Every week, The Interline analyses up the most vital talking points from across the landscape of fashion technology news. This analysis is also delivered to Interline Insiders by email.
What the downturn in the NFT market might mean for fashion.
Representing perhaps the shortest hype-cycle in recent memory, statistics suggest that the market for NFTs has slowed down considerably. From the frankly crazy peaks of spring, when the gold-rush saw big ticket assets being minted and then sold for tens of millions, the current transaction volume represents a 90% fall.
At first glance, this doesn’t seem like headline news. It follows that, when the initial furore around provably-scarce digital art died down, the money changing hands through dealers and brokerages would slow to a relative trickle. But on a deeper inspection, it becomes clear that something else is happening – with potentially profound implications for the way the fashion industry thinks about its ambitions to sell digital-only goods.
The most worrying indicator in this new analysis is that the number of active wallets is also dwindling. This is concerning for anyone invested in the NFT market for the long-term, because it doesn’t just mean that people are no longer spending money – it means they’ve given up on the whole affair. At least for now.
Practically-speaking, though, this probably represents a mundane reality: the user experience of owning private wallets for blockchain-backed assets is likely a barrier to broader adoption the same way it was in cryptocurrencies. And just as user-friendly exchange Coinbase became synonymous with the influx of consumers to cryptocurrency speculation (before its share price took a tumble of its own), The Interline sees the future of NFTs and digital fashion as being contingent on the creation of intuitive platforms and applications, rather than individual governance.
Less immediately concerning, but no less interesting is which segments of the NFT market are sinking, and which seem to be staying afloat. While digital art has fallen precipitously, the market for cheaper collectibles and “metaverse” items (more on the state of the metaverse in a previous roundup) is still buoyant.
This, in The Interline‘s opinion, should be a positive thing for the future of digital fashion. Rather than dealing in high-priced one-offs, which is by definition a limited market, brands should be looking longer-term and borrowing principles from collectible card games and videogames, where rarity exists on a sliding scale rather than being a binary thing. This represents the difference between selling one instance of a garment and selling – as ballpark figures – a few hundred “legendary” versions, a few thousand “epic” versions, and tens of thousands of “rare” versions, with different price points, different colours and materials, and – depending on the use case – perhaps even different functionality.
Relative scarcity is, of course, a model that fashion is already intimately familiar with, and it’s one that the industry should find far more natural to adopt than a shift to digital couture. And based on this week’s data, it’s one that the market itself will be far better able to support.
Post-pandemic growth and sustainability seem to be closely aligned, but objective data is still lacking.
If any further evidence of the long-term shift to online shopping were needed, today saw the publication of new statistics that suggest online shopping has seen a 30% year-on-year increase – one that is likely to be sustained.
Critically, though, while sales of new clothing are all that’s represented in these figures, this week has also seen two major stories that revolve around the online secondary market Depop. First, the company published a new report explaining the extent to which younger consumers’ buying behaviours are being driven by ethical and environmental values. Second, a day later, it was revealed that Depop was being bought by craft and lone designer marketplace Etsy, bringing together two forces – democratised retail and second-hand sale – that are likely to have a defining effect on the shape of fashion post-pandemic.
Interestingly, taking account of that 30% rise in online sales, Etsy’s acquisition can also be seen as a way for the American company to hedge its bets against uncertainty in the eCommerce landscape; Etsy saw a slump in its earnings recently which raised the possibility that online sales might falter as physical retail reopened.
One thing that seems certain, though, is that both used and new sales are going to have a strong sustainability component – the latter supported by re-use, and the former by new initiatives such as H&Ms recent addition of Higg Index Sustainability Profile information to its product labels. The timing here is unlikely to be a coincidence: as consumers start buying again, online and off, in earnest, the brands that are better able to communicate their sustainability credentials will be the ones that stand to benefit from a surge in shopper demand.
But as we mentioned just last week, the level of supply chain visibility that these material-level initiatives offer could very soon fall short of both consumer and regulator demand. Because while it’s comforting for shoppers to know that they’re making a sustainable choice relative to the choices they could have made previously, that remains a different prospect to knowing, in absolute terms, the material, labour, and process makeup of the products they’re buying.
And the best from The Interline this week:
This week we published the latest exclusive feature from Brooke Roberts-Islam, which looked at how brands and retailers can extend the value of the 3D assets creating during design and development.
Featuring perspectives from VNTANA, Shopify, and PlatformE, this new feature is essential reading for anyone interested in discovering the barriers to turning 3D assets into downstream experiences… and how they might be overcome.
