THE IMPACT OF NFT'S ON THE FASHION WORLD

Why NFTs Could Mean Windfall Profits for Fashion...?

NFTs or “non-fungible-tokens” are filling the holes in high-tech’s plan to overtake the fashion industry one $10,000 pair of digital sneakers at a time.

Until now, the idea of spending real money on virtual clothes was something for video games, not the real world. On February 27, design studio Rtfkt and 18-year-old digital artist Fewocious released a trio of doodled over Air-Force One-esque virtual sneakers for around $3,000, $5,000, or even $10,000 a pop. Not even the coveted Air Dior sneaker retailed for that much, and those you could actually put on your feet. Still, 621 pairs of the digital shoes were purchased for a net sale of $3.1 million. That’s a profit margin high enough to interest even the most conservative of fashion’s old guard. The question now is this: what’s the most profitable way for brands to act on this newfound interest?  Of course the answer can’t be confirmed until invoices hit bank accounts, but thus far the possibilities appear to be endless. 

The ability to turn the virtual into tangible profit is thanks to NFTs, otherwise known as "non-fungible tokens,” which are one of a kind digital assets authenticated and minted using blockchain technology. Integrated into the blockchain is a virtual archive that codifies an accessible record of individual transactions (like the purchase of a pair of Rtfkt and Fewocious sneakers). The record cannot later be modified, which means blockchain-backed transaction is also verifiable proof of the price, authenticity, and proprietorship of a good.

NFTs cancel out copycat concerns, as well as increase the value of any physical products linked to NFT purchases. High fashion brands like Gucci, Louis Vuitton, or Prada looking to target a young, resale market obsessed audience, stand to gain a lot by approaching NFTs this way. That’s because the terms of reselling an NFT can be predetermined and encoded into the blockchain, requiring that brands receive royalties with each resale.

Differentiating counterfeit copies of luxury goods from the real thing would be no hassle at all (goodbye StockX authentication center wait times). Even more exciting: designers could profit in perpetuity. The digital artist by the name of Beeple, for example, is contracted to make 10 percent in royalties every time one of his NFTs sells on a secondary marketplace. The artist recently sold one of these NFTs for $69 million in an auction at Christie’s. If handbags, sneakers, and watches came with this sort of guarantee, designers could be rolling in cash.

NFTs also pose a surprising threat to the environment. You’d think a pro of purchasing virtual clothes would be saving resources, but in fact the minting of assets on blockchain requires stifling amounts of energy. In the case of the cryptocurrency Bitcoin for example, a study from the University of Cambridge showed the minting requires more electricity in one year than the entire country of Argentina. Hacking in the form of cyber-attacks and digital theft are also genuine concerns. Recently Rtfkt was even the subject of a cyber-attack, after a drop of sneakers on its website. The sky-high prices of NFTs mean this problem probably won't go away anytime soon.

How are NFTs changing the fashion industry..?

As NFTs become increasingly popular within the fashion sector, Retail Gazette looks at why so many luxury fashion retailers have been so eager to incorporate them and if this shift could have an effect on the wider retail sector. As the world becomes more digital every day, Non-Fungible Tokens (NFTs) have gained raging popularity across the world in just a few months. The trend has taken over all market spheres and now luxury fashion retailers have hopped onto the bandwagon of tokenizing their products.

But what exactly are NFTs..?

NFTs are one-of-a-kind assets in the digital world that can be bought and sold like any other piece of property, but which have no tangible form of their own. Made from a unique string of characters bought and sold using Ethereum and Bitcoin, they authenticate the originality of design and artworks. While digital currencies are interchangeable (or fungible), NFTs are the opposite because they are irreplaceable.

It is this uniqueness that makes them so valuable, especially in the eyes of collectors. When asked why the fashion industry should care about NFTs, Ryan Marsh from Quantus Gallery, which works closely with artists in the digital sphere said: “Whether we like to admit it or not, the digital realm is going to become more and more integrated in society and to ourselves.

