Six Web3 Enabled Business Models for Digital Fashion

Web3 is not changing the world yet, but it is changing many industries like digital fashion by using blockchain and NFTs. Designers can create digital garments and accessories which are unique, scarce, trackable and tradable by unleashing multiple use cases and business models. These innovations using Web3 are promising to revolutionize digital fashion.

The possibilities are endless, such as digital clothes can be worn by avatars in a metaverse, a new asset class is created around buying and selling clothes as digital assets, democratizing fashion by turning the average citizen into a fashion designer and more. Digital fashion assets as collectibles have value as they cannot be replicated. Fans can collect clothes worn at specific events by celebrities or for their uniqueness. These possibilities are ones I am close to in part because of my company's involvement in digital fashion. While my last article focused on the basics of digital fashion, including key drivers, in this article, I want to examine some interesting and commercially viable use cases enabled by Web3 that can support digital fashion.

Digital Twins

Digital twins are a virtual representation of physical garments created using 3-D modeling or simulation. This NFT-enabled use can create a revenue stream enabling sales of both items priced differently. For example, Gucci's digital handbag sold for more than its physical product. Digital twins also enable conveniences like virtual try-ons to visualize the look and feel of the garment in different environments and by predicting its performance in the real world. Digital twins also enhance the design, manufacturing and supply chain processes for companies while proving great experiences for consumers.

Carbon Tracking

Large fashion industry brands are investing heavily in ESG and want to publish their footprint in a transparent way. Current carbon tracking solutions are centralized, opaque and often unverifiable. Many organizations are skeptical about the reliability and accuracy of carbon data, while others have accused companies of "greenwashing." Without technology like a blockchain, it can be difficult to ensure integrity and non-repudiation of carbon data in a multi-party collaborative environment like scope 3 emission tracking.

Web3-driven carbon tracking solutions promise a secure and transparent method for monitoring and tracking carbon emissions in a tamper-proof way. They ensure the accuracy and real-time audibility of data reported by different stakeholders across multiple fashion brands and suppliers by sharing scope 1-2-3 emission data. By automating the process through smart contracts, the likelihood of human errors is significantly reduced, leading to cost efficiencies and improved accuracy.

Event Tickets

Ticket fraud reports have doubled since 2022. Several million dollars are lost each year because of ad fraud, bots and ticket fraud. Data indicates 40% of all online ticket bookings are executed by bots or automated software increases the risk of ticket scalping, such as unauthorized ticket sales and fraud. Most of the illicit ticket sales occur in unregulated secondary markets, reducing customer trust. Secondary markets have unauthorized intermediaries or malicious actors blocking venues and artists from receiving their fair share of revenues from the ticket value.

NFT tickets for fashion events or otherwise are saved on the blockchain, confirming proof of authenticity and the legitimacy of the ticket and the vendor. NFTs can also deliver unique perks like upgraded seating, loyalty rewards, redemption for beverages, faster access through queues, etc. NFT tickets are also transferable from wallet to wallet, cutting intermediary costs, they also eliminate duplicate sales and enhance fan engagement with the sponsoring brands. Resales can drive new revenue streams for fashion designers and brands.

Marketing Campaigns

As the demographics change with millennials, GenZ and Gen Alpha constituting the bulk of the consumer base, CMO (Chief Marketing Officers) should think differently. Web2 customer acquisition campaigns have limitations. It is hard to target non-email native demographics, ad platform costs are on the rise, ROI is difficult to measure and data is opaque, resulting in strong barriers to building meaningful customer relationships. The transition to a cookie-less world is forcing fashion brands to use more transparent and privacy-centric tactics and identify a novel way to collect first-party data and engage directly with customers.

Web3 campaigns seek to offer higher customer engagement and lower costs of acquisition via NFT technology. Fashion brands can directly engage with customers or target hard-to-reach GenZ and millennial prospects. Web3 adds trust, transparency and eliminates top-of-the-funnel costs.

Loyalty Points

One study shows the average U.S. consumer participates in 16.7 loyalty programs and actively uses only half of them. Web2 loyalty programs can be complex, illiquid, opaque and closed, limiting user experience, lowering redemption rates and diminishing true loyalty.

Today's loyalty points are often static and tactical. New-age consumers like millennials and GenZ expect a different relationship with fashion brands, becoming owners, community participants and being involved in the brand story. They also want control of their own data and define the way fashion brands leverage their assets.

Web3 can improve existing loyalty programs by changing the way fashion brands connect and reward consumers by offering collectibles, tokenized rewards, viral community engagements and gamified loyalty engagement (physical and digital). Consumers maintain full ownership of their data while being rewarded for their level of engagement. Fashion brands allow tokenized rewards to be traded, transferred or redeemed on marketplaces, resulting in enhanced trust and loyalty. Fashion brands can also unlock new revenue streams and business models.

Digital Rentals

A new and exploratory business model using NFTs enables consumers to rent digital garments or accessories for specific events, occasions or periods without committing to an upfront buy. At the end of the rental period, the item is returned to the original owner. Standards like ERC 4907 are making this use case a reality.

Concluding Thoughts

A Web3-enabled digital fashion industry has the power to change the way businesses operate. By leveraging the decentralized and transparent nature of Web3, businesses in the digital fashion space can create new business models that offer more equitable and sustainable practices, provide greater transparency and traceability in supply chains and empower consumers with more control over their data. As technology continues to evolve, Web3-enabled business models will play a critical role in shaping the future of digital fashion. By embracing these new and innovative approaches, businesses in this space can not only stay ahead of the curve but also contribute to a more equitable and sustainable fashion industry.