The luxury sector is determined not to make the same mistake again. It generally regarded the internet with suspicion when the ecommerce revolution started in the late 1990s. Most luxury brands took several years to understand its potential before rushing to catch up with the rest of the retail world.
Regular global studies of the personal luxury goods segment by Bain & Company have charted the increasing importance of ecommerce. Its research indicates that the proportion of online sales more than tripled from 7% in 2017 to nearly 22% in a pandemic-boosted 2021.
Having learnt from experience, most luxury brands are determined not to be left behind by the latest online developments, despite the challenges that technologies such as cryptocurrency, NFTs and the metaverse present to a sector that’s particularly focused on preserving its heritage and protecting its image.
Cryptocurrency meets couture
In September 2021, for instance, Philipp Plein became the first global high-end fashion brand to accept crypto as payment both online and in its stores. It has partnered with Coinify, a payments platform owned by Voyager Digital, enabling it to handle 24 cryptocurrencies, including bitcoin and ether.
In the same year, crypto payment processor BitPay saw a 31% annual growth in the volume of transactions involving luxury goods such as yachts, cars and jewellery. More recently, crypto exchange FTX announced that it would be targeting luxury brands to help them to benefit from this fast-moving trend.
For many high-end brands, crypto is in essence a way to enter the metaverse and reap the benefits offered by the growing interest in assets such as non-fungible tokens (NFTs).
Rosh Singh, MD of Unit9, a multidisciplinary production company that works on films and games, notes that luxury brands have become some of the most notable early players in the metaverse.
“The sector’s interest in gen Z is one of the key factors driving this behaviour. The metaverse is a new virtual playground with serious longevity for this group, as well as tomorrow’s consumers,” he predicts. “Experimenting with metaverse and crypto activations gives brands relevance and enables them to tap into new audiences.”
Exploring the metaverse
Gucci has been particularly active in the metaverse, most recently with the release of a set of NFTs called Gucci Grail. Minted on the ethereum blockchain, this is the result of a collaboration between the brand’s creative director, Alessandro Michele, and fictional “famed digital craftsman” Wagmi-san.
Selfridges has announced that it will sell NFTs and digital fashion in its store on Oxford Street, London, with prices ranging from £2,000 to more than £100,000. The inaugural Metaverse Fashion Week was held at the end of March in Decentraland, a browser-based virtual reality platform that uses a cryptocurrency called Mana.
Burberry has announced a partnership with Mythical Games to create an NFT collection inside the latter’s flagship product, Blankos Block Party, an open-world multi-player game. Burberry’s limited-edition Blanko (character), Sharky B, is an NFT that can be bought, upgraded and sold within the game’s marketplace. Alongside this, the brand is launching its own in-game NFT accessories, including a jetpack, armbands and pool shoes, which players can apply to any Blanko they own.
“When it comes to the fashion industry, NFTs can be the digital versions of physical pieces of clothing or a one-off digital-only design. This can be anything from a whole outfit to a pair of digital shoes, a handbag or even earrings,” says James Gaubert, founder and creative director of Republique, which describes itself as a “metaverse-ready” fashion house.
Putting rivalries aside on blockchain
Luxury brands are benefiting from blockchain tech in ways that are less glamorous but every bit as important. LVMH, for instance, has joined forces with Prada Group and Cartier – a subsidiary of its arch-rival, Richemont – to develop the Aura Blockchain Consortium. The world’s first global luxury blockchain, this unprecedented collaboration of competitors represents what its creators call “a single, innovative solution to shared challenges of communicating information on authenticity, responsible sourcing and sustainability in a secure digital format”.
A key challenge for luxury labels is to recreate the same thrill in the virtual world as customers would experience when they walk into a store in Mayfair or Knightsbridge.
“Owning a virtual fashion NFT brings with it the same feeling as owning an exclusive, one-off piece of designer clothing,” Gaubert says. “The NFT is simply the digital equivalent. The perceived value associated with fashion NFTs is also another opportunity for these big fashion houses. Some collectors are treating their NFT purchases as investments.”
But the metaverse presents luxury brands with threats as well as opportunities. The younger customers they have started to target tend to be more concerned about sustainability issues, for instance. A series of transactions emanating from a single NFT, such as bidding, selling and transferring ownership can consume 340kWh of energy – more than is needed to power the average fridge for two months.
The war on digital piracy
And luxury houses are waging a constant battle against fakes, as Abigail Dews, trademark attorney at intellectual property specialist Marks & Clerk, notes.
“Just like physical counterfeit goods, virtual copycat products being sold for thousands of dollars on various NFT markets have the potential to dilute or tarnish a brand in the physical world. This is a particular issue for luxury fashion brands, where unauthorised NFTs are significantly cheaper than their real-world counterparts,” she says, adding that the problem has yet to be addressed in the UK courts. “Luxury brands will want to ensure that the legal protection they have in the physical world is also enjoyed within the metaverse.”
The metaverse certainly offers luxury brands an opportunity to reach new market segments and to showcase their creativity and craftsmanship in different ways. The challenge for them will be to do this while retaining their core values of quality, exclusivity and the highest standards of customer service.
