Last month, The Collective by Lewis Silkin welcomed Cliff Fluet, Joint Head of the Media & Entertainment group at Lewis Silkin LLP, MD of Eleven Advisory and Chair of the Ivors Academy, to discuss the fundamentals of non-fungible tokens (NFTs), how they’ve been used in Art, Sports, Music and their application for the brand, fashion and retail industries going forward. You can find the webinar here and the full write up here. Below, we pick out the key bits on what NFTs mean for brand, fashion and retail businesses.
In the fashion world, the concept of NFTs can be compared to ‘drops’, whereby there is a moment where people can rush out and buy a ‘drop’ which will only be offered for a limited time. The concept of a drop isn’t new to the fashion world. What might be new is that this concept is now seeing more luxury brands take this forward, where in the past it has mainly been attributed to streetwear brands. There are recent examples with luxury brands such as Burberry, Jean Paul Gaultier and Moschino working with influencer collaborations.
In the digital world a company called RTFKT is known for selling viral sneaker designs, memes and collectible exclusives. Gamers can shop during exclusive drops and wear the digital sneakers and jackets in games and virtual worlds. RTFKT have also been doing this by protecting designs by way of NFTs in order to make their work generally desirable and which plays a core part of the value of the digital sneakers. The success of RTKFT demonstrates that fans are willing to pay for their avatars in VR or metaverses to wear desirable digitised clothing.
The Nike case study
By playing detective, Cliff revealed that Nike already seem to be on the path of adopting the use of NFTs in their business. A patent was awarded to Nike in December 2019 titled “[a] system and method for providing cryptographically secured digital assets” which described a system for minting, exchanging, and intermingling cryptographic digital assets in the form of digital shoes, which can each be linked to a real-world physical shoe. Nike’s system would blur the line between physical and virtual, finding monetization opportunities in both. Nike have also trade marked the name “The CryptoKick” so that at the core of the Nike system would be a computer-generated virtual collectible known as the CryptoKick, a tokenized shoe identifier that is stored on the blockchain and linked to a virtual shoe. These tokens may be traded on NFT marketplaces and stored in ‘lockers’, bred with other tokens or even become physical shoes.
Luxury and fashion
Whilst some people may argue that the world of NFTs may only pertain to streetwear brands like Nike and not to luxury and fashion brands, Cliff argued on the contrary and pointed to Robert Triefus, an executive vice president at Gucci, who said in March 2021 that it is “inevitable that luxury brands would begin to design NFTs”. Likewise, Marjorie Hernandez, the founder of Lukso (a blockchain platform that works with fashion brands) stated that “the question is just who will pull the trigger first”.
Some people may still ask why should luxury brands take notice though? However, as Cliff pointed out, the notion of rarity builds the whole idea of scarcity which in turns drives the concept and price of luxury. In today’s globalised and digitised world, a physical scarcity driving the price is not enough. As the luxury world becomes a victim of expansive and increased visibility, it runs the risk of losing its scarcity element. A few prominent challenges that luxury faces are that of counterfeit goods where verifying authenticity in case of second-hand goods market can become hugely problematic. Resale is also a huge market for luxury that locks out the manufacturers and houses from capitalising on upwards value.
There are already examples of luxury fashion NFTs in use as well. The most straightforward example of a fashion NFT is where the NFT is the digital ‘twin’ of a real-life garment. Clothia, an online retailer in the accessible luxury space, is currently auctioning NFT dresses. The winning bidders will receive the corresponding real-life dresses, and both the NFTs and the physical garments are one-of-a-kind. Other examples include Dressx and NEUNO, both companies utilising technology to create 3D clothing.
Consumers now want to be well-informed regarding the provenance of items and want assurance and easy accessibility to a product’s knowledge. With the advent of the concept of tokenization, these allow luxury goods to be taken to the blockchain as an NFT with an integrated certification library, offering not only proof of ownership and history but also to serve as a permanent link to the verified documentation. Using NFTs gives items the property of permanence, similar to how luxury is meant to be timeless and showing it has a long-term appreciating investment.
If Permanence x Provenance x Rarity = Luxury, then NFTs might just be the answer… (Cliff Fluet)