The proliferation of digital products and services like virtual Gucci bags sold via Roblox and token-gated members clubs, begs the question: what really defines true luxury in the metaverse today?
Though luxury had experimented with the metaverse for a number of years, the virtual world’s rise to mainstream acceptance occurred in 2021, largely due to the impact of COVID-19 and a shift to digitalization.
It’s estimated that metaverse luxury goods segment revenue could reach as much as $50 billion by 2030, according to Morgan Stanley.
What qualifies as luxury in the offline terrain encompasses a number of key factors, including exclusivity, authenticity and the creation of hedonic value through customer experiences. With more businesses adopting Web3, luxury brands are having to look for new ways to deliver all-frills digital experiences and diversify their offerings.
Pulling off a community coup
Community is the bedrock of Web3. The rise of consumer communities in the virtual realm is forcing luxury brands to restrategize their retail models to favor incentivization and rewards systems, and defend their values, such as excellence.
As in the offline world, in the digital space luxury spenders seek access to exclusive products and services that differentiate them from the mainstream crowd.
To be sure, obtaining items from a brand’s collection at its flagship boutique is not possible in Web3 (unless in avatar form). In a report published by Boston Consulting Group last year, 67 percent of survey respondents thought luxury brands’ digital experiences do not meet the standards of the labels’ in-store experiences.
The challenge of replicating offline luxury’s level of quality in the metaverse means brands have begun exploring alternative ways to deliver the luxury-standard experience and drive client engagement.
High-profile brands exploring Web3 acknowledge that consumers of luxury will refuse to settle for mediocrity.
For example, luxury jeweler Asprey’s Web3 arm, Asprey Studio, developed its token-gated “Asprey Club” community back in 2022 following its non-fungible token (NFT) collaboration with automotive label Bugatti, which tapped the auto manufacturer’s rich cultural heritage. Community membership provides access to high-profile offline events, with each member gifted an Asprey gold signet ring as an esteemed ‘badge of honor.’
“We chose the ring to make our audience feel like part of the club. This isn’t just for flippers, it’s for people who love collecting,” Ali Walker, Chief Creative Officer at Asprey Studio tells Jing Daily.
The devil is in the details – every aspect of a luxury-standard activation in Web3 should be considered. In Asprey Studio’s case, this comprised selecting the cream of the crypto crop for maximum security and assurance among its community.
The partnership’s latest project was composed of 111 objet eggs, each made with 1,500 pavé diamonds and carbon fiber. Minted on the Bitcoin blockchain, the eggs were made available earlier this month for between $20,000 to $50,000.
“Bitcoin is one of the most secure and decentralized blockchain networks, and it really is a very premium blockchain. It is suitable for small, very high-end luxury and art drops, which is why we chose it,” Walker says.
The metaverse has a branding problem; and luxury is taking note. In a bid to foster digital relationships with consumers and move away from the collective distaste of NFTs and crypto, the sector is eschewing off-putting terminology.
Maintaining desirability in Web3 also requires scarcity. Demand outweighing supply boosts the ‘almost-unattainable’ allure of a brand and its cultural status.
One success story is Dolce & Gabbana’s highly coveted Collezione Genesi NFT collection in 2021. Consisting of only nine, one-of-a-kind pieces, the series fetched a history-making $6 million at auction.
Collectors of luxury items have consistently been enticed by extreme rarity and scarcity, which explains why Dolce & Gabbana achieved such success with its inaugural metaverse offering.
But the bar for creating in Web3 is lower than in the offline world due to better accessibility and democratization across the ecosystem, in turn leading to an overabundance of digital assets and services. To excel in Web3’s luxury segment, brands must embrace rarity, which is key to superiority.
Luxury is also deploying customization and personalization in Web3 to enhance the appeal of digital products and services.
One of the advantages of generative AI technology is that it can help businesses “customize products for individual consumers at scale (for example, eyeglasses based on facial topography)” according to McKinsey’s Generative AI: Unlocking the future of fashion report, switching the shopping experience from an analog process to a memorable interaction.
Knowledge is wealth, and transparency is the new name of the game. According to Boston Consulting Group, six out of 10 of consumers say that they consider sustainability when making purchasing decisions, with 80 percent believing that luxury fashion houses should commit to product life-cycle management beyond the production and sales’ processes.
Both online and offline luxury are now strongly aligned with traceability, with consumers perceiving extensive product knowledge as a luxury itself.
“Today’s consumers want to know that their purchases have been responsibly sourced and increasingly expect evidence of this, rather than just verbal assurances,” Jason McIntosh, chief product officer at De Beers Group’s B2B blockchain solution platform Tracr told Jing Daily earlier this year.
With a generation of consumers growing more conscious of where and how their products are made, luxury brands should present information in the digital realm that extends beyond the ‘made in …’ credentials.
To do so, they are turning to the blockchain as a means of delivering product provenance, ownership details for resales, and production information.
“On-chain product passports offer a new perspective on products, incorporating data, and digital elements. This paves the way for truly ‘phygital’ high-utility experiences, where consumers gain access to a wealth of new information about a product,” Carol Hilsum, Senior Director of Open Innovation and New Venture at Farfetch says. “This evolution in product thinking and the integration of a digital DNA layer has the potential to enhance longevity and value in the physical realm.”
A case in point is super luxury label Loro Piana and diamond company De Beers, which are both leading the way in presenting in-depth information to their clienteles through blockchain technology.
The former joined the Aura Blockchain Consortium in March this year, and pledged to issue digital certificates alongside purchases of all new garments from its The Gift of Kings collection, while De Beers’ Tracr program harnesses a combination of blockchain technology, artificial intelligence, and advanced privacy to track the journey of each diamond across the value chain.
Both businesses provide extensive information on how their products are distributed and made, in turn bolstering the emotional value and reputation of their brands.
As luxury breaks free from conventional practices to keep up with shifting consumer attitudes, it’s revolutionizing its own industry in the process. With the next generation of luxury products and services being rolled out across the virtual terrain, Web3 will play a key role in the segment’s evolution and permanently disrupt the concept of what constitutes true luxury today.