We will be honest with you. There is a lot of weird stuff that goes on in the digital realm. And, as technology continues to evolve, it can be hard to keep up. From deepfakes to obscure TikTok challenges, even the most tech-forward brands can be left scratching their heads.
Some tech trends are certainly better left to dwindle away while others offer promising marketing potential.
So, which basket do luxury NFTs fall into? And what is an NFT, anyway?
We’re here to explain the latest tech craze — and showcase what it means for direct-to-consumer (DTC) luxury brands.
1. What Is an NFT?
An NFT is a digital asset that cannot be replicated like digital art, GIFs, music, videos or video game assets. People buy or sell these creations in a digital marketplace and secure them by the Ethereum blockchain, which is essentially a digital ledger that cannot be hacked.
2. What Does NFT Stand For?
NFT stands for non-fungible token.
These digital assets are non-fungible because they are unique and can not be exchanged. Even an NFT bought for $5 can not be exchanged for another $5 NFT. The assets are one-of-a-kind and considered to be irreplaceable.
In contrast, fungible tokens (like physical money or cryptocurrency) are not unique. One dollar can always be traded for another dollar, and they will always be equal.
3. How Do NFTs Work?
The concept of NFTs can be hard to grasp, so let us break it down even deeper. Here is how NFTs work:
- Someone creates an NFT, which can be any digital asset, including art, music or even a document or tweet.
- The creator of the NFT lists it for sale in a digital marketplace.
- People use their crypto wallet to bid on the NFT (or buy it for a set fee).
- The user who wins the bid receives the NFT digital file and becomes the exclusive owner of the NFT.
- The new NFT owner can publish the NFT on a website, social media or use however they want.
4. Why Are NFTs a Big Deal?
NFTs are suddenly a really big deal in the digital world. In fact, they have garnered $20 million dollars in sales since the first one debuted in 2014. Some NFTs are sold for the price of a Pringles can, while Beeple’s digital art NFTs have sold for a jaw-dropping $69 million.
For many people, purchasing NFTs is similar to investing in fine art. One art collector resold an NFT for almost 1000% more than the original price. Others buy NFTs because they do not trust physical money, or because they are simply excited by the prospect of gaining exclusive ownership of a scarce commodity.
5. How Can Luxury Brands Use NFTs?
With all of the buzz surrounding NFTs as an investment or exclusive ownership opportunity, DTC luxury brands are seizing the opportunity to further amplify the trend.
Here are just a few ways today’s luxury brands are benefiting from NFTs:
Krigler customers can purchase beauty NFTs to go along with their exclusive perfume scents, giving them the satisfaction of being the only person in the world to own a physical and digital asset.
Greater Opportunities for Royalties and Resale
DTC luxury brands can also learn from Nike, which is currently skirting the line as an upscale brand.
Back in December 2019, Nike received a utility patent giving them the ability to generate a “CryptoKick” NFT every time a consumer purchases a physical pair of shoes. Consumers can then trade or sell their NFT or even “breed” a new digital shoe — which Nike can then manufacture into a new pair of physical shoes.
Sure, the whole idea is a little hard to grasp. But it offers an exciting opportunity for Nike to earn royalties on newly bred shoes as well as elevate the brand with even greater exclusivity.
Influencers are already a key part of many DTC luxury brand marketing strategies. But as social media users grow wary of influencer marketing campaigns, NFTs provide a new way for brands to boost authenticity.
Digital talent management company G&B recently made NFTs for influencers, promoting the move as a “certificate of authenticity for digital work.” The firm hopes to use NFTs in partnership with all of their influencers in the future, opening up new opportunities in the realm of travel, fashion and beyond.
Luxury watch brand Jacob & Co. fully embraced the NFT in eCommerce trend by hosting an NFT auction in April 2021. The winner of the auction received an exclusive NFT watch design, along with a certificate of ownership and a watch case containing a hard drive with the digital file.
Whereas counterfeit watches are typically a concern for the brand, Jacob & Co. will not be worried about the prospect with the sale of NFTs. The tokens are secure and easy to track, making it easier to combat eCommerce fraud quickly and effectively.
Gucci’s dive into the world of NFTs certainly drummed up plenty of attention, and many other fashion brands are likely to take note. The NFT stands as one of the most expensive “products” the Italian fashion house has ever sold, with profits donated to UNICEF USA in an effort to make COVID-19 vaccines more accessible throughout the world.
The whole scenario is quite the PR move, elevating Gucci to a new level of elite.
The Future of eCommerce and NFTs
NFTs are a new frontier for DTC luxury brands. Early adopters will certainly do their share of experimenting, but they may reap great rewards for doing so.
Like Bitcoin and other cryptocurrency, luxury NFTs are built on a blockchain technology that allows luxury brands to store transactional data more securely, prevent fraud and provide greater proof of authenticity.