NFTs have seen rapid growth over the past two years and their consistent appearance makes it so. it’s easy to forget that the first NFT was only created in 2014. Less than a decade later, NFTs now represent between 16 and 20% of the art market. The disruptive shift to digital art is so deep that it is likely that many traditional art galleries will disappear by 2030. In addition, I predict that by then 50-70% of the digital art market will be NFTs.
The traditional proximity between luxury and art, which makes things related to culture and services desire, makes NFTs and luxury a logical balance. As a result, many brands are launching or working on NFT projects, most of which also integrate physical products and services into its digital twin. This is one of the dimensions on which the metaverse is shaped and begins to influence the overall luxury brand experience.
Get Hennessy 8. This is a limited edition 250 bottle that celebrates eight generations of master blenders, combining more than 250 years of cognac expertise in one bottle. The first and last bottles of the collection sold at auction for over $ 250,000 and had NFT.
Meanwhile, Prada and adidas are launching the Prada Re-Nylon collection, which includes adidas for the Prada Re-source project. This is an NFT collection curated by digital artist Zach Lieberman, which includes photos submitted by brand enthusiasts. The last piece sold for almost $ 100,000.
At OpenSea, Gucci and Superplastic offer the SUPERGUCCI collection. This is a three -part series of 500 NFTs created by Gucci creative director Alessandro Michele and synthetic artists Janky & Guggimon. All featured items are from Gucci’s Aria collection. Each piece also features an exclusive 8-inch tall white ceramic SUPERGUCCI SuperJanky sculpture, crafted by the hands of Italian ceramists. Most of them now sell for between 3 and 7 ETH, between $ 10,000 and $ 20,000.
These examples show the value that luxury brands can generate using metaverse -based digital products. However, there is a caveat. The pricing mechanisms of NFTs are often poorly understood. NFTs are sold using crypto. And crypto – psychologically – is often not viewed as “currency” by users, but something similar to a chip in a casino where the idea of its dollar value is unclear. The use of crypto removes the traditional security barriers that buyers face in terms of reference pricing and anchor pricing.
This will greatly increase the willingness to pay. In addition, the nature of the auction in markets such as OpenSea sets the stage for the pricing of steroids. Auctions create a sense of “virtual ownership” even if we don’t already own the item. For example, while the auction is taking place, if we now have the highest bid, we “almost” feel like we are the owner. To avoid losses, we are prepared to protect the virtual property even more so if the items are sold without auction. The two effects combined significantly increase the amount a person pays and the NFT.
Therefore, there is a significant risk that the price paid for an NFT will exceed the expected value if a traditional currency is used. In fact, in a recent discussion with wealthy NFT collectors, I was told by attendees that buying NFT is like playing a computer game, like being in a casino, or something. which is fun to do. One said that “he would never buy NFTs with money, but crypto for him is not as money.”
As long as the category is hot and exciting new projects and collaborations emerge, it is possible that many NFTs will continue to win big prizes. There is definitely an element of FOMO today. However, as more and more initiatives hit the market and the user base matures, there are many changes that are truly unique and have a good story to tell. This further increases in value, as many of today’s NFTs may lose significant value over time, especially if they lack communication or diversity.
We’ve seen a lot of projects that seem unintentional but where brands are just launching NFT to experiment or just to have one. The downside of many brands is that a digital product has the same impact on the overall brand image as a physical product. Therefore, if a luxury brand launches NFTs that lose significant value over time, its brand’s overall equity will also fall.
The metaverse offers exciting opportunities for brands. It is however important to be more strategic and play to win rather than play to be a part of it. The NFT market will consolidate at some point and brands that are too quick or not strategic, different and bold enough in their NFT initiatives may pay a heavy price later on.
I always call promotions “easy growth traps”. NFTs can be the same trap for luxury brands, if not too much to forget. Brands need to master the art of luxurious talking about the new category. Above all, like the physical world, brands need to be amazed at the kind of value they make for their customers. Only then can NFTs become long -term value makers. An exciting new world that requires maximum accuracy and focus to succeed.
This is a piece of opinion that reflects the views of the author and does not necessarily represent the views of Jing Daily.
Named one of the “Top Five Global Luxury Key Opinion Leaders to Watch”, Daniel Langer is the CEO of luxury, lifestyle and consumer brand strategy Strengthen Equity, and executive professor of luxury strategy and pricing at Pepperdine University in Malibu, California. He has consulted with many major luxury brands around the world, is the author of many best -selling luxury management books, a keynote speaker, and conducts luxury masterclasses on the future of luxury, distraction and the metaverse of luxury in Europe, the United States and Asia. In compliance @drlanger