The luxury sector is widely associated with premium quality, superb aesthetics, brands with a long history, and prices to match.
By itself, the luxury fashion environment has revenue estimated at approximately $112bn in 2023, with the values expected to grow annually by around 4% over the next five years.
The cryptocurrency industry is similar in this regard, as it is steadily becoming more mainstream, with an increasing number of individuals, organizations and retailers willing to put in capital toward investments.
It can seem that this is all the two have in common and that there’s no point looking for further similarities. However, that’s not necessarily true.
Researchers estimate that the spending habits of wealthy shoppers will change in the next couple of years, thanks to the intervening influence of the digital asset ecosystem.
While in 2022, the market was in dire straits, 2023 has offered investors renewed hope in the potential of cryptocurrencies to return stronger than ever in the aftermath of such a challenging event. Ethereum is currently showing steadier values, and although the prices have fluctuated in the first three months of the year, many are optimistic that they will remain stable from now on and register continuous growth.
NFTs
You’re most likely familiar with the concept of non-fungible tokens, the digital art pieces that have been sold for millions, even tens of millions of dollars, in the online space. Their high value comes from their extreme scarcity, with all NFTs essentially being limited edition pieces.
Many of them are completely unique, and this feature makes them an incredibly attractive asset for collectors to own.
During an era in which it is easier than ever to go shopping, as all you have to do is press a few buttons on your phone screen and you’ll have an item delivered straight to your doorstep from any corner of the world, luxury customers are looking for the experience beyond the object.
These shoppers believe that it is worth paying a substantial amount of money in order to get access to value and exclusivity. Quality craftsmanship and authenticity are also highly valuable to this demographic, all of which can potentially be included in NFTs.
Many fashion brands have joined the trend of creating NFTs of their products or fully digitized clothing items, including Burberry, Louis Vuitton, Givenchy and Gucci.
Volatility
It’s no secret that cryptocurrencies are susceptible to higher volatility levels and more fluctuations compared to other assets. Yet, many luxury brands continue investing in them, as well as allowing customers to make purchases using digital money. In 2022, a 40-meter Benetti yacht was bought using Bitcoin.
The price was a whopping $9.7 million. And although merchants are subjected to the cryptocurrency regulations implemented in their country or region, it might come as a surprise to discover that well-established vendors deal with such a volatile asset.
The answer lies in the fact the brands have some very strong safety nets in place. In fact, for the most part, they don’t come into direct contact with the cryptocurrencies but get the benefits through the access of tens of millions of investors and holders.
Instead of working with direct crypto payments, the retailers use gateways that accept digital currency and convert it into fiat money. Individual brands aren’t the only ones who have used crypto. Online luxury marketplaces and retailers have also started to provide the alternative of paying with crypto when clicking the “place order” button.
Product Integrity
Cryptocurrencies don’t help the market solely through their monetary value but also because of the tools employed by them, namely the blockchain.
While traditionally associated solely with the buying, selling and trading of cryptocurrencies, analysts have estimated that the system powering the creation and circulation of all cryptocurrencies will eventually be used to help improve processes and make everything more efficient across several businesses and industries.
The luxury industry could benefit from the use of the blockchain system as a way to guarantee product integrity.
Fashion has long dealt with the problem of counterfeiting, and premium products are particularly targeted due to their high prices. Some of the smart tags that businesses could use to prove the integrity of their products are:
- RFID labels: These markers use radio frequency to transmit information. You can access the data through the use of a specialized reader. Since the blockchain protects the product information, you can be certain of its authenticity. However, this option is also the most expensive one, meaning that it is rather unrealistic to expect its mass deployment in the industry.
- QR codes: Secure quick response codes are immutable within the blockchain, meaning they’re fully tamper-proof. A lot of information can be transferred as part of a QR code, including details regarding the supply chain and manufacturing process, as well as any relevant websites where you can obtain extra details.
- Ceramic signatures: Companies can incorporate barcodes onto ceramic or metallic surfaces using laser machines. Later, these graphics can be scanned, offering data pertaining to product tracing and features. This also makes the information fully tamper-proof, as it is encoded and can even be anchored in more than one blockchain for extra safety.
Specialized platforms using blockchain technology are another new addition to the market. Several luxury brands, including LVMH, Cartier and Prada, have joined forces to create the Aura Blockchain Consortium, a non-profit association striving to develop blockchain solutions that help make the future of luxury goods more ethical and provide a better customer experience at the same time.
To sum up, while the world of cryptocurrency and blockchain is still growing and evolving, it could have several potential uses for well-established brands that have already made quite a reputation for themselves in the world of luxury products.
While these brands have a long-standing history, they’re still changing and developing in order to cater to newer demographics that have become interested in their products.
Add to that the fact that companies can use blockchain networks to protect the integrity of their products, and you’ve found one of the best and most effective solutions to help the industry thrive.