The global luxury industry has shown resilience in the past years, despite uncertain market conditions. Composed of eight main segments, where the luxury car, luxury hospitality, and luxury goods industries make up 80% of the total market, the global luxury industry grew to $1.25 trillion dollars from 2020 to 2021. The industry has expanded from traditional bricks and mortar consumer goods stores to offering their customers an omnichannel 3.0 structure, combining physical stores, e-commerce, and high-quality experiences. As the personal and experiential luxury trend continues, we see a strong disconnect between price and luxury consumption. More consumers are entering the luxury space, not because of consumption but because of the “feeling” it offers them. In fact, it is estimated that the luxury market consumer base will expand from 400 million people in 2022 to 500 million people by 2030.
As we move into a new era of luxury driven by digitization, experience, and a new generation focused on sustainability, we are also seeing the emergence of a new trend - luxury entering Web3. With NFTs and the Metaverse gaining more sentiment over the past 2 years, more companies are looking into how they can integrate Web3 technology into their digital strategy.
Companies entering the NFT and Metaverse Space
Several luxury brands have recently entered the NFT and Metaverse space. For example, Gucci, Paris Fashion Week, Richemont group, and other brands like IWC and Mugler partnered with Arianee – an enterprise specializing in blockchain solutions for consumer brands. The partnership went hand in hand with the Metaverse world, The Sandbox, as the above-mentioned luxury brands sought to enable customers to get a virtual NFT equivalent of the physical good they were buying. The partnership between the two “worlds” enables consumers to gain utility on their virtual NFTs by acting as an item of clothing, accessory, or good for personalized avatars in the Metaverse.
Similarly, curated NFT marketplace, UNXD created NFT collections with renowned fashion houses Dolce & Gabbana, Jacobs & Co, and recently announced a new partnership with Valentino. UNXDs renowned collection with Dolce & Gabanna’s Collezione Genesi generated around $6 million at the final sale. In their collection Alta Moda, all digital pieces were personally designed by Domenico Dolce and Stefano Gabbana. The collaboration is an indication of how global fashion houses are combining physical and digital designs to create something suitable for the new generation of Web3 users.
Another luxury brand tapping into the NFT space is Porsche. At Art Miami 2023, Porsche released their new NFT collection featuring 2,363 iconic 911 NFTs. Owners of digital collectibles by Porsche have a variety of customization options, a community of NFT holders, specially selected “money can’t buy” experiences as well as the opportunity to co-create Porsche's future in the Web3 universe. The step towards bringing an iconic model like the 911 to the virtual world again shows that timeless luxury houses that have existed for many years are looking to expand into a more digital space and see it as the future of tomorrow’s luxury strategy.
Advantages of Luxury Companies Entering the NFT and Metaverse Space
One of the main advantages of luxury companies entering the NFT and Metaverse space is that they can extend the omnichannel purchasing experience beyond physical and e-commerce boundaries to the Metaverse. By introducing the Metaverse and NFTs as an additional channel, a new way for luxury companies to create immersive brand experiences arises. By creating virtual stores and fashion items, luxury brands can engage with their customers in new and exciting ways. Additionally, the Metaverse offers a unique opportunity for luxury brands to showcase their products and designs in a way that is not limited by physical space.
NFTs, on the other hand, can also provide a new revenue stream for luxury companies. NFTs can be sold at a high price point, and they offer a unique opportunity for luxury brands to create scarcity and exclusivity around their products.
The advantages of luxury brands joining the Web3 ecosystem go both ways. As more globally renowned brands join the industry and drop collections, more non-Web3 natives get interested. Widespread adoption is being sped up by brand collaborations as more people are intrigued by the new trend of luxury. For this, it will be imperative for the collaborating Web3 and luxury brands to put forward educational narratives that create an easy onboarding process for new users.
Disadvantages of Luxury Companies Entering the NFT and Metaverse Space
One potential disadvantage of luxury companies entering the NFT and Metaverse space is that they may face backlash from traditional customers who do not understand or appreciate these new technologies. Moreover, luxury brands may risk diluting their brand value by entering these spaces, particularly if they are perceived as gimmicky or irrelevant to the brand.
Not all forms of luxury can enter the digital space. If you think about a vineyard or 3 Michelin star restaurant in a remote area and creates a luxurious experience through the senses, it would be difficult to bring that into the Metaverse or in NFT form. In the future, it would be interesting to see what types of creative ideas luxury houses come up with to enter another channel.
Future and trends we might see
The luxury industry is extremely resilient and growing at a face pace. As GenZ and Gen Alpha start to enter the market, we might see different values start to form in the Luxury and Web3 industries. As more people are looking for sustainable solutions, blockchain technology will need to start looking way more sustainable than it is now. It is exciting to see how many more collaborations are forming, and especially with the market shifting to more upward trends, we are hoping to see more from the luxury industry in the Web3 ecosystem.
