Luxury is changing its relationship with technology and only recently it has started to blend with the virtual digital world.
The main driving force of this change is the blockchain, the same technology which underpins cryptocurrencies. Bitcoin, the first of its kind, is a digital asset designed at the beginning as a medium of exchange that uses cryptography to control its creation and management. Due to its scarcity, since there always will be a finite number of Bitcoins (21 million), its value has grown impressively over the years. If back in 2010 you could afford only a coffee with at least 10,000 Bitcoins, now you could buy many more, given that nowadays a single crypto is worth around $ 50,000.
Luxury companies have always been at the forefront of the reluctance to implement this new technology, due to the potential loss of perception of exclusivity that accompanies each of their products and to the fact that cryptocurrencies have been associated for a very long time to “dirty money” and considered a risky volatile phenomenon, being a speculative asset.
During the last year, due also to the impressive surge of the cryptocurrency market, there has literally been a rush to convert to new services correlated with blockchain. Actually, they can be considered social tokens and the ultimate tool to build a brand’s community as they further enhance customer loyalty and trust.
Even though experts believe cryptocurrencies are not going to become the mainstream payment instrument in the luxury industry, there are many brands that seem willing to experiment with this new technology. One of the first cases dates back to 2013 when a car dealership in South California broke one of the first deals ever in cryptocurrencies, selling a Tesla for 91.4 BTC that at the time was only worth $ 100,000 (now it would be worth $ 4,570,000). Since then, the purchase of luxury vehicles using cryptocurrencies has been increasing, almost becoming a norm, such that the expression “when Lambo?” has been made up specifically for asking a trader’s overall success. Other forms of luxury vehicles followed the same path, including yacht and jets.
However, this phenomenon is not restricted only to the vehicle industry. Some forward-thinking universities are now accepting cryptos as a form of payment for tuitions, attaching dedicated benefits such as the removal of credit card fees and accrued interest on a loan. The real estate market has welcomed cryptos as well and agencies are now listing houses and lands all over the world, from Bali to Lake Tahoe, purchasable only via Bitcoin. The luxury watch industry is an already established player making use of this technology and Franck Muller and Hublot are one example: they both have produced pieces purchasable exclusively via Bitcoin. The latter, specifically, has introduced the Vanguard Encrypto, “the world’s first functional Bitcoin watch” whose dial includes a QR code that addresses to the user’s Bitcoin digital wallet with the possibility of checking the balance and of making deposits and withdraws. Even the fashion industry, that may have been the most reluctant sector to turn to blockchain, is now finally implementing and exploring this technology. As a matter of fact, any maison already started to sell pieces purchasable exclusively via Bitcoin. Nowadays, this phenomenon is such widespread that there are dedicated e-commerce platforms, such as BitDials and CryptoEmporium, that sell high-end luxury and fashion goods purchasable exclusively via Bitcoin.
Regarding the potential applications of blockchain and cryptocurrencies, you will probably have recently heard about NFTs when back in March Christie’s sold “Everydays – The First 5000 Days”, a digital painting by the artist Beeple, for the moderate sum of $69.3 million. NFT stays for non-fungible token, a new type of decentralized digital asset published on the Ethereum blockchain in 2017 that allows the creation of certifiably singular virtual assets. Some players of the luxury and fashion industry have already started to find related applications for NFTs, even though now fashion being sold via NFTs is considered fashion as art, and not fashion as utility as we are usually used to associate it with. Nike for example has used NFTs to create digital shoes linked to real-world shoes and Gucci did almost the same when it launched its cheapest ever pair of sneakers at $ 11,99 only, even though you will never be able to wear them in real-life.
There are also many players in the industry that are trying to explore this new technological opportunity by building NFT marketplaces with the aim of providing users with an NFT fashion experience that is premium, clean and exclusive, like a crypto-version of Net-a-Porter. Among the many examples, Neuno and Clothia are worth to be mentioned. While the former is a startup that does this working directly with fashion brands, with the aim of reassuring buyers about authenticity, the latter is an online retailer operating in the accessible luxury space that auctions one-of-a-kind virtual NFT pieces linked to real-life products so that the winner of each auction will then receive both the virtual and the physical product.
Another increasingly important and concrete blockchain application is related to the tracking the provenance and authenticity of luxury goods. On April 20th, three major luxury maisons, LVMH, Prada Group and Richemont, announced the creation of Aura Blockchain Consortium, the first luxury global blockchain system and probably one of the greatest collaborations within the industry. The platform is intended for the entire sector and it allows the different brands to prove the authenticity and ownership of goods, to access their products’ history information and to further enhance transparency in exchange for an annual licensing fee and a volume fee. This would eventually allow brands to ensure that their products are made and handled according to their standards and to protect themselves against counterfeiting and controlling secondhand markets. Among the many maisons, Hublot, Bvlgari, Cartier, Prada and Louis Vuitton are already active on the platform and a lot of negotiations for access to the platform by other brands are already in progress.
It will probably sound to you very abstract and not applicable to reality, but its functioning is instead pretty simple. Since blockchain is by definition unchangeable and decentralized, it guarantees that the data is trustworthy and secure. Regarding this specific application, each product will be given a unique digital code during the manufacturing process that will be recorded on the Aura ledger. At the moment of purchase, customers will be given login details to access a platform that will provide the history of the product, including its origin, components, ethical and environmental information, a warranty and care instructions.
It is crucial that brands do not underestimate this opportunity because the guarantee of quality and origin of materials and final products will increase the desirability of products themselves, the transparency of the whole process and the trust of customers, ending up strengthening the relationship with them.
The question comes naturally: how long is this phenomenon going to last? Is it meant to stay? What will be the next step regarding possible applications for blockchain related to luxury? The sky really is the limit and only the future will tell.
Authors: LBSS Lifestyle Division, Gloria Scalabrin
Sources: (Cryptocurrency boom – Vogue Business, Luxury Lifestyle Magazine, Coindesk, Aura Luxury Blockchain, Ny Times, Luxury Society, Aditus, NFT Party – Vogue Business, Gucci – Hypebeast, Watchaffinity, Global Luxury Blockchain – Network Digital 360, Frankmulller.com, Forbes)