The fashion industry is actively moving towards using innovative technology to expand its business opportunities. According to Vogue Business Index, more than 17% of brands already have had experience with NFTs and are satisfied with the results.
At Unikee, we have extensively researched the benefits that the new trend of fashion NFTs can bring to retailers. After consulting with dozens of retail marketing strategists, we have gained valuable insights that we would like to share in this article. Our investigation will delve into the reasons why fashion NFTs are gaining traction among leading fashion houses and retailers. Additionally, we will provide recommendations on how to effectively sell virtual items and identify common risks associated with implementing this development strategy.
What are NFTs, and why are they popular?
NFT (non-fungible token) are virtual items that confirm the uniqueness and ownership of a digital asset. All transactions conducted with them are recorded in a blockchain, a decentralized digital ledger with shared access. Thus, it ensures the transparency and security of NFT sales and purchase transactions.
Tokens are art objects (images, music, video files) you can not fake or copy. NFTs also allow the owner to program a royalty for themselves, ensuring that they receive a percentage of each subsequent transaction.
The virtual collections by fashion brands guarantee 100 percent originality of the purchased NFT. This provides an opportunity to increase customer trust and win their loyalty. For retailers, selling virtual items can be a prerequisite for expanding the audience, drawing attention to the brand, and increasing profitability.
Financial and business benefits of selling fashion items as NFTs
As the Vogue Business Index survey shows, one in five consumers of luxury goods considers NFT a worthy option for collecting. In addition, with the development of innovative technology, interest in virtual worlds and things is only increasing.
Let’s look at the main benefits of NFTs for retailers:
Increased consumer engagement
Retailers can create their own communities open to those who have purchased NFT. In these groups, customers will communicate directly with the brand. This allows the company to demonstrate an interest in each of its customers. Also, creating a large community helps the retailer build a strong connection with consumers and turn them into brand advocates.
Increased company revenue
Thanks to the competent implementation of the NFT project, retailers can earn additional income. Simultaneously selling digital assets and physical goods increases revenue flow, which is positively reflected in company growth.
Increased customer loyalty
Buying NFTs is an opportunity for the consumer to get an exclusive item from a beloved brand. Moreover, the possession of a unique item gives the customer emotional satisfaction. All this forms a trusting attitude and, consequently, increases loyalty.
Reduced operating costs
Smart contracts can be formed when buying and selling virtual assets, which reduces the cost of managing the enterprise system. Also, thanks to the creation of NFT collections of fashion clothes, shoes, and accessories that reflect real things, brands can hold fashion shows on the metaverse platforms instead of organizing live events.
As you can see, by launching their own digital collections, brands are opening up excellent prospects for increasing profits, attracting new audiences, customer retention, and development in general.
The user experience of buying fashion items as NFTs
According to Forbes, digital assets are especially popular among Generation Z, young people born between 1997 and 2012. Experts predict that this will play a vital role in popularizing virtual items shortly.
By 2026, the generation of Zoomers, as well as some millennials (born in 1981-1996), will comprise the main mass of solvent people interested in the virtual user experience of NFTs for fashion.
With this in mind, let’s take a look at the key benefits customers receive when they buy digital assets:
- A personalized experience between the brand and the customer: This approach allows the audience to “touch” their favorite brand. Such an experience can bring a lot of positive emotions and give new memories.
- Gaining access to limited edition items: Purchasing exclusive NFT items is a kind of pass to the “private party,” where the customer gets unique opportunities unavailable to others.
- Participation in loyalty programs: The ownership of digital assets can give the customer bonuses in the form of discounts, invitations to private events, early access to new products, and more.
- Getting authentic products with a transparent method to buy: Blockchain technology, the basis for NFT development, guarantees all participants the security of a transaction and the ability to verify the original data of the token. Therefore, the consumer can be sure they are buying an authentic product.
By selling fashion items as NFTs, retailers allow their customers to dive into the fashion world and experience the futuristic atmosphere.
Best practices for retailers selling fashion items as NFTs
Retailer strategies for NFTs-projects usually focus on giving consumers a new experience with the brand. Some of the main uses of tokens in the fashion industry include:
Collections of digital clothing
Exclusive items, even if they are virtual, attract fashion-conscious customers and brand fans. Augmented reality can be used to “wear” such things. The Ukrainian startup DRESSX, which offers futuristic virtual clothes and accessories, is a vivid example of the solution.
Fancy items for the metaverse
Virtual worlds such as The Sandbox and Decentraland give users a feeling of total immersion. People also want to express themselves in this new space, so more brands focus on creating virtual fashion items. Fashion houses like Louis Vuitton, Gucci, Balenciaga, and others have already entered the metaverse market.
They can be a replica of the physical location or a futuristic building to attract customers. Such three-dimensional points of sale can showcase either real-life products or NFT items. Not long ago, the Selfridges brand opened its first NFT department store in the virtual world of Decentraland, where users can view exclusive tokens and other company products.
Digital analogs of physical objects
Brands actively work toward creating virtual goods that accurately replicate physical items. According to a survey by Art Basel and UBS, more than 88% of luxury collectors are also interested in buying NFT-based art.
The possibilities for building marketing strategies are greatly expanded thanks to digital objects. In collaboration with artists, developers, or designers, retailers can transform their physical assets and promote them in the metaverse. Many leading brands are actively exploring virtual worlds, launching NFT collections, thus attracting even more attention.
Blockchain platforms such as Ethereum, Solana, Cardano, and others support the creation and management of NFT collections. They all operate based on smart contracts, ensuring transactions’ security, transparency, and reliability.
Challenges and risks of selling fashion items as NFTs
One of the biggest challenges faced by businesses is integrating NFT technology into their existing sales and marketing strategies without requiring extensive software development. Fortunately, there are now readily available solutions like Unikee.co that can help streamline this process.
Despite all the advantages of creating and selling virtual collections, the token sales strategy should be built with mandatory consideration of possible risks. Such an approach will help to avoid potential problems and unnecessary financial expenses.
Let’s consider the main challenges of selling fashion items as NFTs and ways to solve them:
Negative impact on the environment
The process of generating digital assets requires a lot of electricity, which leads to the emission of carbon dioxide into the atmosphere. Therefore, retailers who want to follow fashion trends should think about ways to minimize the negative impact on the environment. For example, part of the profits from virtual item sales could be used to support renewable energy projects or environmental funds.
Compliance with intellectual property rules
Since NFTs are art objects, retailers need to take care in advance of the intellectual property rights of all those involved in the creation: artists, designers, programmers, and others. Defining buyers’ rights and providing a document describing them in detail is also necessary. Such a solution will secure the brand from unauthorized use of the property and strengthen the trust of clients/partners/investors.
Ensuring data protection according to the law
Blockchain, a decentralized data chain with shared access and no ability to delete transactions, is against the General Data Protection Regulation (GDPR). Therefore, retailers need to ensure privacy protection when developing NFT. You achieve this through technical solutions and contracts based on legal regulations.
A carefully thought-out strategy for launching a digital project should always consider all possible risks of fashion NFTs and ways to reduce them. Thus, retailers can strengthen their chances for success and gain a steadily developing sales channel.
In a world that increasingly intersects with virtual spaces, digital items are becoming a desirable commodity. Therefore, retailers can win new customer segments, increase profitability and popularize their brands.
NFTs for fashion provide an opportunity to take a new look at familiar traditional collections, stores, and accessories. In the virtual universe, retailers can easily interact with customers and give them a unique user experience.
This insightful article was authored by Slava Todavchich, founder of Unikee, a solution connecting e-commerce to the future of Web3.0.