Welcome to the Sociology of Business. If you are not subscribed, join the community by subscribing below and share it with everyone you think may find it useful. You can find my book, The Business of Aspiration on Amazon and you can find me on Instagram and Twitter. For those new here, I did the Lessons from Cash App analysis, which focused on why turning commerce into culture is the best go-to-market strategy.
The Furry Lisa, a digital piece of art created by Murat Yıldırım, is a symbol. It is physically soft and inviting, but it exists only in the digital domain.
Baudrillard would be thrilled. Forty years ago, he suggested we have “replaced all reality and meaning with symbols and signs, and that our experience is a simulation of reality. The distinction between reality and representation vanishes. There is only the simulation, and originality becomes a totally meaningless concept.”
Reality, symbols and society now have an inverse relationship. Last Fall, Balenciaga launched its Afterworld collection in Fortnite. Since then, Balenciaga’s print ads featuring Justin Bieber look like they came straight from Fortnight. (Baudrillard would have called this “the third order of simulacra,” where the representation precedes and determines the real.)
Luxury has always been in the business of simulation: of making its stories believable by the massive numbers of people. Coco Chanel was an artist; Louis Vuitton was a craftsman; Hermès has inimitable heritage; Ralph Lauren is about American aristocracy; Möet Hennessy has been made according to a secret recipe transmitted over generations. People believe a luxury brand is valuable because others believe it is valuable; the more we believe something’s valuable, the more valuable it becomes.
Luxury is a simulation. So is crypto. Arbitrary images represent things they have no relationship to (Doge Crown? A Bored Ape?) Gucci, Dolce&Gabbana, Balenciaga or Burberry are all creating fashion that we’re never wear our physical bodies. This makes them no less desirable or believable.
Signs and simulation have a great aspirational power (just look at the decoupling of value and price in the current art market). Luxury and crypto assets’ aspirational power fuels modern economy, where the growth motor doesn’t come from physical products, but from the story-rich intangibles like a virtual crown or a pixelated cartoon character.
Here are some scenarios for business and brand growth in the luxury crypto world.
Value-add. Most valuable assets are those that combine physical and digital benefits: e.g. a Gucci jacket has both the use value and exchange value thanks to being associated with a digital collectible. Both the jacket the digital asset linked to it the provide VIP access and membership perks (invites to fashion shows, brand experiences, private events, preferential product access, skipping levels and lines) in the digital and physical worlds. This is a value versus volume strategy that secures revenue without overproduction, over-inventory and discounting.
Fractional ownership. Capsules and special collections come with selling ownership rights of individual products via crypto. If one buys a token attached to a product in a collection, they will receive royalties from the product sales down the line. Example: Particle is program where ownership of a Banksy painting plans to be sold off as 10,000 NFT fractions.
Secondary marketplaces. Authentication - “product passports” - provided by tokens ensures that resold items are not counterfeits. This opens up another marketplace for luxury brands, where they can resell their own pre-owned items. Additional benefit are royalty fees of all future transactions, ensuring that a brand will continue making money off the products it created a long time ago.
Monetizing IP. Turning archives into a new revenue stream is directly monetizing a brand’s intellectual property. Archival collections and pieces can be issued in metaverse only and can obtain their own exchange value.
Financialization. Turning a brand into a platform where the role of the artistic director is to create a brand’s aesthetic universe, and where creativity is not limited only to the members of the design team. Designs come from a wide array of creators and the brand collects a fee from the sale of their designs under its umbrella. Example: The Fabricant invited 50 creatives to design fashion garments on its platform, with the intention to open up to 5000 more. Those who sell their designs pay the Fabricant a 10% fee.
Cost reduction. Digital assets have high margins. Minting them (while it has a high environmental cost) does not require physical materials, production facilities and massive costs of time and labor in order to be created. This expands a brand’s market and reduces its supply and production costs: a selected limited number of items can be produced in the physical world and the rest can be created virtually and used for consumer status-signaling.
Fighting off commodification. There are only so many Gucci items that a person can own, but not if those items come with associated digital assets. Having a metaverse link allows a brand to cultivate “elitism to all:” it can sell a lot of digital asset-accompanied items to a lot of people without diluting a brand’s symbolic value. This symbolic value makes a commodity incomparable: a very few people will pick BooHoo over Zara or H&M. But many will select it thanks to its metaverse link. This link gives brands a temporary monopoly by rendering their competition irrelevant in the metaverse.
Collaborations. Fashion uses art to give itself cultural meaning and relevance. Fashion items stop being commodities and become works of art, by sheer association with an artist who collaborated on them. Digital art and digital artists are the next iteration of this practice. Example: Givenchy dropped a collection of NFTs created in collaboration with the graphic artist Chito.
Co-creation. Fashion companies are talent companies and the creator economy is disrupting its legacy structures. Just like Fortnite community inspired Balenciaga’s designs, fashion companies can move towards becoming creative collectives. Each collection can has its own identity within the brand universe, reputation and community. Collectives can focus on the actual product designs and/or on content creation, with associated royalties based on item/content performance, delivering returns to creators in perpetuity and ensuring that a brand attracts the very top talent. A version of this idea are GOAT’s Spaces is an immersive digital reality where users can create mood board worlds around different themes.
Identity. In mature markets, a brand is the key product differentiator. A brand makes products stand for something more than their function and separates them from commodities. A metaverse link enforces brand identity, ensures its continuity, and connects products into a story.
Influencer relationships. Crypto moves the money to the people who create and the people who consume, and to the people who improve the network itself. This means that influencers can keep earning money off their styles in perpetuity, through royalty fees paid by the brands featured in their looks.
Membership. Crypto has the opportunity to make brand loyalty programs more relevant, meaningful and valuable to its members by rewarding individual and community contributions, providing fractionalized ownership, culturally enriching members’ lives through access and offering signaling of status, social distinction and belonging. Example: adidas launched POAP on its CONFIRMED app, offering digital tokens to its most loyal users.
Taste communities. Tokenized communities build durable verticals, across different interests and tastes, from luxury food and wine to fashion and watches and jewelry and experiences. Tokens give access and ownership and social, cultural and educational benefits.
Marking an occasion. The easiest way to commemorate an anniversary or a special occasion is to mint tokens related to it. Brands spend inordinate amounts of money and time to mark holidays, centenaries or other notable events, when a limited-edition, scarce tokens do the trick. Examples: White Castle marked its 100th birthday with 5001 NFTs, Under Armor created a sneaker NFT to honor it’s ambassador’s Steph Curry’s 3-point record and K-Swiss released its anniversary sneaker accompanied with NFT.
Physical retail. Metaverse extends its life through digital wall displays, galleries and physical renditions of digital assets. Example: Dolce & Gabbana featured an NFT installation in one of its flagships.
The other week, I spoke with Neustreet X, a podcast focused on “the most interesting people in the collectibles space across sneakers, sports, trading cards, NFTs, fashion, art, and more.” We talked about how NFTs and the Metaverse are being approached by major brands, advertisers, and marketers, in addition to exploring how society values things, aspirational economy and web3, the collector economy, and brand growth and loyalty.here.