A computer processing chip with the word "NFT" inscribed in the middle

Why Are Major Apparel Brands Diving Into the NFT Market?

Entering the metaverse has recently become a high priority amongst apparel brands, but is the NFT method the best path forward?

There is no greater example of a terribly confusing technology in 2022 than NFTs. Yet, as the metaverse concept continues to gain traction, major apparel brands such as Nike, Adidas, Wrangler, and Puma have been diving headfirst into these digital assets.

From the outside looking in, NFTs appear to be a tech bro playground encased within one of the largest financial bubbles since the 2008 housing crisis. But from within, NFTs are viewed as a critical entry point into the metaverse, and the allure of personalization, branded experiences, and virtual garments has garnered significant attention from brands and shoppers across the globe.

With this trend showing no signs of slowing down, we decided to dig deeper to discover how NFTs are poised to affect the apparel industry as a whole.

What Actually is an NFT? What Gives Them Value?

A woman avatar linked to an NFT

At a high level, an NFT is a digital token created on a shared ledger (blockchain) and linked to an asset. While these assets tend to be art, there are no limitations to what they can be. It could be music, a website domain name, a physical garment, even the deed to one's house could theoretically be tokenized through an NFT. The token itself verifies one's ownership over the asset, which can be traded to another user through the blockchain.

In most if not all cases, NFTs are not collectible in nature, but offer different forms of utility (or benefits) for those who maintain ownership of the token. Take the Adidas apparel NFT as an example. Token holders are eligible to claim free, physical merchandise from Adidas as well as participate in exclusive metaverse experiences. That is just the tip of the iceberg. In another scenario, holders of an NFT collection were offered networking opportunities with one of the greatest entrepreneurial minds of this generation, Gary Vaynerchuk. Good luck trying to get these perks with a simple screenshot.

Why is the Apparel Industry So Interested in NFTs?

Adidas apparel NFT

Many cite Facebook's overt dedication to the metaverse as the catalyst that brought brands into the world of web3. Since Facebook reshaped its company into Meta, digital experiences of all shapes and sizes are gaining noticeable traction, and brands are eager to capitalize on this emerging trend. While there are several avenues brands can take to get more involved in digital experiences, NFTs are popular for several reasons:

Raising capital for projects - Vaguely similar to an IPO, apparel companies can use NFTs to raise a significant amount of capital in a very short period, which is then used to fund the NFT project itself and other business objectives.

Experimenting with new product designs: Brands leveraging NFT technology to create metaverse apparel have the opportunity to bring these virtual garments to life. They can achieve this by gauging interest in specific styles, shapes, and collections, choosing to bring only the products with the highest-selling potential to life. In the case where exclusive ownership of the NFT’s design is a factor, the garment can still be brought to life as a form of utility specific to the token’s owner.

Entering the metaverse - A considerable amount of apparel brands view NFTs as the gateway to the metaverse. Not only can NFTs act as a digital extension of one's physical identity but also as one's admission ticket to exclusive events and social clubs both within and outside the metaverse. Having branded assets, real estate, and exclusive events within this emerging digital world is a promising concept for brands looking to enhance their web3 experience. 

The NFT Effect on Apparel and Potential Roadblocks Ahead

A shopper using a VR headset to enter the metaverse

Eager to bring digital assets and branded metaverse experiences to their shoppers, apparel brands have been on a tear recently, releasing numerous NFT collections in the past few months alone.

For example, Nike released their MNLTH shoe collection in February which has already seen over $147 million in trading volume. At a 10% royalty fee per transaction, Nike has made over $14 million off this single collection alone. Adidas saw similar success with its in-house apparel NFT launch which saw $120 million in trading volume also at a 10% royalty fee. Needless to say, shopper interest surrounding digital assets is at an all-time high.

While these numbers seem outlandish, a significant portion of this revenue will be used to fund virtual events, create exclusive branded experiences, and bring these digital garments to life. This is much easier said than done however as brands will have to factor in ownership rights, production and distribution efforts, and of course, sizing and fit for physical garments.

As many of these garments will be exclusive to token holders and return possibilities will be slim to none, getting sizing and fit right on the first try will be exceedingly important, especially for the shopper who just invested thousands of dollars into the NFT itself. Modern sizing solutions (like WAIR) can play a pivotal part in ensuring these garments are designed around the body type of each unique shopper, streamlining the distribution process and significantly reducing the possibility of returns.                                

Is There a Future for NFTs?

There is no denying that NFTs are an interesting phenomenon, but only time will tell whether they are the future of digital (and physical) collectibles within the apparel industry. Similar to other "investments," the people who buy NFTs linked to companies like Nike, Adidas, Wrangler, or Puma, do so because they believe in the company's vision. We know by now that these brands are here to stay and if the web3 concept comes to fruition, branded digital assets like NFTs are poised to make a significant splash.

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