GM. 🫶
This is Web3 Espresso ☕-your weekly cup of everything Web3 designed to educate, entertain, and inform.
Hello 😎,
This week, I take a closer look at the intersection of luxury and Web3. Having worked with luxury brands and services for the past 4 years, this is a topic that I am excited to explore.
Some of the biggest luxury brands in the world are pushing forward in Web3 to open up new growth opportunities.
This has come as no surprise to me, given the challenges these brands face to stay relevant, attract younger audiences and keep driving revenue.
Web3 is the latest evolution of the internet. It promises to reshape the way we interact with digital content and assets.
It is undeniable that Web3 technologies, such as blockchain and NFTs have opened up a world of new possibilities, enabling brands to create unique and innovative experiences for their customers.
Today, I examine five problems that luxury brands have that Web3 technology can help them solve.
Read on.
What’s in store today:
🥡 The Weekly Roundup
Luxury and Web3: A Match Made in Heaven
Part 1: 5 Problems Web3 Is Solving for Luxury Brands
Generational brand relevancy
Improved traceability
Sustainability (kind of)
Enhanced unique experiences
Augmented creativity
Let’s go! 🥤
🥡 5 in Five …
The Five Stories You Need to Know This Week
Disney eliminates metaverse division 👉 full story here
Latest KPMG Case Study “ Want to Win in the Metaverse” 👉 get it here
7 Real World Use Cases That Should Be On Your Radar 👉 read it here
British Museum “Offers” Parthenon Marbles NFTs 👉 read it here
Argentinian Airline Issues Every Ticket as an NFT 👉 read it here
5 Problems Web3 Is Solving for Luxury Brands
Luxury brands are leading Web3 adoption. In a recent study, CoinGecko found that 37% (19 out of 51) of the brands surveyed are from the apparel and luxury goods sector.
The first question I ask myself is why.
Why are luxury brands pushing forward in an industry that is perceived as risky and uses technology that, in its current state, is reserved for the most savvy (and courageous) of us?
I see five main reasons for this.
1. Generational brand relevancy
Gen Zs and Millennials are fast becoming key stakeholders in the luxury industry. Recent data shows that they are set to make up 50% of the whole market by 2025.
In a previous newsletter, I looked at the characteristics of people who bought NFTs, and the research shows that they are younger and wealthier than average.
For luxury brands that rely on their longstanding history, tradition, and craftsmanship to differentiate themselves from their (cheaper) competitors, connecting with younger generations presents a new set of challenges.
This digital native generation expects intuitive and modern online experiences, and luxury brands have been quick to understand that today’s Web3 generation (the early adopters) could very well be their clients in the next 5 years.
By launching an NFT, a luxury brand hopes to appeal to a young, affluent, influential, and digital audience, particularly generation Z and millennials.
By being visible and appealing to a younger audience, which shows the potential for high future income, luxury brands are making a bet on the next generation.
2. Improved Traceability
Traceability is the ability to find out about a product's or service's history, where it came from, and whether or not it is real. Up until today, this process has been paper-based and, let’s say, pretty archaic.
Blockchain-enabled traceability can play a crucial role in ensuring the authenticity of goods in a digital format that is both transparent and secure.
Fighting Fake Goods
The counterfeit industry has become increasingly sophisticated and presents a real and immediate problem for luxury brands.
Luxury fashion brand Burberry knows all too well the brand cost and real cost associated with fighting counterfeit goods. It recently was granted a preliminary injunction against Baneberry, a Chinese retailer with over 40 physical stores that is effectively piggy backing on the Burberry brand.
In the luxury sector where image and reputation are key contributors to revenue streams, protecting a brand’s intellectual property is paramount.
Web3 technologies such as the blockchain can offer a powerful solution to this problem by enabling proof of authenticity and traceability for products at scale.
Tapping into the resale market
The resale industry is one of the fastest-growing segments of the retail industry. According to a report by Statista, the estimated revenue of the second-hand luxury goods market worldwide is estimated to reach $64 billion by 2024.
To date, luxury brands have chosen not to position themselves in the resale market. This can be explained by the lower perceived value of goods in the secondary market and a desire to focus on providing luxury experiences to customers.
Rolex is taking a new approach in this area by taking charge of the certification process for its watches. This keeps the value and reputation of the brand intact.The added 2 year warranty that the certificate offers also commands a premium over second hand watches sold without it.
This process moved faster because LVMH gave all of its brands access to the Aura blockchain system it built in 2019. The involvement of the LVMH group means 30 per cent of brands now have the capability to collect traceability details of their products via the blockchain.
The Aura Blockchain Consortium was created in April 2021 by LVMH, Prada Group, and Cartier and was later joined by the OTB Group and Mercedes-Benz. The AURA Luxury Blockchain is a technology platform that uses blockchain to authenticate luxury goods. Each luxury item, such as a watch or a bag, is given a unique code that can be scanned with a phone app to verify that it is genuine. Each good produced is given a unique digital identity, which includes information such as the product’s origin, materials, and manufacturing process.