“On that basis alone, the fashion industry should care about emerging technologies and ways in which they can benefit from it and ways their audience can too.” “Industries are always looking at ways to maximise growth and evolve and I think NFTs are likely going to stick around for some time,” he added. While popular, can NFTs have a significant impact on the fashion world and have they already changed the industry?

Will King, founder of the beauty brand above and beyond explained that the past two years have seen an “irreversible shift towards the digital world, from meetings to purchasing.” However he stated that while cryptocurrency continues to grow in value, and additions such as metamask wallet browser add-ons create new and intriguing opportunities for all retailers, he said he doesn’t predict they will significantly change the industry.

Asics was cited as the first sportswear brand to move into the NFT space, which has allowed the brand to keep abreast of trends that its consumers are interested in. Meanwhile, Louis Vuitton and Burberry are both launching NFTs in video games and digital products.

At the beginning of the year Gucci released neon-coloured, digital-only trainers that shoppers can only “wear” in photographs for social media using augmented reality. In the summer, the luxury retailer then chose to step into the world of digital art with its debut NFT, a film inspired by its recent Aria collection, as a part of a newly-unveiled auction. Blockchain Reply’s UK developer Abdul Gaffar called the luxury retailer’s move into launching NFT, “a brilliant way to market fashion products.”

A lot of brands are now considering giving customers NFTs upon purchase of their limited edition stock.” Gaffar explained that due to the recent hype behind NFTs – and the market climbing rapidly – a lot of people will buy a certain product purely for the NFT behind it.

There’s no denying that the Covid-19 pandemic changed the way consumers shop and given the multiple nationwide lockdowns that were put in place last year, the fashion retail landscape has shifted to consumers purchasing more products online.

Generation Z, those born between 1995-2010, have a significant buying impact and, according to news reports, have a spending power of $140 billion annually. With Gen Z accounting for 2.6 billion individuals worldwide, the future of shopping is heavily influenced by this age group.

Will King cited the recent acquisition of Tiffany by LVMH, and its rapid repositioning to the ‘daughters not the mums or grandmas’, as an example. The retailer’s use of millennial icons Jay-Z & Beyonce, sets a clear precedent that the future of brands lies in ‘the young’. “This new generation has purchasing power from both inheritance, as well as their own newly generated (digital) wealth,” explained King. “In the world of elite e-sports and global gameplay, the digital insertion reinforces the strength of the brands.”

Fashion Adoption

In my opinion, NFTs are about to profoundly change the world of luxury fashion. Scarcity is the basis for both the luxury market and NFTs. Just like in the fashion and art world, NFTs are all about collectibles. NFTs now bring a new level of exclusivity and also an opportunity to turn digital designs and collections into highly scarce, valuable, luxurious and unique collector pieces. While customers’ self-expression used to be only physical, it is now merging with the virtual at an accelerated pace. The most straightforward example of a product NFT is when the asset is the digital twin of a real-life product and has its own value.

When looking at specific garments, sneakers and streetwear have been among the first categories to adopt NFTs. Luxury fashion companies like Gucci have already announced they are launching their own NFTs. Until now, the idea of spending real money on virtual clothes was farfetched. However, this mindset is changing rapidly as millennials, Gen-Z and generation alpha enter the luxury market. Customers will soon be able to create images of themselves wearing 3D clothing and then share them on social media.

Hybridization And Platforms

The future of art and design is a highly hybrid future that mixes traditional physical expressions of originality and creativity with highly digitalized ways and means of selling art. Buyers can already purchase wearable NFTs modeled after digital designs. This is a clear spill-over effect from the digital into the physical world. The future of NFTs will likely also be linked with virtual and augmented reality, and soon you will be able to view your rare collector piece like Raf Simons' parka in your own house.

The concept of ownership is also changing. While in the past, transfers of ownership depended on intermediaries, trustworthy blockchain transactions will become automated.

A New Art World

Sotheby became one of the most recent established names in art to adopt NFTs. The auction house recently sold a digital art collection for more than $17 million. Even art galleries are becoming more and more digital.

