NFTs — whether you love them or hate them, recent revelations have shown that the market still has potential despite the crypto winter. In its latest report, blockchain analytics platform Dune revealed that the fashion NFT sector has accumulated over $245 million combined, thanks to leading players in the virtual space such as Tiffany & Co. and Adidas.
While NFTs continue to be divisive, the statistics are not surprising. The Dolce & Gabbana token sale alone generated $23.68 million, while RTFKT and Nike continue to break records with sell-out drops. Dunes’ study describes how the sportswear giant earned $91.2 million in royalties and brought in another $93.1 million in revenue, with total sales of over $184.31 million.
Despite being hailed as the next big thing for luxury fashion, consumers aren’t convinced. How come the mainstream appeal still hasn’t happened?
The rise of Web3 has shaken the status quo of the industry. But change is inevitable. Despite the divided opinion, major brands are still pushing their NFT plans. When it comes to maintaining sales momentum and ultimately achieving mass market adoption, what challenges should they face this year?
Navigating the unreliable crypto market
Crypto investments mean directing money into a very volatile market, while new technology is difficult to understand and integrate into people’s daily routine. Couple this with the unclear value and it’s obvious why NFTs have seen a decline in popularity.
Metaverse producer in Decentraland and host of Metaverse Fashion Week Giovanna Graziosi Casimiro believes that the reinvention of blockchain after its crash can lead to a stronger market in the long run. “The blockchain world is also going through phases of adaptation and consolidation of its core values,” she emphasizes. “For me, the collapse of the sector is an opportunity to review and look back at those who came before us and shaped the basis of what we are building.”
As a result, brands must grapple with mistrust of virtual assets and think of ways to leverage the appeal of NFTs, through conveniences such as token-gating and offline counterparts. Another is tapping into fashion’s discourse of exclusivity, where NFTs unlock access to once restricted areas of the industry.
Take Prada’s Timecapsule token project. The luxury house began running monthly NFT drops back in June, using each launch as a learning opportunity to improve on its previous offerings. Now the label offers perks like tickets to your own Men’s fashion show fall/winter 2023 in Milan to generate sales and increase value appeal, even during times of market uncertainty.
Dropping drops in times of recession and market controversies
In an era where people are reducing their spending and prioritizing transactions, NFTs may seem like a superficial investment with little return. Demand and appetite are falling, leaving brands to rethink how they can cope with dwindling consumer interest.
“Current market conditions definitely pose a challenge for brands running NFTs in 2023, but I still think a few brands will continue to thrive through experimentation, activations, and the development of the Web3 community,” Founder and CEO of Metaverse consulting firm Journey Cathy Hackl says. In order to encourage consumers to invest, even in times of economic crisis, labels must consider making the purchase process as seamless as possible.
Consumers cannot be expected to understand the complexities of blockchain technology. Therefore, companies should strive to combine existing programs with new innovations. “I feel that the luxury NFT community will need to take a deep dive into utility and review the past in order to build the future,” explains Casimiro. “But without incorporating previous technologies, we won’t be able to solidify a consistent technology for generations to come.”
One possibility is to leverage the power of existing retail programs. For his NFT collection at London Fashion Week, designer Richard Quinn partnered with Clearpay (a trusted and established shopping platform) rather than native Web3 channels such as OpenSea to tap into his traditional fashion following.
Palm-Beach-based accessories brand Steel is also relying on features such as QR codes and Apple Wallet to enable less intimidating NFT transactions, as well as limited drop-offs via Farfetch’s private customer service to attract the attention of cynical fashion natives . The same goes for Excludable. The luxury metaverse agency uses CRM software to easily distribute its NFTs, which audiences can download using just an email address.
Rebranding NFTs and blockchain jargon
Competitors collectively reject the term “NFT” because of its bad reputation. “I see brands moving away from NFTs and focusing more on gaming,” says Hackl. “Those who are still thriving in NFTs are focusing their narrative more on using terms like digital collectibles, NFC-enabled virtual twins, connected fashion, web3 loyalty and community programs, and not using the term NFT as much.” As a result, brands can redefine their offerings and make them more appealing to the fashion-conscious audience.
Last year, the founder of luxury platform 9dcc gmoney launched his collection of “networked products”. The trademarked term was coined to replace “phygital”, a term that has attracted a lot of – but not entirely positive – attention over the past 12 months. “People really hate the word phygital,” Coindesk Senior Manager Garrett Skrovina (@GSkrovina) wrote on Twitter. Others opt for terms like “connected fashion” in an attempt to make virtual goods seem less “fake”.
The same applies to irreplaceables. A term that has already been replaced by the term “digital collectibles”, a rebranding is on the horizon. This year, we’re likely to see brands shy away from categorizing their digital assets as NFTs, instead turning to these alternative terminologies to garner interest.
“In NFT terminology, it’s similar to MP3 20 years ago. We used to carry around the clunky MP3 that seemed so revolutionary at the time and then load the files onto our iPod. Now we just listen to music. No one is talking about the tech,” points out Olivier Moingeon, chief commercial officer at Exclusible. “The same thing will happen with NFTs. I believe most of our digital life will be NFTs, like airline or concert tickets or loyalty points and cards. Everyone will have crypto wallets without them knowing or caring that we have them.”
NFTs have huge opportunities for growth, but brands need to ensure that they execute the trend in the right way
For brands struggling in the real world, the NFT marketplace is not a one-stop solution. “NFTs will always be relevant as long as they solve pre-existing industrial problems, with corresponding utility developed on a case-by-case basis,” says Casimiro. “What I don’t believe is that NFTs are being imposed on the fashion industry as the only available solution or that they are creating an additional problem for brands, rather than solving the constraints that already exist.”
Big names flocked to cement their status in Web3. But a lack of technological understanding and a loose strategy mean that many efforts fail to achieve impact. NYFW NFT Keys they welcomed exciting prospects for the fashion community, but many wearers were denied access to the areas they were initially promised. RTFKT’s latest decline has also come under fire for disappointing US restrictions and unexpected costs, leaving customers confused in the process.
NFTs are more than an advertisement for making quick money. Brands are just beginning to scratch the surface of what they can offer, including new areas of affordability and creativity that will encourage customers to invest. Looking back on the past year, 2023 is an opportunity for brands to use their mistakes as learning curves and strengthen their Web3 strategies.
Does the future of NFTs look bright?
The normalization of NFTs will help the market move away from its closed status and become an integral part of the fashion industry. There’s no denying that essentials have gained momentum over the past few years—whether for the right or wrong reasons—but their longevity relies on a holistic mindset and approach.
“In 2023, we will see fashion and Web3 come even closer despite the current market, but with a focus on community, loyalty, co-creation rather than crypto,” says Hackl. “As the industry’s use of Web3 tools matures, so does the understanding that for many brands this is a long-term play, not just a marketing activation.”
The metaverse and fashion have colossal potential. But cultural changes as big as Web3 take time to gain momentum. Now it’s up to brands to prove that the digital world and NFT are here to stay.