2021: The year of digital fashion and NFTs

This year, brands have gotten more comfortable with digital formats after being forced to befriend them last year amid canceled fashion weeks. The digital fashion opportunity is only growing, with fashion and collectible NFTs seeing several standout moments this year. Digital fashion houses and marketplaces like The Fabricant, DressX and The Dematerialised have released collections throughout the year with notable brands like Rebecca Minkoff, as well as companies like Farfetch, Google and lesser-known digital companies like RTFKT. 

Digital fashion is also helping with production, as with the case of digital fashion sampling through Alvanon, a digital modeling and production company. “It gets people on the same page faster, which means that product development lead times are shortened. This can have a positive impact on sustainability, as it means that those key buying decisions can be made closer to market, leading to less waste and fewer markdowns,” said Petah Marian, founder of consultancy Future Narrative. Through more realistic and universal digital samples, brands will rely on physical samples less, making for a more sustainable production loop.

However, the main opportunity remains in digital fashion products and NFT’s. As the market was still adjusting to Covid restrictions around the world in the first half of the year, many of the projects showing the potential in the space came in the latter half. 

Among the biggest launches of the year was that driven by luxury fashion brand Balenciaga, when it entered the gaming world for the second time, in September, following its initial entry via its game dubbed “Afterworld.” Partnering with Fortnite, the brand launched a limited-edition capsule of four characters in head-to-toe brandwear for the gaming platform, along with a physical collection. “Balenciaga’s game was a pivotal moment in fashion. It was just the beginning of how the brand is further exploring the metaverse and what the brand will become in virtual spaces,” said Cathy Hackl, metaverse officer and futurist. 

As Balenciaga tiptoes the line between edgy and high fashion, it plays well into the gaming space that prides itself on not being too literal. In building brand awareness among a new demographic in the gaming world, it’s forming an authentic connection that could work to its advantage for future Fortnite collaborations. In online gaming worlds like Fortnite, digital fashion follows the drop format, with limited edition runs and small collections, leading to the skins being regarded as covetable trophies. The pieces from the collection that could be bought sold out fast and are now categorized as “rare’” pieces in-game. The mirroring physical pieces have now become collector’s items, with some going for almost double their original value, at StockX. 

Interestingly, though the brand has been expanding its gaming audience reach through “Astroworld” and the Fortnite collaboration, it has yet to launch an NFT. The luxury NFT market is a tough one to crack, with many brands preferring to debut a soft launch into the space through digital fashion. The only luxury brands that have entered the space are Dolce and Gabbana and Givenchy. More focused on exclusivity and art collaborations, these have not become cult items among fashion fans. Therefore, the floor is open for other brands to step in and become leaders in the space. 

However, artists have taken it upon themselves to bring fashion items to life through NFTs, as with artist Mason Rothschild’s new collection of exclusive Birkin bags, or MetaBirkins, that launched at the beginning of December. With no affiliation to Hermès, the NFT project is showing that fashion items can become cult NFTs even without brand collaboration. The project of 100 MetaBirkin NFTs has already driven nearly $450,000 in sales, reaching a floor price of 8 ETH during Miami Art Basel following the success of Rothschild’s “Baby Birkin” NFT collection sold on Basic.Space in May this year. The MetaBirkins were made available on social commerce marketplace Basic.Space. 

In a statement, a Hermès representative said that these NFTs function as fake Birkins in the metaverse. However, neither Basic.Space nor the artist have been contacted by the brand or received cease and desist letters, showing that even legacy brands are limited in their ability to control digital creators and the NFT market. 

Talking to Basic.Space founder Jesse Lee, the Birkin was an obvious choice for an NFT. “We settled on the Baby Birkin [style], because it has social recognition among women, who aren’t typically the ones buying NFTs. A typical web 3.0 crypto-native may not know anything about Baby Birkins, because they’re usually guys who are into video games and crypto. But most women, whether it’s my wife or customers on our site, would know what a Baby Birkin is.” This may also be why not many luxury brands have dabbled in NFTs — the female market that makes up a vast majority of their customer base may not yet be buying NFTs. According to small-scale polls by the Morning Consult, only 4% of U.S. women surveyed claim to collect NFTs. 

The Institute of Digital Fashion is working to break down these barriers through strategic partnerships. It recently launched its first NFT with marketplace The Dematerialised. “Both the Institute of Digital Fashion and The Dematerialised are working to remove barriers to entry and provide alternative systems and ways of thinking that are more inclusive,” said Leanne Elliot Young, co-founder of IoDF. “We already see that, in the traditional crypto space and in gaming, the fastest growing segment are those who identify as female.”

Most brands are seeing the opportunity in the space, especially considering that 68% of the Gen-Z consumer base see themselves as gamers. More importantly, according to Bain & Co., Generations Y and Z will account for more than 70% of the global luxury market by 2025.

Some digital brands like Republiqe are partnering with e-commerce sites to combine the virtual and the traditional fashion markets. “Our strategy is to build this future of virtual, crypto, metaverse — and to address this young generation of Gen Z and, tomorrow, Gen Meta,” said Diaa Elyaacoubi, CEO of French marketplace Monnier Frères. “Those young people are much more demanding. They want to be entertained in the metaverse and have clothes for digital parties and concerts.”

Talking about the partnership, James Gaubert, CEO of Republiqe, said, “Even as recent as 12-14 months ago, digital fashion was not as readily available as it is now, with virtual fashion only perceived as something to be purchased for a video game character or avatar.”

“The fashion industry will see more brands entering the space and creating new culturally relevant experiences for new generations, which will, in turn, create new revenue streams for brands. The biggest innovations in the gaming-and-fashion scene are related to direct-to-avatar slowly becoming the next direct-to-consumer. One great example is Ralph Lauren’s virtual fashion line in Zepeto and the virtual RL world,” said Hackl. 

The Ralph Lauren Zepeto line marked the brand’s entry into the digital fashion space. It has since moved on to other platforms to test reception, most recently Roblox. Metaverses in places like Roblox are facilitating access to digital fashion — for example, Ralph Lauren’s collection was encased in a winter wonderland snowglobe. The pieces were digital recreations of styles from the Polo Sport, Stadium and Snow Beach archives,. They featured blocky graphic prints and colors, and ranged from 150 to 300 Robux ($1.25 to $3), making them far more accessible than brand NFTs.

The digital world is now creating a pricing hierarchy system that is making brands more accessible. Other brands have brought brand storefronts onto the gaming platform, opening digital fashion collections to the players and spotlighting unique features and aesthetics from stores that are in line with their brand identity. That’s included Gucci with its Gucci Garden that launched in April, Vans’ Vans World (50 million site visits) that launched in September and Nikeland, which has seen 6 million visits since launching in November. 

As VR wearables become more prevalent with the rollout of technologies like Snapchat’s Spectacles and Microsoft Mesh, the digital fashion industry is only going to grow bigger. The field of augmented reality is going to be a key driver in making digital fashion more widespread, especially as ‘wear-to-earn’ models become more prevalent in 2022. Damara Ingles, one of the creators using the latest Spectacles to create digital fashion is excited about what wearables will bring.

“The experience of seeing myself wearing a digital garment in front of the mirror without having to hold anything in my hand was a little bit scary, but very exciting,” she said. “It has made me rethink the sense of physical identity in the digital space, as it reinforces that idea that I’m now imposing a digital environment onto my body, and I have to behave accordingly.”

Wrapping up the year, streetwear brands like Adidas and fast-fashion brands like Forever 21 and Boohoo are all entering the metaverse through NFT’s and digital fashion collections, showcasing different approaches to the rapidly growing market. Read more about it here.