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Non-fungible tokens (NFTs) are a digital experience that boomed in 2021. The phenomenon captured wider attention around the world. In 2021, the market was valued at a revenue of $21 billion. However, experts have stated that around 95% of the NFTs are worthless now. This drop is driven by various factors such as economic shifts, failure among big players, market saturation, and many more.
Rise of NFTs
The introduction of NFTs started when blockchain and cryptocurrency technology were created. NFts acted as a digital concept that guided us on how we see digital ownership. They are digital tokens, generally purchased with cryptocurrency to represent the ownership of a specific product.
It was Adidas that introduced this phenomenon to the Fashion industry. The brand launched the NFT collection in Metaverse in December 2021. The digital collection is the largest web3 project that a fashion and/or footwear company has taken at that time. It sold 30K tokens in a few hours at a starting rate of $800 for a token. But now, one can buy an NFT token for $260 on OpenSea, the famous NFT marketplace. In December 2019, Prada launched Prada Timecapsule collection which was then renewed to monthly NFT drops. Moncler entered the NFT market in 2022 with the 500 limited-edition Maya down jacket.
Nars Cosmetics released the pioneer beauty brand-based NFTs in 2021. Givenchy Parfums was the first beauty brand to launch an NFT, named Pride, to show its support to the LGBTQIA+ community during pride month. Yves Saint Laurent Beauté dropped its NFT blocks for the first time in June 2022.
NFTs can be differentiated from one another with their unique code verified by blockchain technology. This technology has helped consumers and brands to transact and transfer the ownership of NFT. With this transparent and immutable nature, the authenticity of the product is assured. Labels including Louis Vuitton, Dolce & Gabbana, Gucci, Dior, and Prada used NFTs to authenticate their products and avoid counterfeiting. Dolce & Gabbana’s Collezione Genesi sold around 6 million phygital NFTs as of February 2022. The collection was auctioned off for $5,7 million.
The brands also collaborated with NFT artists and creators to launch collections. Louis Vuitton, Burberry, and many other labels have partnered with NFT-only companies such as The Fabricant, RSTLSS, and RTFKT.
Fall of NFTs
NFTs took a fall at the same pace they went up. The phenomenon was rising exponentially due to the higher inflation, compact monetary policy, and interest rates during the pandemic. After the end of the post-pandemic lifestyle, the NFT market began to show downturns due to various reasons. During the initial days, the investors were drawn to the market due to its several features, including digital authenticity, high selling point, and quick returns among others. This excitement was gradually saturated due to an overwhelming creation of NFTs and the comeback of old economic spending in supply and demand.
One classic example is the investors’ lawsuit against Yuga Labs for the financial loss faced due to Bored Ape Yacht Club NFTs and ApeCoin tokens. They sighted the misleading promotion through the endorsements by celebrities including Jimmy Fallon, Paris Hilton, Justin Beiber, and Madonna, who were labeled as plaintiffs in this class-action lawsuit.
The factors for this downfall are
Socio-economic factor: The increase in inflation and lack of disposable income to spend on digital tokens which were widely available during and after the pandemic.
Fall of cryptocurrency: Due to the growth of the market, the taxes on cryptocurrencies have increased to control the trading. To avoid the loss, consumers started to sell their digital assets, which led to the cost of crypto coins such as LUNA and TerraUSD falling to $0. So, the value of cryptocurrency started to fall apart.
Complex procedures: in order to buy a digital asset, one has to have and maintain a digital wallet. They had to include a specific amount of cryptocurrencies, preferably Ethereum. Their wallets must be connected to the brand website. This complex process has led many to withdraw from this phenomenon.
Supply vs Demand: As the demand for NFT products got high, the production of NFTs has become boringly high too. The market was flooding with NFT products, making it another fad.
Scams and lack of security: The cryptocurrency and NFT scams were gaining attention in the middle of 2021. Even though luxury brands were not vulnerable to these scams, the fake fashion NFTs have ruined many brands’ images.
Unawareness of the technology: Despite many brands building a strong base on this segment by making their consumers aware of it, many people were unable to get familiar with this technology. The labels wanted to establish this technology to empower their selling experience but they couldn’t raise awareness on it as expected.
