The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
This month, fashion brands RTFKT and The Fabricant collaborated on a line of earrings, sneakers and formal wear. Priced between $20 to $10,000, the collection was sold on the online marketplace Dematerialised, which had over 3,000 users register for access to the drop.
In under 15 minutes, the entire collection sold out, a familiar anecdote in the age of streetwear. RTFKT and The Fabricant’s collection, however, was entirely virtual, meaning all the garments produced, as well as the fashion houses and the retailer that supported them, exist solely in the digital fashion realm. The pieces were issued as non-fungible tokens, or NFTs, and can be worn for AR experiences, within virtual sites like Decentraland or as collectible items for those with faith in the market’s future growth.
Demand is clearly increasing within the virtual fashion market, as NFT mania propels new interest (and sales) for virtual fashion houses and the retailers, like Dematerialised, that enable brands and designers with a platform to sell to consumers. Though NFTs have been the predominant buzzword, the category for virtual apparel extends beyond both NFTs and cryptocurrency, as companies look to capitalise on digital garments within gaming, metaverses and augmented reality.
But despite headlines, quick sellouts and brands like Gucci dabbling in the space, the market is still in its infancy. What’s more, digital investments, cryptocurrency volatility and interoperability all pose barriers to wide-scale adoption. The emergence of a player that rivals top luxury brands within the digital fashion world is still a long way off — but those who want to experiment should have a specific set of goals and expectations in mind before launching virtual products.
The virtual fashion market is still nascent, but has already proven volatile for buyers and sellers.
In recent weeks, the average price of NFTs has dropped nearly 70 percent, according to figures by NFT tracker Nonfungible.com. Bitcoin and Ethereum, the cryptocurrencies that often facilitate sales of NFTs, have also experienced heightened instability after unconfirmed reports that the US treasury would be ramping up investigations into money laundering schemes involving cryptocurrencies, with Bitcoin dropping 14 percent in less than an hour.
“To assume that this particular technology — NFTs or more generally blockchain — won’t be an incredibly volatile environment for the next five years is to have forgotten the lessons of history when it comes to the internet,” said Ken Seiff, a partner at Blockchange Ventures, a venture capital firm investing in early-stage blockchain technology. “I think companies are going to have to decide if this is a short-term bust cycle, or just a blip on the path to the sky.”
In the face of an ever-changing ecosystem, flexibility is key for both brands and retailers, as is having a long-term approach to the market as it matures, particularly within the blockchain space.
“Although [the NFT market] has been great to grow and harvest initial attention, it is not the sustainable route for the industry moving forward and certainly not a path for larger brands, independent designers to effectively bridge into the digital space and have longevity,” said Emma-Jane MacKinnon-Lee, chief executive and founder of Digitalax, a virtual fashion operating system specialising in gaming and e-sports.
I think companies are going to have to decide if this is a short-term bust cycle, or just a blip on the path to the sky.
That means making further investments in new technologies, and testing a range of approaches in order to find the right category and product fit. That’s proven particularly necessary in virtual fashion, an industry that relies on outside platforms and their respective software developments for success, such as virtual try-on filters, metaverses or gaming.
“We say to any fashion brand we work with: it’s experimental, it’s not always going to work and we can’t guarantee it will work,” said Amber Slooten, co-founder and creative director of The Fabricant, a digital fashion house that helps brands create their own virtual products and has worked with brands including Adidas, Marques Almeida and Buffalo London.
While virtual fashion houses and designers are the ones leading innovation, for the category to grow, traditional fashion players will need to make investments beyond one-off drops. So far, few digital fashion brands have managed to bring mainstream attention to the market, and online marketplaces are depending on traditional fashion brands to do so.
“It’s going to take leaders in the market to push mass adoption,” said Natalia Modenova, co-founder of virtual fashion retailer DressX. “We’re still in the early days.”
Many are confident that in time brands will see more uses for exploring virtual fashion as technology progresses.
“We haven’t seen any reluctance or hesitation as it relates to fashion designers or fashion houses,” said Marc Beckman, founder and chief executive of advertising agency DMA United and founding partner to fashion blockchain platform Truesy, which is set to launch this week. “I think that they see the value in using this technology for commercial growth and for marketing activation.”
A Burgeoning Business
But if virtual retailers want brands to enter the market, they must provide a certain level of hand-holding to navigate the challenges ahead. And brands, too, must be prepared to make the aesthetic and technological changes necessary to translate physical pieces into digital assets that will stand out within gaming and virtual reality worlds.
Gucci’s virtual sneakers, for instance, were a drastic departure from the brand’s typical design, opting for neon green and pink hues instead of its traditional muted brown, red and green colours.
Creating virtual fashion also means designing with an end use-case, and the capabilities of each platform’s system in mind. A virtual garment for a photo, game or metaverse all have different specifications: retailers currently can’t create one virtual garment that seamlessly plugs into all platforms for consumers. A product for a Snapchat try-on requires a completely different technology and software than a Fortnight skin or metaverse product, for example.
It’s going to take leaders in the market to push mass adoption.
Wide-scale adoption partially hinges on imbedding application utility into digital products so they can work across gaming platforms and virtual worlds. To develop a greater understanding of new platforms, traditional fashion brands may need to embrace open source collaboration, despite the fact that it’s often antithetical to the secretive and competitive world of luxury houses.
In an increasingly crowded space, virtual fashion retailers also must make efforts to differentiate themselves from other marketplaces like SuperRare or Opensea.
DressX, for instance, focuses primarily on photo try-ons, in which users buy a product and send in a photo which is then digitally tailored to include the garment, while Dematerialised specialises in augmented reality and metaverse pieces backed by blockchain Lukso.
It’s a horizontal way of building an industry.
Experimentation involves cross departmental collaboration as well: The Fabricant typically works closely with a mix of marketing and design teams in order to develop new ideas that lend themselves to virtual products.
But it’s not just the existence of these products that will propel online marketplaces, but access to them. That’s why gaming is perhaps the biggest roadblock for virtual fashion retailers: Each platform requires partnerships and exclusivity with brands that can often exclude digital retailers.
“It’s a horizontal way of building an industry,” said MacKinnon-Lee. “That’s not scalable, it’s a siloed approach where you’re only getting in on one game or release.”
However, there are signs that more integration between platforms and software is coming: All of the companies BoF spoke with for this story mentioned more rollouts and additional features that would allow users to buy virtual garments for a range of uses.
“We believe the market will be big soon,” said Daria Shapovalova, co-founder of DressX. “Then the competition will start.”
The Opportunity in Digital Fashion and Avatars Report — BoF Insights
BoF Insights’ guide to digital assets in fashion, which examines the rise of the metaverse and underlying technological, social and consumer shifts, plus includes a playbook for how to seize the opportunity. To explore the full report click here.
The Opportunity in Digital Fashion and Avatars is the in-depth report published by BoF Insights, a new data and analysis think tank from The Business of Fashion arming business leaders with proprietary and data-driven research to navigate the fast-changing global fashion industry.