New digital platforms are emerging daily. Abu Dhabi recently launched a new art platform called Hart, which allows artists to digitally tokenize and sell their artworks. Masterworks have emerged as a new investment platform of iconic artworks. It is turning the art market into a stock market by selling fractions of paintings by famous artists. The recent Netflix documentary made You Look on art fraud shows how important it is to have authentication in the art world.

Monetization and the Future

The creators of NFTs can receive royalties every time their creation is sold or changes hands. In the past, second-hand markets struggled with attracting the most exquisite buyers and collectors. NFTs could change the rules of this luxury game forever as they are meant to be timeless.

In my opinion, NFTs will also impact advertising and digital storytelling, as consumers are increasingly more interested in stories behind the brands they buy. NFTs bring democratization, decentralization and demystification of artwork and design pieces. Up-and-coming brands in the fashion and art industries should follow along with NFT updates and other similar trends. Collaborations with famous fashion designers and artists could be one way of tapping into this market. Launching a few unique NFTs to test the waters could also be a good early adoption test. If designed and marketed properly, various forms of creative works can be turned into collector items. Brands that are already using NFTs today allow users to acquire unique digital artworks and digital collectibles like albums, gig tickets, clothing, original forms of art and even unique experiences.

The key angle for brands here is to establish a new world of sale engagement and digital interaction with customers. Memorable items can increase customer loyalty. One-off experiences and unique moments in time can now be captured, exchanged and treasured, which is something that all brands could use to establish a much more permanent tie with their clients. Ephemeral items fade away, but a collector piece is a much stronger tie to a specific brand. 

French philosopher Jean-Paul Sartre once said: "Life has no meaning, the moment you lose the illusion of being eternal." NFTs are surely a new tool that is bringing us a step closer to eternity.

Pros and Cons of NFTs for the Fashion Industry

The growth of NFTs, Non-Fungible tokens, in the Fashion industry throws up a few questions. We all know the story began in February 2021 when design firm Rtfkt and teenage digital artist Fewocious launched a trio of NFTs for an estimated $3,000, $5,000 or $10,000 respectively. This was a runaway success with 621 pairs of the digital shoes being acquired, resulting in an estimated $3.1 million. A windfall by any measure!

In no time, fashion brands began selling their work embedded with a unique digital signature that verifies its authenticity and increases its value. Younger consumers entered the luxury fashion market eager to create images of themselves wearing 3D clothing from their go-to fashion brand — and share it on social media. As we all know, customers do not buy yet another pair of expensive apparel and accessories because there is a red carpet soiree that just fits the bill. They acquire it because they want to be a part of the luxury culture, heritage and unique story that the brand has built. It offers them a certain status.

However, despite the clear advantages, fashion has yet to figure the ideal way to integrate NFTs. The digital character of NFTs is a direct contrast with the fact that fashion is all about touch and feel. And there are reports that minting it is not at conducive to the environment. Per l’official, ”NFTs also pose a surprising threat to the environment… The minting of assets on blockchain requires stifling amounts of energy. In the case of the cryptocurrency Bitcoin for example, a study from the University of Cambridge showed the minting requires more electricity in one year than the entire country of Argentina. Hacking in the form of cyber-attacks and digital theft are also genuine concerns. Recently Rtfkt was even the subject of a cyber-attack, after a drop of sneakers on its website. The sky-high prices of NFTs mean this problem probably won’t go away anytime soon.”

BENEFITS OF NFT

Almost as soon as fashion began investing and minting in NFTs it seemed like a modern-day digital gold rush. It was apparent that NFTs represent a greater opportunity than collecting exorbitant digital images for social status. So let’s look at a few of the most promising benefits of this technology space.

