NFTs & Luxury Fashion: What's The Deal?
Fashion Series: A look at the relationship between luxury fashion and NFTs.
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Luxury brands have had to undergo significant changes in the way they operate in the digital era. One of the biggest challenges is how to stay scarce and unavailable in a world that now demands accessibility through content and social media twenty-four hours per day. This challenge was evident in the early stages of social media when the top luxury brands stayed away, this turned out to be a big mistake and smaller brands took advantage and grabbed significant market share.
They soon realised the error and had to make serious marketing philosophy adjustments and find a way to keep the allure of inaccessibility while also being accessible within their marketing efforts. As you can see today, they act very differently from twenty years ago. Of course, many of these brands are supported by very deep pockets so they managed to turn things around, but it was certainly a learning experience for them.
It was interesting to me when NFT technology reared its head in the mainstream and some of the earliest adopters were in fact the biggest luxury brands, including Gucci, Dolce & Gabbana, Louis Vuitton, and Burberry who all took the leap between 2021 and 2022. I certainly got the feeling they were thinking “we messed up last time there was a digital revolution, let’s not make that mistake again”. This new era was a little easier for them to understand and adapt to now that the world is digital first and digital concepts are already at the forefront of their strategies, however, NFTs are such a new concept I was a little surprised to see some of them move so quickly.
The most obvious connection between Luxury Fashion and NFTs is the scarcity methodology of the product. Scarcity has been one of the driving forces behind the most successful NFT projects and of course, the whole luxury industry including fashion.
Let’s look at Scarcity through the eyes of a leading Fashion House.
As soon as supply is greater than demand a product is no longer scarce. People who buy into scarcity are doing so to ensure they stand out and are different to other people. If they see a bunch of people wearing the same things then the perception of their own uniqueness is lost and the product(s) in question also lose value in their minds.
With that in mind, if Louis Vuitton were to produce massive quantities of an item or significantly reduce their prices to make its products available to more people, the brand would damage its perceived luxury status.
When a luxury product becomes ‘available’, it’s no longer a luxury product, it’s merely a premium product. Meaning, it’s of very good quality that can stand side by side with luxury goods but lacks some of the elements that make it a true luxury product.
The lack of availability of luxury products is one of the leading elements along with quality materials, craftsmanship, brand experience, and heritage, that sets them apart in the eyes of the market. It creates the allure and glamour of something aspirational and the brand is perceived in a certain way because of this.
When a person buys a luxury item, they aren’t just buying a product, they’re buying prestige and status, they’re paying for confidence and higher self-esteem (even if subconsciously and only temporarily) and gaining entrance to an elite club. This is important for people in the NFT space to understand, and anybody else selling high-end and exclusive products. Luxury purchases are not based on rational thinking, they are exactly what they’re called, a luxury!
Luxury brands are well-oiled machines that know how to communicate in a way that allows them to sell expensive products. If you want to sell exclusivity, I highly recommend learning more about how luxury brands operate. There’s a great book from luxury branding experts Jean-Noël Kapferer and Vincent Bastien called The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands. A great read on this subject and full of great tips that can be implemented in an exclusive NFT project.
Luxury brands, in my opinion, created the blueprint on how to generate revenue that is disproportionate to the actual product. And it’s all down to the brand strategy and how they position themselves in the minds of consumers.
There was a recent example with the Louis Vuitton and Nike Air Max 1 collaboration. I don’t know what the retail ticket price on these was as from my understanding they were only made available to existing Louis Vuitton customers (exclusivity and scarcity) and I’ve not seen a public ticket price, but they’ve been flipped on the secondary market for $300,000. For context, you can buy regular Nike Air Max 1’s for around $100 retail.
Specific to NFTs, Tiffany & Co. (a jewellery brand but closely associated with fashion and a great example) recently entered the NFT space with a project available exclusively to CryptoPunk’s holders. The project is called NFTiff and transforms your NFT into a bespoke pendant handcrafted by Tiffany & Co. artisans. Owners also received an additional NFT version of the pendant.
Only 250 of these were made available and the starting price was 30 ETH, which at the time of the sale equated to around $50,000. This divided opinion in the NFT community with some considering the move to be a “cash grab”, but I saw it differently.
Yes, it was a very expensive starting point, but Tiffany & Co. are a top-level luxury brand, they’re not going to spit out 10,000 NFTs at $100, it would have a negative impact on their luxury status if they were easily accessible. They were not targeting the general NFT community, they were targeting the wealthiest end of the NFT community and the general Tiffany & Co consumers so they had to do something that aligns with their overall brand strategy.
This brings me to an important fact that is lost on a lot of people in the NFT space. The messaging!
Where I feel many brands have gone wrong with NFT marketing is they’ve focused too much on the NFT itself. Look, at the end of the day, an NFT is just a piece of technology, an incredible piece, but still just technology. It’s a medium to deliver something much like a canvas is a medium to deliver a painting for an artist. If you’re an NFT enthusiast then sure, you may get excited about a big brand speaking about NFTs but for the most part, a big brand’s audience is not crypto/NFT savvy (yet), therefore, the messaging should be very different. Sales and marketing always come down to understanding the consumer's wants, needs, and expectations, you then build your message in the best way possible to connect to those wants and needs.
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