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Is Web3 really the future of luxury?

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Is Web3 really the future of luxury?

Seduced by the potential of blockchain and cryptos, many luxury brands such as Louis Vuitton, Le Bristol Paris and Gucci have launched projects. While some have met with success, others have encountered more difficulties, whether technical or commercial, which shows just how far the sector still has to go.

Louis Vuitton isn't the most bankable luxury brand on the planet for nothing. When it does something, the famous French label does it completely, perhaps even more so when it's in a universe that's still fairly unknown to it, such as Web3 and cryptos.

A few weeks ago, the flagship of the LVMH group launched a collection of NFTs that caused quite a stir. Called "Via", the project combines physical objects, in this case a Louis Vuitton trunk, with a digital double registered on the blockchain: the "Treasure Trunks".

Of course only holders of the NFTs in the collection - there are around a hundred of them - receive the physical trunk, and have access to a succession of other exclusive items 💫.

The project hasn't just generated buzz because it's deployed on the Ethereum public blockchain. It has also, and more importantly, attracted comment because of its price: the "Treasure Trunks" cost €39,000 each 😅, making it unaffordable for the average person. "That wasn't the aim anyway," slips a source close to the luxury giant.

Contacted by The Big Whale, Louis Vuitton declined to comment on this collection, which is currently being sold. According to our information, not all the NFTs have found takers yet. "It's even a bit complicated", slips an investor and customer of the brand, who has been approached several times to buy his.

"Beyond the price or even sales volumes, the objective of this kind of project is to test and innovate", analyses Karen Jouve, co-founder of Doors3, a consultancy specialising in Web3. "In any case, that's what a lot of luxury brands have been doing for the past two years", she adds.

Louis Vuitton's NFT trunk (credits: Louis Vuitton)

Louis Vuitton is indeed far from the only group to frolic in Web3.

Whether in wines and spirits with Hennessy, fashion (Prada, Christian Louboutin, etc), cosmetics (Yves Saint Laurent), watchmaking (Cartier, Breitling) or hotels with Le Bristol Paris, initiatives are legion 🚀.

But how can such a phenomenon be explained, especially in luxury? What is the objective? What are the results? What are the ambitions? This is what we have tried to understand through our survey.

👉 Why such a phenomenon?

There are several elements that explain the interest of luxury players in the Web3 universe. The first is obviously linked to the digital scarcity made possible by cryptos and NFTs (non-fungible tokens), the unique tokens on the blockchain.

"Web3 tools make it possible to introduce the notions of ownership, rarity and exclusivity into a digital universe that is characterised by abundance, so there is a perfect symmetry with the approach of luxury groups," confirms Thibault Genouville, Web3 consultant at The Boston Consulting Group (BCG), a firm specialising in strategy.

For luxury brands, which are attached to rarity, being able to recreate this dimension in the digital world is a considerable asset, all the more so - and this is the second reason - because the majority of the sector has failed to make the shift to e-commerce over the last 20 years.

"Luxury watched the Internet train go by in the 2000s," confirms Elise Yoshida, digital and Web3 director at Christian Louboutin. "Right now, we can clearly feel that there has been an awakening and that there are also opportunities," she explains.

"With NFTs and cryptos, luxury groups can skip straight to Web2 and move on to Web3 with a more immersive Internet," stresses Johannes Wilbrenninck, head of Luxury and Web3 at the consultancy Fabernovel (acquired by EY).

👉 What projects?

In an attempt to immerse themselves in this universe, the Christian Louboutin brand, known for its iconic red soles 👠, launched an NFTs system in the form of a Proof of Attendance Protocol (POAP) at the end of 2022.

The brand's customers who attended certain fashion shows received an NFT proving that they were indeed there. On paper, there's nothing revolutionary about it, but possession of these NFTs then gives access to new products from the brand. "It's a way of engaging and building loyalty", stresses Elise Yoshida.

Christian Louboutin is thus working on other campaigns, but this time with other types of NFTs. According to several sources, these could be products in the form of NFTs such as, for example, tokenised shoes that could be used in the metaverse. Christian Louboutin has not confirmed this.

YSL Beauté is taking a slightly different approach. For the cosmetics brand, which belongs to the L'Oréal group, the aim of its arrival on Web3 was above all to position itself on a buoyant subject in terms of image 😎.

"Yves Saint Laurent has always been at the forefront of social movements. At one time it was the skirt, today it's Web3", explains Diane Hecquet, Loyalty and Web3 Manager at YSL Beauté.

Targeting new customers is also a priority. "Today, we are present on platforms such as Youtube and Twitch to broaden our audience among the younger generations. Our presence on Web3 with NFTs is part of the same strategy. We are creating a link and a rendezvous with the new generation who are more geeky and sensitive to the ownership of digital objects", she adds.

YSL Beauté launched its first project in 2022, at the VivaTech technology fair in Paris. The brand distributed 10,000 NFTs, "Golden Blocks", to its fans present at the show and on social networks.

"Thanks to this type of project, brands create a direct link with their customers. NFTs make it possible to enrich the relationship and offer new services", points out Pierre-Nicolas Hurstel, co-founder and CEO of Arianee, which supports brands in their Web3 projects and works, among others, with YSL Beauté.