After design firm Rtfkt and teenage digital artist Fewocious retailed a trio of digital sneakers for reportedly $3.1 million, even the most conservative luxury fashion brands embraced the potential of NFTs. Gucci debuted its first NFT with a fashion film inspired by its new collection ‘Aria’. Co-directed by Gucci Creative Director Alessandro Michele and award-winning photographer- director Floria Sigismondi, it was released as part of ‘Proof of Sovereignty: A Curated NFT Sale By Lady Pheonix’ at Christie’s. All proceeds from Gucci’s NFT sale were donated to Unicef USA to support Unicef’s role in Covax, an initiative aimed at ensuring global equitable access to Covid19 vaccines. The starting bid began at US$20,000 and ended at reportedly US$25,000 on June 3, 2021 — payable in Ethereum cryptocurrency.

An NFT can make virtual fashion items as unique as tangible products, solving the problem of manufacturing and shipping the product. Per GQ, ”It might seem strange to buy a watch you can never wear. But how often do sneakerheads actually wear their sneakers? John Crain, co-founder of digital art marketplace SuperRare, says, ‘What do they do with their sneakers? They post pictures up on Instagram and then they go into a closet. The value of the sneaker is in its digital cache.’ In that case, NFTs only makes this process easier, and buyers no longer have to deal with the annoyance of shipping, storing and praying they’re actually getting the real deal when they buy an expensive shoe online.”

NEGATIVES OF NFT

Despite the clear advantages, the digital character of NFT is a direct contrast with all that fashion is revered for — touch and feel.

Per l’official, ”NFTs also pose a surprising threat to the environment… The minting of assets on blockchain requires stifling amounts of energy. In the case of the cryptocurrency Bitcoin for example, a study from the University of Cambridge showed the minting requires more electricity in one year than the entire country of Argentina. Hacking in the form of cyber attacks and digital theft are also genuine concerns. Recently Rtfkt was even the subject of a cyber attack, after a drop of sneakers on its website. The sky-high prices of NFTs mean this problem probably won’t go away anytime soon.”

NFTs are still a relatively new type of asset and could introduce unexpected challenges for buyers. Here are just a few issues to be aware of and investigate further before purchasing NFTs — anyone could take a photo of an image, put it on a blockchain and sell it so the buyers must confirm that they are purchasing the NFTs from the artist or that the seller has the rights to sell the NFT. Additionally, the value of your purchase has the potential for dilution, depending on how many times the artist will sell that work. Per the contract, define the value of what is being bought and if that changes whether you buy one of the first ten in a series or the hundredth!! Lastly, if you purchase something, you need to know its value and include it in your tax returns and insurance policy. Laws, IRS guidelines and insurance policies are continually change as this new asset class evolves and may not agree with you on the value of your NFT.

Most importantly, the growing awareness of NFTs’ environmental impact comes to light as evidence piles up against crypto technology. Consider the factors that contribute to the carbon footprint of NFTs to perceive if the advantages outweigh the disadvantages. Annually, Ethereum is estimated to consume 44.94 terawatt-hours of electrical energy and is responsible for about 21.35 metric tons of carbon dioxide released each year. The amount of electricity that mining Bitcoin consumes in a year is comparable to that used to power regions like Malaysia, Sweden or Ukraine, per Cambridge Bitcoin Electricity Consumption Index. In a recent study, scientists warned Bitcoin alone could push the Earth’s temperature 2 degrees Celsius above historical levels, if it were to become as widely adopted as other new technologies.

“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” Brendan McGill, co-founder and head of product design and engineering for carbon offset company Offsetra, told CBS News.

NFT and fashion world

Conventional companies with a traditional history and background have embraced the digital world with open arms because of their distinct strengths. They are not interested in saturated accessible marketplaces since they prefer NFTs, which are unique and have readily available holdings, ensuring great security.

You don’t need a lot of machines to make NFTs. Everybody can make an NFT using programs like clo3D. NFT has been around since 2012. NFTs have the potential to help fashion regain its technical foot. Most fashion NFTs represent products such as jewelry, shoes, and bags that may be utilized as investments, such as in games and images and movies, like putting on avatars.

