THE FUTURE OF LUXURY: HOW NFTS ARE REDEFINING OWNERSHIP IN FASHION
- BSLB
- Apr 6
- 5 min read
The luxury industry was always associated with material and tangible items, fostering fashion development, excellent craftsmanship, while maintaining their heritage and status. Today’s dynamic technological landscape is reshaping the industry. NFTs (Non-Fungible Tokens), distinctive digital assets secured by blockchain technology, have recently experienced an increase in popularity, changing the concept of luxury.
NFTs and the transformation of luxury fashion
Major fashion houses such as, Gucci, Louis Vuitton, and Dolce & Gabbana are undergoing major transformation, launching exclusive NFT collections. By introducing blockchain technology in their collections, these brands promote authentication, which reduces counterfeits in the marketplace, and strengthen secondary market, hence increasing reselling value of luxury goods. Further, NFTs enable luxury brands to broaden their customer base by providing new ways to connect with their consumers through virtual experiences.
The strategic move towards digitalization
Why would established fashion houses be interested in digitalizing their products? Breaking into luxury industry is not easy, since highly competitive field is dominated by major brands with strong position in the marketplace, reputation and loyal consumers. At first glance, raise of NFTs might not seem like a direct threat to traditional luxury industry, but if we look deeper, owning a non-fungible token is a new way to make a statement in society, thus it can be considered as a substitute. In this sense, introducing digital products into their collections was great move, one may call it FOMO, but it strengthened their positions and avoided potential competition.
The core appeal of luxury NFTs
What distinguishes luxury brands from others is their business strategy, they are not merely selling a product but offer experience and feeling of accomplishment . Their prices are driven by creative designs, excellent quality and great customer service as well as status the products provide. Firms tie prestige within their goods by artificially creating scarcity. This approach now extends in digital world as well. Luxury NFTs embody core elements that define high-end goods: digital scarcity, exclusivity, authenticity.
One of the factors that makes digital sector differ from traditional luxury shops is accessibility. Everyone can purchase the item online, which is not the case with tangible items, one cannot just buy Rolex or Birkin. Hence, brands are creating limited numbers of NFTs and offer customization to VIP clients, to promote exclusivity. These digital assets can be used as a membership card, granting access to high-value experiences like early product releases and private events, which further drives their value.
One of the first NFTs, which incorporated physical couture with digital world, was Dolce & Gabbana’s “Collezione Genesi.” The collection made of nine exclusive creations - four only existing in virtual form, and five having physical parts - was presented in Venice, exclusively to 450 guests in 2021. This fashion project, representing a marriage between virtual and physical world, was sold for nearly six million dollars as NFT model. Price point should not be a surprise according to Nick Jushchyshyn: "You have world-famous designers creating something absolutely unique, with an attention to detail that is beyond what you would expect to see in a typical digital rendering. All in a unique and non-reproducible form."
NFTs and luxury re-sale market
NFTs thoroughly influence secondary market, which plays a significant role in luxury industry. In recent years, one can see rise in companies of pre-owned sales, like The RealReal. The possibility to resale product and sometimes even making a profit from it further drives good’s value and prestige. NFTs’ one of the valuable properties is that they are considered as a liquid assets. Unlike physical luxury goods that should be kept in pristine condition and needs to be verified, digital assets can be sold almost instantly. Prior to blockchain technologies, verification process was limited, brands were dependent on serial numbers and experts’ opinion. Nowadays, fashion houses incorporate creative designs in digital world and each masterpiece have unique metadata, ensuring exclusivity. NFTs offer secure solution to the counterfeit’s problem and eliminate replicas. They serve as digital certificates containing key factors such as origin and ownership history, offering authenticity and verifiable ownership thanks to blockchain technology. Hence, making reselling process more secure, efficient, and reliable.
To take advantage of blockchain technology even further, high-end brands started to link their physical products with NFTs - promoting verification. One example of this approach is Hublot’s NFT-backed watches, which was released in 2022 with limited quantity – two hundred pieces. Each watch has unique NFT, which plays the role of authentication certificate. Hence, the brand eliminated risk of counterfeits, strengthening second-hand market. Limited collection, with innovative twist and high reselling value is already eye-catching and increases interests in its target audience. Additionally, brand took their strategy bit further by granting NFTs special benefits. Non-fungible tokens function as a membership card to digital exclusive club, offering access to events and future drops.
Challenges facing NFTs in Luxury
Despite their potential, NFTs are facing some major issues in the industry. Firstly, even-though they embody all the key characteristics of luxury goods, they do not serve a purpose in day-to-day operations. High-end car companies are not just offering the vehicles to make the transportation more convenient or status it grants the owner, they are selling heart-beat one experiences when turning on the engine. This kind of emotion is indeed lacking in digital luxury. In addition, many potential consumers still have to adapt to recent technology and have severe doubts about digital ownership’s validity.
Further, since NFTs are new fruit to society, legal system has not been adjusted to it yet, which in many cases transforms NFTs’ major strength into its weakness. For instance, legal systems do not often recognize them as a proof of ownership, and seller/buyer rights are not clear from a legal standpoint. Additionally, it faces technological challenges, whenever demand is high blockchain technology slows down – making transactions more expensive and less efficient. Lastly, smart contracts have major threats with it. It can potentially have many loopholes, and context may not align with legal system. In addition, such contracts can have a default code, increasing chance of stolen asset and monetary loss.
Uncertainty in NFT’s future
In conclusion, what was the main factor that drove NFTs’ development in luxury field? Was it fear of missing out? Calculated move to avoid competition outside of the high-end market? While those assumptions seems to be rational, exact answer tends to be subjective. Maybe Non-Fungible Tokens would not even be able to become statue of symbol without luxury brand names, not alone their competitor.
Not only is understanding the reason behind the rise of NFTs controversial, but also its future is unclear, due to various challenges technology faces. Will legal system prove to be ready for innovation? Will society see further increase of NFTs’ popularity in other fields? However, one can make assumptions about its further development.
CC: Mariam Labadze
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