The rise of the NFT space and emergence of the metaverse has been widely received as a promising new avenue for several industries — including the luxury goods industry. This burgeoning digital arena offers unheard-of ways for luxury brands to reach and engage with their customers, even transforming business models and opening up new and profitable revenue streams for those brands that utilise the metaverse in luxury retail.
A new wave of digital customer experiences facilitated by blockchain, NFT, and metaverse technology, is well suited to brands offering luxury goods and provides a unique opportunity to connect with and engage Millennials and Gen Z audiences, both of which are becoming the key target markets.
Enhancing the Customer Experience
There has always been an expectation for luxury goods brands to provide more than simply their wares; customer experience, bespoke add-ons, personalised treatments and cutting edge innovations are part and parcel of the industry. But, as the market evolves with an up-and-coming generation and digital demands grow, luxury retail needs to adapt to serve the needs of their customers.
The likes of the metaverse in luxury retail, and the NFT space, are changing the face of the luxury industry. Today, there is now an expectation from consumers in this space that they will be met with enhanced customer experiences, especially of the digital kind. Blockchain and Web3 technology in luxury retail are powerful tools to facilitate this, as innovative applications of these technologies allow customers to be engaged in new ways via digital platforms.
First-class online experiences that feel genuinely bespoke to affluent consumers; personal shoppers and private viewings, personalised treatments, rare goods, exclusive rewards and more can all be delivered digitally with a successful metaverse and NFT strategy.
As NFT digital collectibles have exploded in popularity for their rarity and ability to offer uniqueness; for luxury brands they offer a popular and profitable opportunity to deliver on their customer’s demand for exclusive and original assets.
Take Johnnie Walker, for example, the whisky maker has created NFTs that combine ownership with experience. Each NFT entitles the buyer to own an extremely rare 48-year-old bottle from the Johnnie Walker Masters of Flavour series. While Club dVIN, the world’s premier NFT wine club utilises NFT and Web3 technology to reward Club dVIN’s global community of wine collectors with exclusive rewards, tokens and experiences.
A whole new Metaverse
The metaverse, virtual spaces where people can interact with each other and with digital objects through personalised avatars, is arguably a core pillar to the growing Web3 architecture currently being developed and built. It is an arena that works in conjunction with NFTs — a key part of the digital objects present in the metaverse.
This new world, where visual representation is critical, is also clearly aligned to luxury retail as exclusivity, rarity, and prestige are all features of the metaverse and luxury goods. Thus, for the luxury goods retailers, there is scope to utilise the metaverse to deliver an enhanced customer experience, improve customer retention and loyalty, and create new revenue streams.
As for the metaverse in luxury retail, there are already a number of examples of successful application.
In terms of providing a more remarkable customer experience, Gucci took to the gaming platform Roblox to host a virtual exhibition. Players on Roblox could purchase digital models of genuine Gucci products for a small amount of in-game currency. It was a new and unique experience for fans of Gucci, and it was also a way to create a new revenue stream as they sold digital representations of Gucci products in the form of NFTs.
Moreover, once the exhibition ran out of digital assets to sell, gamers began to put up the branded NFT items for auction, inflating their cost tenfold. One of the digital items sold at auction for $4,100, which is $700 higher than the retail price of the real-life version. There are added opportunities for brands in NFT resales. It is possible for brands to build in a percentage cut on each further NFT sale that comes down the line.
There are many other ways of course for brands to interact with and engage their customers in the metaverse. For example, high-end beer brand, Heineken, took to the metaverse for a virtual, tongue-in-cheek press conference unveiling a new and entirely virtual product called Heineken Silver.
The beer launched at the Decentraland-hosted press conference boasts: “No calories, no hidden ingredients, and no beer.” Heineken Silver was only available to visitors to Heineken’s virtual brewery in Decentraland — until launching it ‘for real’ a few days later as part of the marketing ploy.
