Featured blog image courtesy of Medium
An original is worth more than a copy.
Suzy Kassem, Rise Up and Salute the Sun
Remember the last time you purchased an original? Maybe you were at an auction or an art gallery, where that one uniquely crafted design truly moved you. Maybe you were out at your local flea market, scanning kiosks filled with garments, art, and collectibles made by local artisans, whose dedication to their craft excited you to support them. What about that time you were online browsing through Etsy? You could not help but buy that new garment to support your favorite up and coming fashion designer.
Now, let’s take a step back and think for a moment. What do all these scenarios share in common, besides the purchasing of an original work? They all center around the purchase of items considered to be non-fungible. But what does non-fungible mean? Well, simply put, non-fungible is a term given to items and objects characterized and given value based on the unique properties they have which cannot be replicated or replaced.
For example, let’s look at basketball cards - the monetary value of an original Lebron James rookie card is going to have a different monetary value compared to an original Michael Jordan rookie card, even though they’re both just basketball cards. However, if there were multiple originals for both players in circulation, then other factors such as the maker, production date, production number, and sourcing materials will weigh into each card’s unique value.
So, what do items that are considered non-fungible have to do with fashion? Well, as the fashion industry has evolved its business operandi to serve customers in the mysteriously emerging Metaverse, brands are equally involving themselves with designing, developing, and implementing non-fungible tokens (NFTs) into their fashion catalogs. They believe that the digital tokenization of fashion products will assign them an inherent value both physically and across the Metaverse as NFTs continue their rapid advance to accessibility.
However, before integrating NFTs into your brand’s product strategy, consider these four overarching questions:
- What are non-fungible tokens?
- How is value created using tokenized fashion NFTs?
- What benefits do NFTs serve your brand?
- What limitations could impact the NFT movement as fashion immerses itself into e-commerce and the Metaverse?
What Is An NFT?
Image Source: Medium
A non-fungible token (NFT) adopts the same principles as an original physical item or asset with uniquely definable and specific characteristics that cannot be replaced, altered, or replicated. The main difference – NFTs are digital assets used to represent one’s ownership of an original art, collectible, or garment. However, they also share other fundamental characteristics that you should be aware of:
- NFTs exist and operate on a blockchain – Blockchain technology is the bread and butter that give NFTs life. Acting as secure, digitized ledgers that cannot be altered, blockchain is the transaction mechanism used for the transfer of NFTs from one party to another. By using unique identification codes and metadata, an NFT’s uniqueness can be traced and verified to ensure that it is the original or part of the original.
- They cannot be traded or exchanged at equivalency – Like trading cards, no single NFT has the same value as another. Therefore, you are unable to trade or exchange one NFT for another because their values are not equal.
- NFTs use cryptocurrencies – The traditional dollar cannot be used to acquire or sell an NFT. Since the Ethereum Network is where a majority of NFT marketplaces operate, you will need to convert your dollar via a cryptocurrency exchange to ETH (Ethereum’s currency) before using it to purchase or sell an NFT.
- Every individual NFT can only have one owner at a time – Due to its use of blockchain, only a single owner at a time can own a particular NFT. However, if an asset has multiple NFTs in circulation, each will have its own embedded identification codes and metadata to distinguish unique value.
What NFTs Bring to Your Fashion Brand
Image Source: Forbes
With major luxury fashion brands like Gucci, Versace, and Louis Vuitton all dipping their toes into NFT fashion and claiming stakes inside the Metaverse, it's clear that integrating non-fungible digital assets into your brand’s fashion catalog has value. But what are those benefits? How can NFTs create value for your brand and therefore, value for your customers? Let’s take a closer look:
- NFT creators can retain ownership rights and claim resale royalties. – By implementing a smart contract with a resale royalty percentage per trade written into it, an NFT creator (your brand) will always receive a monetary portion of each exchange. Typically, this percentage lies between 5-10%, depending on which NFT marketplace the creator operates on.
- Designing NFT fashion enables greater creative flexibility. – Ever wanted to design a garment that glows in the front while emitting radiant flames of vivacious colors from the back? With NFTs, whatever ludicrous fashion ideas your mind conjures up can be transformed into a reality. This opens up all kinds of intricate and nifty NFT collector designs for fashion consumers. An NFT fashion line doesn’t require you to abide by the laws of physics or materials sourcing to design a Metaverse collection.
- Physical assets can be linked to NFTs. – Brands can integrate NFTs directly linked to physical fashion products to help combat counterfeiters, provide proof of authenticity, and create value. Essentially, this allows buyers to use an NFT as a way to identify and authenticate a garment’s origin before they make a physical retail purchase. This is particularly important in the growing fashion resale ecosystem, where fraudulent assets sold by counterfeiters can be purchased unbeknownst to a buyer.
- Scarcity increases value. – Following the simple law of supply and demand, the more unique and less available an NFT fashion product is, the more value it will have to NFT collectors and consumers. Applying the same concept as in a physical product launch, the scarcity of your limited edition NFT will increase the value of the physical asset it ties to.
Should You Integrate NFTs into Your Brand?
Not all fashion brands are buying into the hype and phenomena surrounding NFTs and their use cases, instead preferring to take a “wait and see” approach. While fashion embraces change and setting new trends, this hesitancy to move forward is justified – investing a significant amount of capital into an idea surrounded by uncertainty with no guaranteed return on investment (ROI) is risky. What happens if the crypto sphere bursts like the dotcom bubble and the Metaverse fails to deliver? Will NFTs survive, let alone still hold any value? Here are a few other issues to consider:
- Converting the US dollar to a cryptocurrency can be a hassle. – If you are unfamiliar with how cryptocurrencies work, then the process of acquiring ETH can be cumbersome. You’ll need to set up a digital wallet and find a cryptocurrency exchange to convert the US dollar into ETH, which will then need to be sent from the exchange to your digital wallet. Once this transaction occurs, you’ll have to connect your digital wallet to an NFT marketplace to buy and sell NFTs. Through this entire process, gas fees will incur; these are small fees associated with the computational power needed to complete each transaction.
- Government regulations - Currently, the US government has set up no unanimous frameworks to regulate cryptocurrencies and NFTs. However, as they begin to understand the crypto sphere as a whole, looming regulations could impact how NFTs are categorized, copyrighted, distributed, collected, and traded in the Metaverse and by NFT collectors. Fashion brands integrating NFTs must monitor these coming regulations to develop strategies of compliance.
With that all said, ask yourself - are NFTs worth investing a portion of your financial resources into? Do these relatively new, non-fungible digital assets hold value to you, your brand, and its goals? We know that fashion is flocking to streamline their development and implementation to claim stakes across the Metaverse. Will you be left out of competition or do you believe the financial risk will reap a lucrative reward?
Featured blog image courtesy of Medium