NFTs — whether you love them or hate them, recent findings have shown that the market continues to hold potential despite the crypto winter. In its latest report, blockchain analytics platform Dune unveiled that the fashion NFT sector has accumulated over $245 million collectively, thanks to leading players in the virtual space such as Tiffany & Co. and Adidas.
Though NFTs remain divisive, the stats aren’t surprising. Dolce & Gabbana’s token sales alone have generated $23.68 million, while RTFKT and Nike continue to break records with their sell out drops. Dunes’ study outlines how the sportswear giant has earned $91.2 million in royalties and brought in another $93.1 million in revenue, with sales to date totaling over $184.31 million.
Despite being hailed as the next big thing for luxury fashion, consumers remain unconvinced. How come mainstream appeal still hasn’t happened?
The rise of Web3 rocked the status quo of the industry. But change is inevitable. Despite divisive opinions, major brands are still going ahead with pushing their NFT roadmaps. When it comes to keeping up sales momentum and finally achieving mass adoption of the market, what challenges should they expect to face this year?
Navigating an unreliable crypto market
Crypto investments mean channeling money into a highly volatile market, while new technology is hard to grasp and integrate into people’s everyday routines. Pair this with unclear value, and it’s evident why NFTs have experienced a slump in popularity.
Metaverse Producer at Decentraland and Head of Metaverse Fashion Week Giovanna Graziosi Casimiro believes that blockchain’s reinvention following its crash can lead to a stronger market in the long run. “The blockchain world is also passing through phases of adjustment and consolidating its core values,” she outlines. “For me, the crash of a sector is the opportunity to reevaluate and look back to the ones who came before us and shaped the basis of what we are building.”
As a result, brands are having to tackle distrust in virtual assets and brainstorm ways of leveraging NFT appeal, through perks such as token-gating and offline counterparts. Another is tapping into fashion’s discourse on exclusivity, where NFTs unlock access to once roped-off areas of the industry.
Take Prada’s Timecapsule token project. The luxury house began its ongoing monthly NFT drops back in June, using each launch as a learning opportunity to improve on its previous offerings. Now, the label offers benefits such as tickets to its Menswear Fall/Winter 2023 fashion show in Milan to generate sales and enhance value appeal, even during times of market uncertainty.
Releasing drops in a time of recession and market controversy
In a period where people are reducing their spending and prioritizing transactions, NFTs may seem like a superficial investment with not much return. Demand and appetite fall, leaving brands to rethink how they can tackle dwindling consumer interest.
“The current market conditions definitely pose a challenge for brands that are launching NFTs in 2023, but I still think several brands will continue to power through with experimentation, activations and Web3 community development,” Founder and Chief Metaverse Officer of consultancy firm Journey Cathy Hackl says. To encourage consumers to invest, even during times of economic crisis, labels need to consider making the purchasing process as seamless as possible.
Consumers can’t be expected to understand the complexity of blockchain technology. So companies should be looking to blend existing programs with new innovations. “I feel the luxury NFT community will need to dive deep into utility, and review the past to build the future,” Casimiro explains. “Because without incorporating the previous technologies, we will not be able to solidify a consistent technology for the generations to come.”
One option is utilizing the power of existing retail programs. For his London Fashion Week NFT collection, designer Richard Quinn partnered with Clearpay (a trusted and established shopping platform) rather than Web3-native channels like OpenSea to tap his traditional fashion following.
Palm-Beach based accessories brand Steel is also banking on functions such as QR codes and Apple Wallet to allow less-intimidating NFT transactions, as well as limited drops through Farfetch’s private client service, to grab the attention of cynical fashion natives. The same applies for Exclusible. The luxury metaverse agency uses CRM software to easily distribute its NFTs, which audience’s can claim using just an email address.
The rebranding of NFTs and blockchain jargon
Competitors are collectively scrapping the term “NFT” due to its rocky reputation. “I do see brands taking a step back from NFTs and focusing more on gaming,” Hackl says. “The ones that are still all steam ahead into NFTs are shifting their narrative more into 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 are able to redefine their offerings and make them appear more attractive to a fashion-based crowd.
Last year, founder of luxury platform 9dcc gmoney launched his collection of “networked products.” The trademarked term was coined to replace “phygital,” a phrase which has garnered huge — but not entirely positive — attention over the past 12 months. “People really hate the word phygital,” Senior Manager of Coindesk Garrett Skrovina (@GSkrovina) wrote on Twitter. Others are opting for phrases such as “connected fashion” in a bid to make the virtual goods seem less “phony.”
The same is true for non-fungibles. A term already being replaced by “digital collectibles,” a rebrand is well on the horizon. This year, we’re likely to see brands steer away from categorizing their digital assets as NFTs, instead turning towards these alternative terminologies to draw interest.
“With NFT terminology, it is similar to MP3’s 20 years ago. We used to deal with a clunky MP3 which felt so revolutionary at the time, and then upload the files to our iPod. Now, we just listen to music. No one talks about the tech,” Olivier Moingeon, Chief Commercial Officer at Exclusible, outlines. “The same will happen with NFTs. I believe that most of our digital life will be an NFT, like plane or concert tickets, or loyalty points and cards. Everyone will have crypto wallets without knowing or caring that we have them.”
NFTs hold huge opportunities for growth, but brands need to ensure that they’re executing the trend right
For brands struggling in the real world, the NFT market isn’t a one-stop solution. “NFTs will always be relevant as long as they solve pre-existing industry issues, with proper utility developed on demand case by case,” Casimiro says. “What I don’t believe is in NFTs being imposed on the fashion industry as the only solution available or creating an additional problem for brands, rather than solving pre-existing limitations.”
Big names have flocked to solidify their status in Web3. But lack of technological understanding and lax strategies mean that many efforts fail to make an impact. NYFW’s NFT keys hailed exciting prospects for the fashion community, but many of the holders were denied access to areas they were initially promised. RTFKT’s latest drop also came under fire due to disappointing US-based restrictions and unexpected costs, leaving buyers confused in the process.
NFTs are more than a get-profit-quick hype. Brands are only just beginning to scratch the surface of what they can offer, including new realms of accessibility and creativity that will encourage shoppers to invest. Looking back on the past year, 2023 is an opportunity for brands to use their mistakes as learning curves and bolster their Web3 strategies.
Does the future of NFTs look bright?
The normalization of NFTs will help the market move away from its siloed status to becoming an integral part of the fashion industry. There’s no denying that non-fungibles have gotten pulses racing over the past few years — whether that be for the right or wrong reasons — but their longevity relies on a holistic mindset and approach.
“In 2023 we will see fashion and Web3 get even closer despite the current market, but with a focus on community, loyalty, co-creation, and not on crypto,” Hackl says. “As the industry’s use of Web3 tools matures, so does the understanding that for many brands this is a longer term play and not just a marketing activation.”
The metaverse and fashion hold colossal potential. But cultural changes as big as Web3 need time to gain momentum. Now, it’s down to brands to prove that the digital world, and NFTs, are here to stay.