The metaverse in luxury retail is clearly an exciting avenue for brands to explore. The process of interacting virtually offers customers a unique, convenient and engaging experience, often exceeding the expectations of what a luxury brand would offer in the physical world. But, through NFTs operating within the metaverse, things can really get interesting…
NFTs in Luxury: A New Digital Good
These non-fungible tokens are not only in high demand but offer multiple applications and opportunities for luxury goods retailers and their customers alike. They can be used for collectables, in exchange for experiences, as rewards, and to provide access into spaces in the metaverse.
Looking at recent applications, there are already many instances of luxury brands already rolling out NFTs as digital wearables, digital art and even digital land.
NFT collectables, skins, and avatars are an easy way to enter the space for luxury retail brands. French premium brand Balenciaga launched a digital line of Fortnite fashion apparel, which could be purchased with in-game currency for approximately $8. That allowed players of Fortnight to dress their avatars with authentic Balenciaga fashion.
Digital art and even digital land are also avenues that NFTs in luxury retail have already thrived in and are also seeing higher uptake.
NFTs offer a broad base of new and unique offerings for luxury retailers. While they can operate simply as branded collectibles, they can also unlock the door for substantial collaboration opportunities between brands and bridge a gap to an experience many customers would not have dreamed of.
For example, Prada announced that it would team up with Adidas Originals to launch Adidas for Prada re-source. This “first-of-its-kind” NFT project invites fashion, design, and crypto creators to collaborate on a large-scale digital piece inspired by its physical Re-Nylon collection. Through this initiative, anyone with a digital wallet can contribute an anonymous photograph. From there, 3,000 people are randomly selected to mint their submission as an NFT, free of cost.
The opportunities that NFTs can bring a retailer both as a standalone asset, or as an asset in the metaverse are constantly growing, and it is being seen across popular and established luxury brands. Even loyalty programs can be fuelled by NFTs.
Beauty brand Clinique has opted to offer NFTs rather than sell them. Shoppers who are signed to its rewards scheme have the chance to receive free products for ten years, along with one of three editions of an NFT artwork.
Again, NFTs can operate within the metaverse space as collectables and digital items, but they can also be used to create an even better, more exclusive, metaverse customer experience, too. The nature of the NFT means it can be used as a key in the digital space or even as an invitation to VIP events hosted in digital worlds.
A Changing Demographic
It is also worth highlighting that all the possibilities and opportunities afforded by the metaverse in luxury retail and NFTs are only as successful as the demand from them. However, the need for this niche and burgeoning digital space is incredibly high as it coincides with a changing demographic.
Millennials and Gen Z are emerging into the economy and are driving demand for a digital experience. They are also growing to become a key market for luxury brands as these generations continue to permeate the space.
Today, Gen Z and Millennial shoppers buy premium goods faster than anyone else and bring entirely different preferences and priorities than older generations. Through 2021, Gen Z (60%) and millennial (63%) luxury purchases have outpaced spending by Gen X (46%) and baby boomer (18%) shoppers, according to a new report from Klarna.
This generation has been brought to luxury goods by social media and is getting ingrained in it thanks to Web3, alongside the metaverse and NFT space. As much as 78% of Gen Z and 70% of Millennials already follow high-end brands on social channels, and with that following, they are now wanting more.
This demand manifests as more exclusive experiences, better digital experiences, and an expectation of brands meeting them on their channels. Not to mention, exclusivity and rarity, as well as ownership and authenticity
Stepping into the Metaverse with Protokol
The metaverse is a prime opportunity for luxury retailers to engage, delight and monetise their customers, but knowing how to effectively enter this emerging space is difficult.
At Protokol, we consult on and develop custom NFT and Web3 solutions to help luxury brands understand, strategise and implement the tools they need to capitalise on the opportunities that both the metaverse and NFTs unlock.
We help brands across a range of industries from wine to watches understand and define their Web2 to Web3 strategy and explore the opportunities that blockchain and associated technologies can facilitate, especially when it comes to delivering exclusive rewards and experiences for customers, and profitable new revenue streams for brands.
Why not take the first step today and let Protokol help your organisation uncover the benefits of blockchain, metaverse and NFT technology for your brand. Book a consultation with our blockchain experts to discover your use case and learn about Protokol’s services and solutions for luxury brands.
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