The NFT market is a hot one that is predicted to get even hotter, especially if Morgan Stanley is correct. In a note published last Tuesday, it said luxury-branded non-fungible tokens could become a $56 billion market by 2030 and could see “dramatically” increased demand thanks to the Metaverse. Added to this, the general NFT market could grow to a roughly $240 billion market by 2030, with digital collectibles from luxury brands making up 8% of the space by that time.
The analysts at Morgan Stanley said that in 2021, luxury brand NFTs only accounted for around one percent of the market’s transaction value. They said, “We think this is about to change. The metaverse will likely take many years to develop; however, NFTs and social gaming present two nearer-term opportunities for luxury brands.”
Balenciaga and Gucci make an early entrance
Early ventures into this area for the luxury brands include Balenciaga launching Fortnite outfits in September 2021 priced at 1,000 v-bucks, which equates to approximately $8. Earlier, in May 2021, Roblox, a global gaming platform, hosted a virtual Gucci exhibition where players could purchase digital models of real Gucci products for a small amount of in-game currency. Once the exhibition ran out of products, the gamers began to put up the branded NFT items for auction, inflating their cost tenfold. As a result, a digital version of Gucci’s Dionysus bag sold for 350,000 Robux, or roughly $4,100, which is $700 higher than the retail price of the real-life version.
Currently, the best-exposed companies in the run up to the coming of the Metaverse are soft luxury brands, including ready-to-wear, leather goods and shoes, rather than items such as jewellery and watches.
Widening the luxury market
NFTs will also open up brands to the possibility of earning in “perpetuity” thanks to smart contracts, which capture a percentage of each sale for the owner, as opposed to the physical world wherein the profit only comes from the first and initial sale. The analysts said, “The metaverse will more than likely allow brands to appeal to an even broader audience,” adding that the average age of Roblox players is 13, while women generate 70% of sales in the luxury brand market, but that as the Metaverse develops the luxury brands will gain exposure to ever-younger customers, and more importantly, male customers.
The importance of the immersive experience
One reason that luxury brands stand to do so well in the Metaverse is the ‘immersive experience’. As Constantin Kogan writes at Cointelegraph, “The personal avatars that users utilize will wear clothing and use items as manifestations of individualization and personal expression, much like they would in the physical world — this opens up a really exciting opportunity for premium brands.” For example, in the aforementioned Roblox’s gaming and creation system, “one in five players will change their avatar every day, much in the same way a person gets up and gets dressed every morning.” Together with Fortnite, these platforms provide some insight into the emergence of Metaverse malls.
As our physical world still maintains a capital on luxury fashion brands due to their dependence on the physicality of clothing to connect with their customers, the success of Gucci and Balenciaga are only examples of what could be. It seems luxury will always have a home in the Metaverse, but as it is early days, this is not to say that the brands we now know to be in that category won’t be out-performed by the creation of desirable goods and the arts in general. As Kogan says, “As the rules and economic landscape are yet to be full-formed in this exciting new digital frontier, and everyone has a unique opportunity to find success.”