Fashion NFTs experienced this downfall even before the entire market. Experts believe that there will be days when there will be no activities in this sector. The prices faced similar backlashes. On the second-hand market, Gucci and toymaker Superplastic’s NFT collaboration collection sold for high prices when it was launched. But its price fell soon after and went downwards.
Collections from major labels such as Nike, Gucci, and Adidas faced fewer buys and decreased prices. Prada is letting its customers who bought a limited-edition product get access to its Timecapsule NFTs. However, these assets cannot be sold for higher prices now. Nike does not allow its shoppers to trade NFTs under its own shelter. Gucci is without its executives in charge of the web3 project, Marco Bizzarri and Robert Triefus.
Even though the brands are selling these NFTs to bridge the gap between web3 and what they stand for and to build loyalty. Companies including Nike and Adidas had the potential to capitalize on their NFT arena. But now, if they launch the NFT project, it won’t have the same impact as the pioneer ones.
Continuing Web3 Project Launches
NFTs are a potential medium in building loyal communities for the brands and enhance sales with it. This NFT ownership can be used to set up membership programmes with a lot of perks, offers, invites to private events and many more.
Louis Vuitton
Louis Vuitton's first in-house phygital treasure trunk granted its owners access to digital events, future products, and other exclusive experiences. In July 2023, the brand released its ‘Speedy’ bag in a reimagined version, Speedy 40 VIA, in a form of digital collectible.These VIA NFTs will give its possessor the right to claim one physical product attached to it, known as the “Physical Twin,” just like the Digital Representation. Unlike the VIA Treasure Trunks, Speedy 40 VIA NFT can be traded and transferred.
The next NFT introduced in November 2023, Tile Trunk VIA Nicolas Ghesquière, was available in 200 units and cost at $6.000 per piece. The most recent launch from April 2024 was dedicated to a Jacket from Pharrell Williams Fall Winter 2024 men’s collection. Louis Vuitton VIA has issued 200 of these NFT, valued at $8,500. Buyers will receive both a jacket and NFT. This limited-edition release is only available to owners of VIA Treasure Trunk NFTs.
Maison Martin Margiela
Maison Martin Margiela collaborated with The Fabricant to launch a phygital MetaTABI collection with virtual AR experience, avatar uses, and collaborative partnerships. This collection has two editions - 15 Tier 1 NFT pieces in white shade and 1.500 Tier 2 NFT items in black shade. The Tier 1 holders will get personalized Tabi boots with gold finishing and the Tier 2 holders will get a custom leather wallet printed with crypto wallet numeric code. The participants, from the brand’s blockchain game, who competed to acquire 24 token-connected digital codes and the users of The Fabricant will be given special access to the presale of the collection.
Moncler
In October 2023, Moncler collaborated with Adidas for an NFT project, featuring an AI-designed campaign billed as the ‘The Art of Explorers’ combined with a limited edition NFT collection and immersive virtual experience. The brand encouraged various artists to design sculptures of their kind of explorers influenced by the looks of its collections. The campaign displayed the evolution that happened in the “Art of Genius” show of Moncler which took place in London.
NFT collection featured Moncler x Adidas Originals NMD boots which were available on the immersive platform and Adidas Confirmed application. The first 3.000 NFTs will be offered to customers for free along with the proprietors of the “Drips” edition of Adidas ALTS NFTs getting one for free automatically through airdrop.
Crocs
Crocs collaborated with a web3 powerhouse Doodles to introduce a line that combines traditional physical fashion with modern technology. Each product has a redeemable digital collectible named “Crocs Box.” The shoppers can get access to the immersive Stoodio platform of Doodles by acquiring a Beta Pass, which enables the personalization of avatars of Doodles with the wearables of Crocs. The digital collectible holders of Doodles got early access with a discounted price for the collection.
Lacoste
In July 2023, Lacoste, with Emperia, unveiled its second virtual outlet after the holiday-influenced store in December 2022. This virtual shop displayed the summer collection of the brand along with an exclusive digital experience as well as an NFT-driven UNDW3 loyalty initiative. The program’s goal was to build a strong community and loyalty. The experience includes a crocodile-inspired scavenger hunt and underwater VIP leisure locations accessed by UNDW3 and Le Club Lacoste members, where the NFT collection and weekly offers are provided.
Cover Image: Louis Vuitton's Tile Trunk VIA Nicolas Ghesquière, courtesy SHOWstudio.