NFTs for Fashion: Fad or Opportunity?
A fast-moving market for digital collectibles offers people a new way to communicate status in their increasingly digital lives. How should fashion brands respond?
Last week, NFT mania hit new highs when 255-year-old auction house Christie’s sold a JPEG file by the digital artist known as Beeple for a record-breaking $69.3 million.
Some saw a speculative bubble, others a historical inflection point. But there’s no disputing the explosion of interest in “non-fungible tokens,” unique digital assets, whose authenticity and ownership is verified by a digital ledger known as a blockchain. Proponents of NFTs say they remove a key barrier to virtual goods, which are otherwise easily copied, being valued and collected like physical objects.
A unique version of Nyan Cat, a flying cartoon cat with a Pop-Tart body and rainbow trail that became a viral sensation and has been seen and shared hundreds of millions of times since it was first uploaded to YouTube almost ten years ago, sold for $580,000 last month.
And it’s not just the art world that’s taking the plunge. In music, Grimes sold 10 digital works on NFT marketplace Nifty Gateway for nearly $6 million earlier this month. Some of the pieces were offered in large editions and sold for $7,500 each, while others were auctioned as one-offs. A music video called “Death of the Old” commanded almost $389,000.
Meanwhile, in sport, NBA Top Shot, a partnership between the NBA and blockchain company Dapper Labs, has sold virtual basketball cards featuring short video clips for thousands of dollars each. An NFT depicting a LeBron James dunk recently sold for $208,000.
The NFT craze has come to fashion, too. Two weeks ago, a collaboration between 18-year-old crypto artist Fewocious and virtual sneaker brand RTFKT Studios sold out in seven minutes, generating $3.1 million. Though each virtual edition of the drop came with a physical pair of shoes, the digital product with associated bragging rights was the primary source of value.
According to market sources, leading fashion brands are examining the NFT space. But are NFTs a real opportunity for the fashion industry or just a passing fad?
There’s no denying that the space is heavily hyped, not least by speculators. During the pandemic, housebound day traders looking for new and entertaining asset classes have poured money into the market. What’s more, NFTs are typically purchased with cryptocurrency and many see a bubble within a bubble as crypto investors, who have seen the value of their holdings skyrocket, pile into the space.
“I feel like I got a steal,” the mystery buyer of the record-breaking Beeple work, a Singapore-based crypto entrepreneur who goes by the pseudonym MetaKovan, told The New York Times this week. As it turns out, MetaKovan, who had bought other works by Beeple and sold fractional ownership of them to the public as NFTs, may have also profited from pushing the price he paid Christie’s to astonishing heights in a calculated cash grab.
But beneath the hype there are signs that NFTs could have staying power.
From paintings to baseball cards, people have long assigned emotional and social value to physical objects that far outweigh their material worth. After all, canvas and paint is worth nothing compared to a Picasso. The same is true for fashion goods like handbags and sneakers.
Collecting these objects, over which we enjoy a kind of sovereignty, turning them into extensions of ourselves, is a fundamentally human activity deeply linked to how we craft and communicate our identities. And as we lead more and more of our lives online, everywhere from social media to video games, the concept of collecting and displaying digital objects seems likely to grow.
How should fashion brands respond?
Many are taking a wait and see approach, not the worst idea given how fast the space is shifting. For those eager to experiment, NFTs can be minted with a range of creative assets — a designer’s sketch or a memorable runway moment — and used to drive a variety of marketing outcomes, from being seen as “innovative” to deepening fan loyalty. It doesn’t hurt that NFTs are hot with precisely the young, affluent, tech-savvy audience many fashion brands are after.
But issuing NFTs that are linked to physical products and extend their value is perhaps the most strategic way to engage with the space. These could be arty digital certificates that prove ownership of physical products, earning consumers clout when they display them online (unlike an Instagram pic or unboxing video, NFTs prove the goods haven’t been returned or resold) or “digital twins” for people to wear online, when they play video games, for example.
“Luxury customers have digital lives now, and it’s natural for them to want to take products into these lives,” said Ian Rogers, chief experience officer at French crypto start-up Ledger and an advisor to LVMH. “The idea of buying a luxury handbag and taking a digital representation of this into a video game or another digital environment is not too far away.”
NFTs linked to physical goods can also help combat counterfeiting, serving as proof of authenticity. They could also have a transformative effect on the resale market. That’s because with NFTs, the blockchain that authenticates them can also create a contract that governs their future use. In the case of Beeple, the artist is set to make 10 percent in royalties every time one of his NFTs is sold on the secondary market. What if handbags and sneakers came with NFTs that guaranteed the brand got a royalty each time the product changed hands?
While diving headfirst into the digital art gold rush may be tempting for fashion brands eager to test the waters and generate marketing buzz, NFT strategies anchored in physical goods could unlock far greater value for the sector.