt disrupt many aspects of how we run business as well as conduct our daily lives.