On-chain digital product passports
Swiss watchmaker Vacheron Constantin, recently partnered with blockchain start-up Arianee to launch its digital certificate of authenticity.
A digital product passport is a blockchain-based end-to-end provenance and traceability solution that allows companies to digitally record and share information about the product to prove its origin and sustainability.
By announcing the digitisation of its certificates of authenticity, our Maison is evolving with the times. - Guillaume Boilot, Chief Operating Officer Vacheron Constantin
Breitling has also integrated blockchain technology into their offering by including a digital passport (NFT) with every watch purchased.
These Web3 enabled innovations allow customers to have access to a secure and permanent digital record of their watch’s authenticity, ownership, and provenance.
3. Sustainability (kind of)
I find it difficult to make the case for sustainability in Web3. Given the huge amount of energy required to power blockchain networks, you can hardly say that Web3 is green.
However, if we specifically look at the question in the context of luxury brands, blockchain technology can offer the opportunity for more ethical and responsible sourcing. Blockchain technology can be used as proof of sustainable and ethical sourcing methods because it can be used to keep track of the whole sourcing and manufacturing process.
A French nappy brand has done this quite well: Joone uses blockchain technology to demonstrate the traceability of its manufacturing.
We know that Gen X and Millennials value authenticity and integrity in the brands they choose. This can be one way for brands to demonstrate that the proof is in the pudding.
4. Enhanced unique experiences
In recent years, luxury brands have had to work hard to prove their point of difference. As the world enters a global economic downturn, luxury brands are moving away from their aspirational customers to focus on their so-called Very Important Clients (VICs). The customers that are least likely to be affected by the world’s turmoil.
The Future Laboratory coined the term “Guilded Luxury” as a framework by which brands create ultra-bespoke services and immersive experiences for different kinds of consumers.
The key to Guilded Luxury is enhanced exclusivity; where the ‘by invitation only’ experience becomes a tiered level of access offering a multitude of benefits for the highest spenders.
The benefit of offering ultra-personalised services is to foster a deeper sense of involvement and belonging. Luxury audiences value personalised and bespoke experiences, and Web3 technologies offer new ways to create these experiences.
4 Brands redefining the definition of exclusivity and experience
Hublot
The blockchain-based membership program that Swiss luxury watchmaker Hublot launched is one example. The programme offers members exclusive access to limited-edition watches, events, and experiences. The most recent collaboration was with Takashi Murakami. Only collectors who have already bought one of the 324 Murakami Hublot NFTs will be able to buy 12 of the 13 physical timepieces.
By minting rare NFT collections, luxury brands get the opportunity to offer their customers exclusive access to limited-edition products, events, and experiences; that contribute to creating a sense of exclusivity and scarcity.
Dolce & Gabbana
Dolce & Gabbana released an NFT collection called “Collezione Genesi” (or Genesis Collection) and consisted of nine pieces: five NFTs that were accompanied by custom physical pieces and four strictly digital NFTs. The collection sold out for $6 million.
Lamborghini
Lamborghini also joined the NFT space with its “Epic Road Trip” Collection. The collection screams exclusivity and luxury. It features 400 Lamborghini Aventadors recreated as spaceships.
Louis Vuitton
In honour of the late founder’s 200th birthday, the fashion house released “Louis the Game", which featured Louis Vuitton’s customisable figurine “Vivienne” on her journey throughout 200 virtual worlds to find two-hundred birthday candles. Upon completing the game, players can look for thirty hidden collectible NFTs, ten of which were designed in collaboration with major digital artist Beeple.
5. Augmented creativity
According to Statista, the global metaverse market will be worth $47.48 billion in 2022, and is expected to surge to $678.8 billion by 2030.
The blurring of the lines between what is physical and what is digital is now a reality. This is a Web 2.5 concept - coined “phygital”, where the realms of reality and digital intertwine, offering consumers both a tangible and virtual experience.
I believe that in the near future, we will be regularly interacting in a metaverse. This experience is currently clunky, but in the not-too-distant future it will be seamless.
Luxury brands are seeing this as an opportunity to grab an “early movers” advantage. By being present and already delivering phygital experiences to customers, they are introducing to the world, the key experiences that will soon become part of our everyday lives.
The metaverse also allows for unlimited creativity. It has created an outlet for testing the attractiveness of new products that is easier and faster to implement. It is no surprise that Fashion Weeks around the world have jumped into the metaverse. This virtual environment can enhance existing experiences at scale and create an avenue to showcase creativity that is limitless.
I couldn’t leave you this week without a little NFT humour 💟
That’s all for this week… 🫶
Please note that I do not recommend or endorse the companies and organisations mentioned in this newsletter. This content is purely informative and not a recommendation. Always be mindful of where you connect your wallet. Always do your own research. 💛