How Luxury Brands Can Enter China's Crypto-Forbidden Metaverse

    NFTs might be illegal in China, but there are a plethora of options for luxury brands entering the Chinese metaverse.
    NFTs might be illegal in China, but there are a plethora of options for luxury brands entering the Chinese metaverse. Photo: Gucci
    Zihao LiuAuthor
      Published   in Collaborations

    Despite the NFT boom of the West, when it comes to implementing digital offerings in China, the tight regulation of the metaverse has, to date, deterred luxury brands. Not only is there an absence of a resale market when it comes to crypto-assets, digital collectibles also have low prices, limiting how much profit a brand can actually gain from minting NFTs there.

    China’s metaverse still exists, though, which means that international luxury brands need to adopt tailored promotional strategies. However, it must be thought of as a marketing, promotional activity, rather than being driven by the financial objective which the West’s multi-million dollar NFTs thrive upon.

    Featuring research from Jing Collabs & Drops’ latest market report: NFT Collaboration: Luxury's Metaverse Opportunity, here, we detail three types of partnerships which can help foreign luxury brands break into the Chinese metaverse:

    Popular art toy IPs#

    Collaborations between luxury brands and art toys are expected to be an 11.7 billion market in China by 2024, and one can expect such partnerships to extend into the metaverse as art toys go digital.

    In December 2021, Gucci announced a collaboration with Chinese pop culture IP Marsper, a virtual character that has been made into collectible figurines. Marsper, with “Born to Love” as its core value, has teamed up with various artists globally to express its concept from different angles. The collaboration was announced through the image of three Marsper figures dressed in suits from Gucci’s Aria Collection. Although it is still unclear whether the figurines will be introduced as NFTs or physical toys, the collaboration demonstrates Gucci’s commitment to incorporate more elements from Chinese youth culture into its products. Additionally, it speaks to Gucci’s ambition to promote its presence in China’s digital world through collaborating with a virtual IP.

    Another recent example, in January 2022, Moncler became the first luxury brand to partner with POP MART, the leading art toy brand in China by market share. The collaboration featured the MEGA COLLECTION 1000% SPACE MOLLY × MONCLER and was limited to 2,000 collectibles worldwide, creating much hype among Chinese art toy enthusiasts. Other brands are expected to follow suit as art toys are beloved by a considerable number of young Chinese consumers.

    The MEGA COLLECTION 1000% SPACE MOLLY × MONCLER has created hype among local art toy collectors. Photo: Courtesy of Moncler
    The MEGA COLLECTION 1000% SPACE MOLLY × MONCLER has created hype among local art toy collectors. Photo: Courtesy of Moncler

    Chinese video games#

    Moreover, luxury brands are no stranger to trending video games in China. Louis Vuitton, MAC Cosmetics, and Tesla are some of the brands that have introduced in-game content to leading players such as League of Legends, Honor of Kings, and Game for Peace. As major gaming IPs enter the metaverse, luxury brands can transfer their in-game presence, akin to how users can dress their avatars in virtual luxury outfits in e-commerce platform Taobao’s “Taobao Life” socialization game.

    Chinese idols and local talent#

    The involvement of major Chinese KOLs has been proven to generate NFT hype. PHANTACi, a streetwear brand co-founded by Mandarin pop idol Jay Chou, issued its first NFT offering “Phanta Bear” in January 2022; the NFT was limited to 10,000 copies at 974.60 (RMB 6,200) each and sold out in 40 minutes — 3,000 of which were sold within the first five minutes.

    Jay Chou's Phanta Bear on OpenSea. Photo: OpenSea
    Jay Chou's Phanta Bear on OpenSea. Photo: OpenSea

    In October 2021, Jay Chou co-launched a limited-edition art toy called “PUNKCAT STING” and utilized NFT technology for authentication purposes. In May 2021, A Duo, who rose to fame through the talent show Sisters Who Makes Waves, became one of the first mainland China artists to sell a song as an NFT. Her single Water Know was purchased for 47,000 at an auction, with all proceeds going to a charity. A Duo could pave the way for more Chinese musicians to protect their frequently abused IP rights by using NFTs, bringing more potential partners for luxury brands to work with.

    A Duo's Water Know track was made into an NFT. Photo: A Duo's Weibo
    A Duo's Water Know track was made into an NFT. Photo: A Duo's Weibo

    Chinese designers can also be instrumental in assisting luxury brands to gain ground in China’s metaverse. For instance, in September 2021, Chinese digital designer Stephanie Fung worked with the Scottish whiskey brand Glenfiddich to develop and launch a limited-edition NFT fashion collection named "The Filigree Aesthetic." A capable designer such as Fung can significantly shorten the timeframe required for a foreign brand to be integrated into an immersive Chinese virtual world.

    Although real-life KOLs are useful, brands can work with digital ones too. China’s impressive virtual idol sector presents considerable opportunities for collaboration, especially when real-life idols carry unprecedented risks of “moral missteps” in China. According to market research firm iiMedia, the rise of virtual influencers is no coincidence, considering the fruit of the digital environment we live in — 5G, AI, Blockchain, and NFTs. According to iiMedia Research, of the over 80 percent of Chinese netizens who follow celebrities online, 63.6. percent also follow virtual idols. About half of them spend more than 78.50 (RMB 500) per month on virtual idols, and 37.6 percent express a willingness to spend an even greater amount.

    Such AI-developed characters powered by advanced animation technologies are beloved by China’s huge anime, comics, and game (ACG) fans, with about 80 percent of Chinese netizens spending around 155 per month on them. An endorsement by one of the top virtual idols, such as the aforementioned Ayayi, could significantly broaden a brand’s consumer base. Alternatively, brands could also develop their own virtual ambassadors for the Chinese metaverse.

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