What exactly is a fashion NFT? How do international brands make millions from it?
NFTs have seen too many ups and downs recently. In 2021, the market was at the top but in 2022, there have been a lot of downs in the industry. The reason could be many but the importance & value of NFTs can’t be ignored.
Recently, many international brands especially in the fashion industry entered the game.
Are you willing to spend $449,000 on a set of sneakers? Will you spend $449,000 on a set of digital sneakers that you can’t wear? Perhaps you should “just do it,” but someone else has. Nike released a pair of virtual Dunk Genesis Cryptokicks sneakers, which are non-fungible tokens (NFTs) with prices ranging from $2,500 to $449,000 per pair.
Not just that. Through NFT drops, the renowned footwear company has already made $185 million in sales. Together with Gucci, Dolce & Gabbana (D&G), Nike, Tiffany, as well as Adidas, they have made $240 million from NFTs so far as they work to make the digital asset a significant new source of income.
At the height of the NFT craze last year, Indian fashion labels joined the bandwagon, taking a hint from their international counterparts. A five-piece NFT collection, featuring three hand-drawn designs of clothing, an old photograph of Lisa Ray, a former model, taken by the designer, and a film from one of his presentations, was unveiled by renowned designer Manish Malhotra.
Designers Raghavendra Rathore, Pankaj & Nidhi, and luxury brand AK-Anamika OK’s Khanna, as well as other well-known personalities, debuted their digital artworks. The majority of them were swiftly sold for sizable sums. The “Illuminating Showstopper,” a couture costume created by Malhotra for Kareena Kapoor, sold for Rs 2.8 lakh.
But you ask, “What exactly is a stylish NFT?” Due to their special characteristics, NFTs, also known as non-fungible tokens, are blockchain-based virtual assets that can’t be exchanged for another ticket of an equivalent value.
Yes, they could be effective for abstract categories like art, music, or gaming. However, how can a digital asset that is intangible make logical sense for tangible goods like clothing and footwear? Is there a goal in mind?
Being one of the earliest designers in the nation to introduce a fashion NFT, designer Malhotra says, “Virtual possessions do create actual sales, even if the thought of paying real money on apparel that does not correspond to reality is rather puzzling.”
For instance, virtual clothing used in virtual worlds is referred to as “fashion NFTs.”
Yes, it provides designers with a new source of income. But what does it provide the customers with? As it turns out, not much. After joining the NFT frenzy a year ago, fashion has yet to advance past selling pricey memorabilia. Even within the developing NFT sector, it has maintained a very specialized segment without compelling use cases for consumers.
Unfortunately, most NFTs are now primarily used for marketing communication to capitalize on the buzz. Up to eight use cases come to mind. However, Ajeet Khurana, the creator of Web 3.0 company Reflexical and a crypto specialist, claims that individuals are only using the name NFT and divulging photographs of anything.
But why are use cases even necessary for NFTs? It is a financial asset that operates according to supply-and-demand principles. Every time an NFT is sold again, the original inventor receives a royalty. It must motivate the NFT holder to continue trading in them for that to happen. “You can’t just show up, dump it, and leave.” That is ineffective. Making certain that the buyer can resell it is your obligation.
Sandesh B. Suvarna, a board member of WazirX, an NFT marketplace, claims that businesses (in India) have just used it as a marketing trick thus far. Using Nike as an example, he continues, “Any popular NFT series has built its millions simply by consistently offering benefit to NFT holders.”
To raise its metaverse game, the footwear behemoth purchased Web 3 firm RTFKT in December 2021. Its $185 million in NFT revenue is split in half by royalties that holders get from futures trading. Additionally, it created secondary volumes worth nearly $1.3 billion.
According to statistics from the cryptocurrency-related data portal Dune Analytics, the total NFT industry is in bad shape since trade volumes have dropped by 97% since the start of the year.
In addition, earnings or income growth from digital online services like cryptocurrencies and NFTs are subject to a flat tax of 30% in India. Although it appears that the NFT boom has lost some of its original enthusiasm, some people think that the fall is required to cool off an inflamed marketplace before it can regain equilibrium.
Adidas has already purchased the virtual property in the blockchain-supported virtual environment of The Sandbox, while Nike has already established a store called “Nikeland” in the metaverse. The who’s who of the high-end fashion industry participated in the Metaverse Fashion Week, which was held in another virtual world called Decentraland.
In the meantime, brands are also constructing physical-digital links. For example, D&G has utilized its NFT as a virtual environment. Domenico Dolce and Stefano Gabbana personally designed custom-fit physical parts for five of the company’s NFTs. Others are devising strategies to provide exclusive advantages in the real world, such as content access or personalized clothing, to strengthen user relationships and loyalty.
Gucci’s 4-minute NFT “Aria” film gives customers an inside look at the brand’s design and manufacturing processes by allowing them to virtually try on the products.
Even though marketers worldwide are attempting to identify creative utilities to capitalize on the new class of consumers, Indian designers who are experimenting with NFTs do not share this mindset. It is most likely due to difficulties with interoperability, challenges with blockchain technology, and a lack of regulatory framework.
Regarding all the economics involved, the whole NFT concept is being comprehended, tested, and attempted, according to Malhotra.