To stay in touch with their consumers, brands must develop digital closets. They are able to announce themselves to the outside world by accessing their clothing. This has the effect of physically dispersing carbon. The manufacture of digital clothes is not the same as the production of real apparel. With more than 900000 users, Ethereum is the world’s largest cryptocurrency on which NFTs are built. To reduce the number of blockchains, this blockchain is going to be transferred.

Ethereum-compatible networks may be linked together using Polygon’s platform. It generates virtual closets with products that are now accessible. Those who buy NFTs will be able to learn about the history of each product. They are, in truth, works of art rather than functional devices.

Until recently, I had no intention of spending money on virtual clothing unless it was part of a game experience. Most people don’t comprehend this at all.

However, now that digital fashion rooms have a tool to help make this new area mainstream, they will become more popular. In addition, NFTs make it easier for firms to raise capital for charters from the interests generated by their investments.

The luxury design and fashion market is taking an interest in this technology. Among the pioneers, there are the RTFKT design studio and 18-year-old digital designer Fewocious who have sold 613 pairs of shoes for a total of $ 3.1 million at prices ranging from $ 3 to $ 10,000 per pair. In this case, the shoppers received the shoes at home, but the real product to show off is the one visible using the smartphone.

Gucci tried a similar operation, launching a pair of sneakers together in collaboration with the fashion-tech company Wanna Kicks. In the past, companies such as Reebok, Puma used the app of Wanna Kicks to allow their users virtual “fittings” on Snapchat.

However, Gucci’s shoes do not have blockchain authentication. Therefore, despite being exclusively virtual at a cost of $12, the Gucci Virtual 25 are not pure NFTs, but rather a mass virtual product as replicable. To date, there are few traditional brands that have concretely implemented the new possibilities offered by NFT. This is why the application of NFT in fashion by traditional brands is not so intuitive. On the other hand, some specialized marketplaces – such as Digitalax and Dematerialised – are emerging as virtual fashion players instead of luxury brands. The digital fashion house Fabricant, for example, collaborated with the blockchain company Dapper Labs to create an NFT suit sold for $ 9,500.

Why use NFT in fashion?

There are three main reasons:

·        An NFT can make virtual fashion items as designer and unique as tangible products, solving the problem of the reproducibility of digital clothing.

·        With NFT, the catalogue of unique products widens. A fashion brand could sell their own show video or individual backstage photos as NFT. In the case of digital copies, the NFT makes it possible to trace the original copy that could be purchased by a collector.

·        NFT could have an impact on the resell market, not only by keeping an accurate map of changes in ownership of a certain item but also, for example, by providing brands with a royalty every time their product is sold in the second-hand luxury market.

In short, the fact that a digital item can be as unique as a physical one is interesting for fashion as it makes digital assets monetizable and extends the control that the brand has over the product even beyond the sale.

Future developments

Of course, in order to take advantage of non-fungible tokens, traditional fashion brands must consider that not all customers are used to virtual environments or cryptocurrencies.

If fashion brands want to embrace NFT, they will have to start satisfying the needs of a new clientele with a different set of preferences. Due to these barriers, fashion companies will have to collaborate with players with experience in the sector, Business of Fashion argues.

A solution is the creation of original goods in limited quantities – such as digital clothing, shoes and fashion accessories – with an associated NFT that demonstrates the inherent value of its exclusivity as limited editions.

Another solution is a “phygital” strategy, that is halfway between digital and real, as done by RTFKT with its shoes. In other words, you could sell a real product with an associated NFT that unlocks the same product in a digital version that can be used in virtual environments such as those of Fortnite and Roblox.

The use of NFT in fashion is still in primordial and experimental phase. Technology goes on fast and brands need to be ready when it will become a must-have.

To do this, fashion brands – and not only – should start today to offer its customers personalized shopping experiences that combine the real with the virtual using augmented reality technology. In this way, customers learn new ways of shopping. One solution is to use in shops – both online and offline – a 3D product configurator with highly realistic and detailed 3D models that customers can make unique and can already see on their feet or in their homes simply by using a smartphone.