Non-Fungible Tokens, or NFTs, have become one of the most discussed markets in the cryptocurrency space this year. A recent report by Cointelegraph Research found that NFT sales are targeting a record $17.7 billion by the end of 2021.
This may well be the case, as a number of major brands have started to launch NFTs. According to a recent study by Bain & Company and the online luxury fashion platform Farfetch, digital interactions with consumers are increasingly important for brands. The report specifically states that "digital interaction with peers is on the rise when choosing to purchase a product." Hence, non-fungible tokens tied directly to brands and their consumers are now more important than ever.
While it is notable that major brands like Adidas, Dolce & Gabbana and others have already launched NFTs, the utility behind non-fungible tokens is proving to be the true key to a fashion brand's success. Karinna Grant, co-CEO of The Dematerialised, a trendy digital marketplace, told Cointelegraph that utility is what gives non-fungible tokens purpose and value:
Grant noted that The Dematerialised has experimented with multiple forms of utility with each of the trendy NFT releases the platform has released. She explained that previous releases have included features like wearing or playing with a 3D asset in augmented reality, or unlocking access to the brand's communities. "With Rebecca Minkoff's NFT collection selling out in September, the highest level of NFT unlocked VIP access to brand experiences for one year." He added: "Karl Lagerfeld's 'x Endless' collection provided owners of Karl's collectibles with an IRL ticket and URL for a brand event in Paris in 2022, which will feature another launch where only the Karl's forks will be invited to participate."
It is clear that fashion NFTs must offer some form of consumer engagement, allowing brands to interact with individuals in both the physical and digital worlds. Avery Akkineni, president of VaynerNFT—an NFT consulting agency—told Cointelegraph that while the utility of some NFTs may simply be artistic, brands launching NFTs require deeper functionality built on top of an existing community.
For example, Akkineni shared that VaynerNFT recently helped global fashion house, Coach, launch its first NFT collection, which featured eight Coach Holiday animals from the brand's Snow City digital game. Akkineni added that the launch of NFT was also to celebrate Coach's 80th birthday, which resulted in the creation of 80 unique pieces of digital art featuring all eight Coach holiday animals.
Akkineni explained that each Coach digital NFT also entitles initial holders to receive a complimentary custom-made physical bag in 2022. "Something Coach wanted to do was explore this new world of NFTs, but I wanted to do it in a way not market their intellectual property or ask consumers to pay for anything," he said. To effectively engage with the Coach community, Akkineni mentioned that Coach NFTs were given away during the period between December 17 and 24 of this year:
The fact that brands must now interact with consumers both virtually and in real life has also added an additional layer of technical utility to NFTs. As Bain & Company's latest luxury goods report states, "new keywords and phrases—such as the metaverse, personalization at scale, and the tech stack—will come to the fore as the industry grows and evolves."
For this reason, some companies have begun to explore NFTs in the metaverse. For example, Pet Krewe—a pet clothing e-commerce company—recently opened a digital retail space in the Metaverse community known as "ShibaVerse." Allison Albert, founder and CEO of Pet Krewe, told Cointelegraph that the company is promoting its brand by featuring its pet apparel on NFTs in a Metaverse containing balloon dogs called “Shibaloons.”
According to Albert, the Pet Krewe NFTs will be used as unique skins that fit the Shibaloons. While Albert noted that these outfits can be held and swapped on different Shibaloon dogs within the ShibaVerse, Pet Krewe is using this digital commercial space as another form of brand engagement or marketing. "We are able to connect with dog-loving customers in a dog-centric metaverse. This is reaching our customer base in a totally different marketing element."
Fashion brand Mishka, in business for 18 years, has also entered the NFT space with its famous eyeball logo. The 6,696 NFT collection is known as "The Keep Watch Crew", or "KWC" for short. Greg Mishka, founder of the Mishka NFT and the Keep Watch Crew, told Cointelegraph that the Keep Watch is Mishka's most iconic and well-known brand item, both to fans and the fashion and streetwear community.
Given the brand's strong user base, Mishka has explained that KWC NFTs are the next chapter for the brand. "The KWC is your ticket to what we like to call the MISHKAVERSE. The immediate benefits include lifetime discounts and exclusive merchandise," he explained. Mishka added that the brand is working on integrating Web3 elements into its website. "This would allow consumers to verify the NFTs they hold in order to access exclusive pages and launches through the website."
Although the utility of trendy NFTs goes beyond simply offering digital items connected to physical items, some in the industry believe this remains one of the most important functions. For example, Grant noted that connecting physical items to digital NFTs is a critical part of the adoption process for non-fungible tokens of all categories. And he explained it in more detail:
Echoing Grant, Mishka commented that it's important to have physical items that can be claimed or acquired by purchasing something in the Metaverse, as most consumers still live in the "real world".
So it should come as no surprise to him that a mainstream fashion brand like Coach has gifted NFT holders with bespoke physical bags. However, Akkineni mentioned that sometimes NFT holders do not redeem their physical items, which has proven to be the case with other launches associated with consumer-facing brands. “VaynerNFT did a collab called “Anwar Carrots x Veefriends” which was a collection that was sold at Nordstrom and was available to all “Self-Aware Hare” NFT holders. Only after a few reminders did holders claim the physical items," he said.
The rise of NFTs in 2021 has shown the growth of big brands. While companies like Nike have already taken steps to enter the Metaverse, more brands will follow suit. This is happening as the world moves towards digital business models, which have also been promoted by the rise of COVID-19. For example, Albert explained that Pet Krewe is still unsure how COVID-19 will play out in 2022, noting that current supply chains are still being disrupted:
Grant further noted that The Dematerialised is excited about the "behavior changing" type of releases, which include the use of NFTs to alter physical production methods. However, it is important to note that brands will face challenges along the way.
According to Grant, fashion brands will face three main hurdles, the first being a mindset shift around the value of Web3 and digital ownership. Second, Grant explained that it's important to understand the purpose and narrative of an NFT release: "We support releases that are part of long-term strategic commitments to Web3, not a marketing gimmick to briefly boost revenue."
Lastly, Grant noted that it will be a challenge for big brands to secure an in-house 3D asset design line. However, Grant remains optimistic about solving these challenges: "Mass adoption will come as more big fashion brands, influencers and creators get involved."
He continues reading:
