Over the past year, non-fungible tokens, or NFTs, have emerged as a promising new avenue for fashion brands to engage shoppers and build communities of members, allowing them to interact in ways that are arguably deeper and more meaningful than simply having a Email address.

A brand can attract customers who hold their NFTs, whether they have purchased them or claimed them for free after purchasing a physical product, rewarding them with free items or exclusive access to locked products or experiences, using the crypto wallet that holds their digital tokens. as a unique identifier. NFTs tied to real-world goods can also serve to authenticate products and act as a gateway to related services, such as repairs.

NFTs are part of the world of web3, the nascent internet based on blockchain technology. Web3 advocates say they offer a path forward for fashion digital marketers, who face a number of challenges in reaching new audiences, including stricter data privacy rules, rising customer acquisition costs and the rapid cycle of social media content, to name just a few.

NFT technology is still young, so the web3 user experience can be clunky, and NFT buyers, which are now niche in the broader market, often judge tokens by whether they can be traded for Profits. It also remains to be seen how useful NFTs can be for introducing a brand or its products to audiences it is not yet connected with, a top priority for digital marketers, and even if brands can build community, it may require careful breeding to thrive.

But some argue that the days of buying attention online on the cheap are over, and it’s time for brands to start building an online approach to this new reality.

“Marketers will have to learn this new playbook, where attention is earned more than it is bought,” said Brian Trunzo, leader of the Polygon blockchain metaverse. “In web3, there is a purer way to speak to a client by incentivizing them, providing them with digital assets and benefits through NFTs.”

Community building with NFT

Adidas was an early fashion leader to embrace NFT, partnering with web3 influencers Bored Ape Yacht Club, Gmoney and Punks Comic to launch a collection of 30,000 “Into the Metaverse” tokens in December 2021. Each costs . 2 ETH (Ether), or about $800, at the moment. However, generating income was not the main objective of the German sportswear brand.

“It was to launch a new community, a new membership model,” said Erika Wykes-Sneyd, co-founder of Adidas studio web3. (Adidas also shared the revenue from NFT sales with its partners in the project.)

The brand has given its NFT holders exclusive physical goods, like a tracksuit and beanie, and recently allowed them to vote on the color of an upcoming release (orange and bright pink were the options). Most of the community activity happens on a server on the Discord chat platform dedicated to the project with around 60,000 members. Wykes-Sneyd said they plan to engage NFT holders more in the coming months as contributors and co-creators, not just customers.

Adidas’s relationship with this community is different from the usual brand-buyer dynamic, largely because members are financially involved.

“These are real stakeholders right now,” Wykes-Sneyd said. “They are supporting us, trying to support the success of this project, and they want to see it succeed. And if they don’t, they will let us know by selling and showing us the minimum prices that are going to drop”. (The floor price refers to the lowest cost of an NFT on the secondary market.)

In his opinion, the project has been successful so far, and the prices of Adidas NFTs in the secondary market suggest that customers are still interested. As of October 2022, they were selling for around $700 on the OpenSea marketplace, which is below their dollar equivalent initial cost, but qualifies as fairly stable given the year’s market turmoil that has sent cryptocurrency values ​​and NFTs crash. However, Wykes-Sneyd stressed that Adidas is focused on long-term goals for its project and the community involved, not market fluctuations.

Prada has also used NFTs to build deeper relationships with customers, although it has taken a different approach to distributing them. The Italian brand allows shoppers to claim them for free when they purchase physical pieces from its limited-edition Timecapsule collections, which drop online for a short period each month. All drops tied to NFT so far have been sold out.

NFT holders congregate on a Prada Discord server with approximately 5,600 members. In September 2022, a Timecapsule NFT owner won a trip to Milan that included an invitation to Prada’s Spring/Summer 2023 show, a tour of Fondazione Prada (the company’s contemporary art and cultural institute), and other perks. Later in the year, NFT holders could attend the next “Prada Extends” event, a celebration of local culture and music, this time in Miami.

NFTs give Prada a “greater level of intimacy” with its community base, Lorenzo Bertelli, Prada Group’s director of marketing and head of corporate social responsibility, wrote in an email.

“Web3 presents a unique opportunity to enrich our relationships with existing customers and also to engage new and diverse communities,” Bertelli wrote. “We view our NFT program as an increasingly important component of our customer relations and community engagement strategies.”

Members of the crypto community tend to be the largest audience participating in these NFT projects, but they are not the only ones. Prada NFT holders range from “longtime highly regarded Prada devotees, to curious newcomers and native web3 participants,” according to Bertelli.

As for Adidas, it made sure to appeal to several of its established customers, reserving 8,000 of its NFTs in the initial sale for users of its Confirmed app, where it rolls out advertised merchandise to its most engaged fans. Many of them were new to the world of cryptocurrency, Wykes-Sneyd said.

Great expectations Web3

Managing a community and its expectations is not easy. Bertelli said Prada has made a “considerable effort” to expand its capabilities on web3 and plans to continue investing to support more NFT and community engagement projects.

Other NFT projects have met with backlash when they fell short of expectations. RTFKT, a virtual fashion maker and NFT, has publicly apologized to its community members when one of its hyped product launches encountered technical glitches that left customers waiting for hours trying to claim the items. Adidas NFT holders have grown agitated when the brand hasn’t provided regular updates on what to expect, relaying their complaints directly to Adidas on Discord.

“We have a full-time moderator team of seven people who manage this community,” Wykes-Sneyd said. “That for us is a direct and unfiltered access to what people feel and think, whether it’s good, bad or indifferent.”

Of course, brands can use NFTs without having to create an explicit membership group. They could simply treat them as a way to push incentives and rewards to holders’ crypto wallets to occasionally grab their attention and build loyalty.

However, one challenge that all NFT creators face is making sure that customers have a reason to care about their NFTs in the first place. Ideally, tokens should have some reason to exist on their own, according to Pierre-Nicolas Hurstel, co-founder and CEO of Arianee, an NFT platform for luxury and fashion brands.

“The utility of an NFT should be native. It’s a proof of something, so the question is: do you have a good reason to distribute a proof of something to someone? A proof of attendance, participation, ownership,” Hurstel said.

Part of Prada’s goal with her project is to offer a point of view that only she can provide. As with the physical products they offer and their brand identities, brands need to distinguish themselves and give consumers a reason to want to be associated. As Polygon’s Trunzo put it: “The closer a brand is to a commodity, the harder it is to use web3 tools to grab the attention of potential customers and then keep them as followers.”

But if brands can entice shoppers to want their NFTs, it arguably provides the foundation for a deeper relationship than simply collecting an email during checkout or having the shopper follow the brand on Instagram. Hurstel described NFTs as “third-party data,” as opposed to third-party data collected and sold by other platforms or first-party data collected by a brand. It represents a relationship that the customer has deliberately opted into, which also has the benefit of avoiding data privacy issues, Hurstel noted.

He and others at web3 envision a time in the future when a customer’s crypto wallet becomes their public profile, with the NFTs they’ve collected from purchases and event attendance becoming a brand’s way of identifying their customers. interests. However, getting to this point will take time and much broader adoption of crypto wallets.

“This conversation about blockchain, solving identity and empowering consumers to take control of their identity [where] they can participate, it sounds ideal,” said Trevor Testwuide, co-founder and CEO of Measured, a digital marketing analytics platform. “By implementing that at scale, there’s a lot of work to be done to get there.”

Brands like Adidas and Prada are among those who see enough potential to start now.

This article first appeared on The state of fashion 2023an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company.