INVESTMENT CLIMATE, NFT

Burberry and Coca-Cola: Why do big businesses get involved in NFT?

Luxury brands and fast food companies are increasingly taking interest in NFTs (non-fungible tokens).

The NFT market is booming. While in the beginning of the year, the entire NFT market was worth just over $1 billion, the industry’s sales soared by 700% in Q3 2021 alone, according to DappRadar. This dynamic is largely due to the growing prices of the cryptocurrencies that are used in NFT transactions. Another significant factor is the interest shown by big brands and corporations representing large conventional business. Many of them are venturing into the NFT world following the example of artists and auctioneers. It appears that tokenized art is not the only popular asset in the digital world and many cryptomarket participants are equally enthusiastic about NFT shoes, cosmetics and accessories. So why are large businesses dipping their toes into NFT?

New NFT loyalty

NFTs for brands are also a marketing ploy — and not only because of media coverage and publicity. It turns out that tokens help to form another communications channel with the brand’s audience in addition to private sales and limited collections. Loyalty programs are in tatters (according to CFI Group and Radial, 38% consumers are not interested in joining them) and NFTs may be a chance to revive them.

For example, Clinique released a limited range of NFTs for its loyal customers. Others would not be able to buy the beauty brand’s tokens even if they really wanted to. To have access, one must be a member of the SmartReward program and share stories of optimism. McDonald’s France put up NFTs representing popular dishes on its menu as prizes for social media contests. In a similar gig, McDonald’s China will distribute 188 NFTs as gifts among employees and customers to mark the 31st anniversary of the company’s first restaurant in China.

Off to the metaverse

Releasing NFTs is yet another way for businesses to claim their place in the digital world of the future — or the metaverse, an interactive three-dimensional digital environment that includes multiple virtual spaces. The world’s largest corporations like Microsoft are already working on creating their own metaverses. Mark Zuckerberg’s company even changed its name to Meta. Brands are also making their first steps into virtual existence.

Coca-Cola launched its first NFTs in the Decentraland metaverse during a virtual rooftop party with one of the NFTs being a branded bubble jacket that could be worn in the virtual reality platform. Sotheby’s, the world’s top auction house, chose Decentraland as the venue of its virtual gallery, a replica of a real gallery building in London, and now presents digital art there for the digital world participants.

The sportswear giant Nike also plans to sell virtual products in metaverses: the company has filed several trademarks with the patent office. In turn, ASICS has already presented NFT sneakers that can be worn in various apps, including Metaverse-based virtual worlds.

NFTs for ESG

For large brands and corporations, the launch of NFT tokens has become a way to support charitable and social initiatives. For instance, the Taco Bell chain of fast food restaurants sold up NFTs based on its food in just 30 minutes, with some selling for almost $2.5K. The company said that proceeds from the sale of the digital collectibles would go to the Taco Bell Foundation, which raises money for young people’s education and career progression. Campbell Soup Company, a maker of condensed soups, will donate its NFT funds to the hunger-relief organization Feeding America. Fashion brand DKNY will auction NFTs featuring its logo to benefit the American Nurses Foundation.

Such campaigns help brands reach younger audiences: according to Nielsen, millennials are willing to spend more money on brands that support social or environmental projects.

Man the player… in NFT

By 2025, the global video game market reached $200 bln; according to PwC, it generated 10% more in revenue last year alone. Every fourth person on the planet plays computer games. Games are becoming more important for young people, transforming into a means of communication with the world and brands in particular.

The latter are striving to ride a wave of the interest in video gaming, including by using NFTs. Among the most popular mechanics is the launch of in-game NFTs that are directly associated with brands. For instance, the luxury brand Burberry that makes clothing, accessories and fragrances has created a virtual character with the brand’s logo for the Blanko’s Block Party blockchain game.

To celebrate Louis Vuitton’s 200th birthday, the luxury goods manufacturer LVMH launched Louis The Game, a mobile game with embedded NFTs. Throughout the game, which features a fantasy world and several virtual universes, users can travel to Paris and collect NFTs, some of which were designed by digital artist Beeple.

The reasons for launching such projects are clearly obvious: by 2025, up to 45% of the fashion brand users will represent members of Gen Y and Gen Z — that is, the “gamer generations.”

Reliance on income

Brands make money through selling their own NFTs as well — especially given that customers are ready to pay for digital assets that are increasing in value. In 2019, an NFT of a dress design was sold by the Dutch company The Fabrikant for $9,000, while in 2021, the US brand RTFKT Studios sold NFT sneakers bringing in more than $3 mio.

Yet, current NFT sales even by the world’s biggest brands are a far cry from non-digital markets. The nine-piece NFT collection from luxury fashion brand Dolce & Gabbana, Collezione Genesi (including the Glass Suit and Dress from Dream lots), was sold on the digital platform for $5.6 mio — while the company’s annual turnover exceeds one bln euros. But the situation in the industry is rapidly changing — and this is not about the surge in cryptocurrency value, which makes NFTs increasingly attractive. We should rather remember the dynamics of online sales market: few had believed in its potential, which led to many experiencing considerable losses at the very least. Now, it looks like big business is unwilling to repeat past mistakes.

The NFTs based on Yury Aratovsky’s cartoons are available through bidding here: Binance NFT. The auction is open to all Binance users. Binance NFT Marketplace uses the same user account system as Binance.com. New users will need to create an account on Binance.com first.

By Olga Blinova

Read more about Yury Aratovsky here: An artist with a sense of humor

This is only background information about the NFTs. This is not an advertising of digital financial assets, or a recommendation to perform any actions.

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