Since then, YSL Beauté has launched other projects, such as the "Black Opium, The Night is Ours" collection associated with the brand's famous fragrance (Black Opium). Each buyer of one of the 2014 bottles of perfume - in reference to its launch date - could receive an NFT from the brand: 14 of them were particularly rare NFTs.

Possession of these NFTs entitles the buyer to exclusive benefits such as access to private sales. "Some of the buyers requested their NFTs and received them in their wallet," explains Diane Hecquet. But how much? This time, the brands are less forthcoming.

The subject where they are less forthcoming is traceability and environmental impact. Luxury is in fact one of the sectors most affected, both by issues relating to the origin of materials - leather, precious stones, etc - and the consequences of its activity. Karen Jouve, co-founder of Doors3, confirms: "No player in the sector can ignore this issue."

Dozens of brands, such as Loro Piana, have launched traceability projects. The brand, which belongs to the LVMH group, began tracking all its raw materials, particularly wool, on the blockchain in March. Each of the brand's garments is also sold with an NFT, which makes it possible to trace the brand's entire supply chain.

👉 What are the results?

What impact have these projects had on the brand and customer engagement? "It's complicated to know," admits Elise Yoshida. Same answer from Danielle Barich, head of Web3 strategy at Hennessy (LVMH Group).

In 18 months, the famous Cognac brand has launched several projects, such as Café 11, which is a club bringing together customers - even fans - of the brand.

At the end of 2022, Hennessy put its 1765 NFTs on sale, in reference to the brand's creation date, and only 460 of them were sold after several months 🤨. A failure? "We have withdrawn the rest of the collection from OpenSea," explains Danielle Barich, who refuses to talk about a failure.

"We are in the process of discovering this universe, its codes, so it's normal that there will be adjustments," she stresses.

Meanwhile, while all the lucky owners of the NFTs have their customised digital token, all the events announced for members are overdue.

"Some brands don't necessarily measure what the launch of a collection involves in terms of both commercial and technical deliverables," stresses Johannes Wilbrenninck of Fabernobel.

"Web3 is seen as an El Dorado where everyone wants to be first, but the consequence is that not all projects have necessarily been thought through," adds an expert on the subject.

Hennessy
NFTs from Hennessy's Café 11 collection (credits: Hennessy)

👉 What's the financial cost?

Financial cost and its impact on business is the question that many luxury players are asking.

For some, there are indeed issues around the profitability of projects. "I have a budget of one million euros in 2023", explains the Web3 manager of a luxury brand. "If I want to keep that budget, I'm going to have to start showing that there's a financial impact. At the very least", she adds.

"Web3 used to be just a stunt, but now it has to make a profit", stresses Karen Jouve, co-founder of Doors3.

This observation is shared by several other big names, who nevertheless want to remain anonymous 🕵️♂️.

"Web3 is a real opportunity and an area we want to continue to explore, but we're going to have to be able to quantify its impact, at least a little," admits Thomas Matteï, head of marketing and e-commerce at Bristol Paris.

In the spring, the famous Parisian palace launched a collection of 11 NFTs giving access to a series of benefits: a night at the hotel, access to the Bristol Paris swimming pool for 5 years as well as breakfasts.

Each NFT costs 8 ethers, or around 15,000 euros at the current rate. "That may sound expensive, but in reality the benefits far outweigh the cost of the NFT," explains Thomas Matteï.

However, not all the NFTs have gone, far from it! According to our information, only 3 of them have been sold. "We are very demanding about the candidates", insists Thomas Matteï. In other words, some were rejected because they didn't meet all the criteria. Is this enough to explain the 'low' sales figures? "It's a very exclusive product," stresses BCG's Thibault Genouville.

What's certain is that launching such a project costs money 💶 and not all companies are capable of doing as, for example, Dolce & Gabbana did with its "Collezione Genesi" collection. The brand recovered more than €5 million. Important detail: the collection dates from... 2021. "It's always easier during a boom", slips a sector specialist.

Quotes vary, but launching a collection of NFTs or a project in the metaverse, with the purchase of land in The Sandbox for example, can easily cost a few hundred thousand euros. "

The bill can climb even higher because luxury standards are high and sales volumes are a far cry from what more mainstream players like Nike can achieve. In 2022, the American giant generated almost $200 million from the sale of NFTs.

For other brands, the priority is above all to continue rolling out projects with consistency. "We have launched for the long term. The objective is not to have a financial impact directly via NFTs, but more via the impact in terms of image", insists Diane Hecquet of YSL Beauté.

The fact remains that some projects are far from being well put together. "Many have launched without necessarily having a long-term vision," explains Johannes Wilbrenninck. Now they're in the phase where they have to keep telling a story even though they don't know exactly where they're going."

Who are these brands? Still difficult to know, but their number is not negligible 🧐.

Some, however, do not hesitate to mention cases such as Guerlain and its "Cryptobees" project. Launched in 2022, before the market crash, the project based on NFTs was supposed to make it possible to "rewild" a nature reserve in France with bees.

A little over a year after its launch, the project has made almost no progress, and the community is very little active, particularly on the Discord. "This is typically the project that wasn't thought through enough upstream and didn't need Web3-related technologies", criticises one industry specialist.

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