Luxury is defined by scarcity and uniqueness. But what about in the digital world, where luxury products can be obtained with a right click? How do we define their value? McKenna Sweazey explores how the three concepts that define traditional exclusivity can be translated to the digital space.
Most of us accept the idea of luxury exclusivity, even if we dislike it. We understand velvet ropes, logos that convey hours of workmanship and high price tags, and limited drops which favour those with a deep relationship with their salesperson or the patience to line up overnight.
Exclusivity is critical for luxury brands because it creates a perception of scarcity and uniqueness, defining their value. But how do we create and convey exclusivity with digital fashion, when scarcity is manufactured and there is yet to be an agreed-upon understanding of good digital design?
Digital fashion needs a new system for value-driven exclusivity when producing iterations of designs is frictionless and free. If everything is just a right-clicked JPEG (a common shorthand for the criticism that you could just download a picture of a Bored Ape NFT et voila, now you have one!), then there’s no financial value. If a designer labours for days on a “couture” digital outfit, but can make millions of copies within seconds, how do you know what’s of value?
Digital fashion needs a new system for value-driven exclusivity.
Creators of all stripes need to be paid for their work, which requires labelling, categorising, limiting, and pricing those efforts. OG web3 projects like Bored Ape or World of Women are valuable tools for digital exclusivity and examples of how these principles can work on the digital era. You can distinguish the originals from the fakes, and only holders of the former can access the Bored Ape or WoW network.
Finding a way to create exclusivity in a purely virtual form will be a foundational marketing challenge for many luxury brands in the next few years. Traditional exclusivity requires three concepts to translate to the digital space successfully: a boundary, a way to confirm provenance, and definitions of exclusivity.
Whether due to limited editions or limited access, not everyone can interact with things deemed to be luxury.
Luxury lies beyond the boundary, and boundaries are easy in web3. In fact, tokens allow for innovative solutions to the most common boundaries: price, location, and effort.
Price. The most obvious boundary is price. An Hermes Birkin, perhaps the most expensive and coveted luxury handbag, or a Bored Ape, perhaps the most expensive and coveted NFT, are simply outside the financial bounds of most people. This concept is easy enough to implement for brands with existing cache and luxury brand equity; Tiffany’s bejewelled CryptoPunks were priced at 30 eth (£40,000 at the time).
Effort. The Birkin has another element of exclusivity: they aren’t simple to purchase. Hermes is famously selective about selling their handbags, with customers working their way up the bag “food chain,” scuffling for coveted appointments, schmoozing their sales assistants, and buying lesser-valued bags to increase their status and earn the right to purchase a Birkin. Other examples of effort include letters of recommendation to be able to join a social club or creating onerous booking systems to get reservations at a desirable new restaurant.
For virtual goods, brands are already testing out ways of rewarding “effort,” or what you might call inclusive exclusivity. It doesn’t have to be about money. Inclusive exclusivity is a way for fans to be rewarded for high levels of engagement instead of merely buying their way in. As we start to see tokenised loyalty programmes become more commonplace, like Starbucks Odyssey, we will see exciting ways to “get behind the velvet rope” by performing a series of actions.
Tokenised loyalty means that holders can be rewarded using blockchain and smart contract mechanics in both monetary and experience benefits. Like airline points, you can use your tokens for discounts and access. Following Easter Egg clues found on Twitter and Reddit, posting actively on social media, or checking in to a brand’s physical outlet (via a POAP or another digital tool) are all examples of putting in the effort to reach the luxury tier. Your effort is what gets you entry into the exclusive club.
Location. There are two ways to think about location when it comes to exclusivity. Either the location itself is exclusive, requiring some special key to get there (such as money, time, or membership), or being in the location is what gets you exclusive access, like people who collect POAPs or other NFTs at branded events. Think of token-gated websites or events; holders of the token have the key to get into a different world, to shop or socialise or be entertained. Once there, they can level up their inclusion by proving their allegiance via tokens.
A digital key is usually transferable, which holders can sell on the secondary market, whilst remaining unique, thus preventing shared log-in details. Imagine how much easier it would be if the gating system for tickets was based on a tiered membership scheme maintained on the blockchain.
And that exclusivity flows the other way, like with POAPs, Proof of Attendance Protocol tokens, which prove that a holder was present at a specific moment in time. The concert tee of the digital age, but verifiably legitimate; a digital collectible that can be used to delineate true fans from wannabes. Brands, projects, and artists looking to harness virtual exclusivity can work with both of these ideas to create the exclusivity that makes the most sense for their ethos.
Where did this item come from? If you can right-click copy a digital file, there must be a standard to ensure history and ownership.
What is it exactly that you are buying? Who made it, why, and what for? For any special good, people want answers to these questions, particularly on the secondary market. This is how luxury items retain their exclusivity over time. Without the workmanship or intrinsic value visible in physical luxury goods, digital luxury needs new rules for provenance.
Specifically, it needs the digital fingerprints that blockchain can provide: irrefutable evidence that goods and people are who they say they are, and come from where they say they come from. If you acquire a digita luxury item, want to maintain its value, and want proof, then that proof has to be stored in a public, immutable ledger. Without blockchain, one has little recourse for ownership unless they stay within, say, the walled garden of Roblox, but you'll have to sacrifice some degree of owernship to do that.
Finding a way to create exclusivity in a purely virtual form will be a foundational marketing challenge.
Definitions of good taste
Who decides what’s cool in a decentralised world of community-driven digital goods?
Beyond empowering a wave of genuine digital artistic creativity, the NFT boom did web3 a disservice in many ways, as JPEGs intended fundamentally as fun community tokens were interpreted as shallow attempts at art. It’s clearer now which projects had actual value, either artistically or otherwise, but it still remains that anyone can create an NFT art project. And with AI tools like MidJourney and DallE-2, a lot of those amateur projects can look aesthetically pleasing if, obviously, derivative.
In the future, perhaps craft and taste will be more agreed upon. Or perhaps not. Perhaps a web3 future leads to a total nichification of taste, and any consumer of the arts, including fashion, will be guided by their own eye. This is unlikely, given the persistence of trends throughout time, but possible, especially as the world enters just the fourth decade of the internet.
Luxury and exclusivity are intrinsic to the human experience.
Who will rule taste in web3? There are three big contenders: the same old guard consisting of established outlets and influencers, where following is not quite as important as accepted cultural cache; a new vanguard of social media, where the largest following wins; or nobody, and we move to a decentralised micro-influencer landscape. While web3 embraces decentralised systems today, humans lean towards trends, looking for meaning amongst individuality. This makes the old guard or a similar new one more likely purveyors of taste in web3.
It is impossible to say what goods or experiences will be as desirable as Birkins or Bored Apes in the future. Yet, luxury and exclusivity are intrinsic to the human experience, to want what others cannot have. In an infinite digital world, creating the boundaries that extract that desire will be a critical hurdle for new purveyors of luxury.
McKenna is a speaker, writer, and consultant with a passion for digital empathy. She holds an MBA from INSEAD and is the author of How to Win Friends and Manage Remotely. She is excited about the emergence of digital fashion in web3.
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