NFT
“Phygital.”
The definitely not cool word, which combines “physical” and “digital” to describe real products associated with NFTs, describes the soon-to-be-released Louis Vuitton brand name “Treasure Trunks.”
It also makes Jason Yanowitz cringe. “Oh God. I hate that word so much.”
While it tends to elicit deep discomfort from the familiar, the Empire podcast host admits in a recent episode (Spotify/Apple) that he remains intrigued by the luxury brand’s take on pricey physical-to-digital NFTs.
Co-host Santiago Santos seems equally interested, saying, “I don’t think I’ve ever bought anything there, but maybe I will now.”
While “phygital” is cringey on a similar scale to a certain “#WAGMI” video, the fact that holders can’t sell or give away the rare “soul-bound” tokens seems cool enough to generate, especially when combined with exclusive items of the luxury brand.
Percolation in the background
In an otherwise subdued market, “these are the catalysts,” says Santos.
It’s the kind of headline that, in better circumstances, would make the scene an animated buzz. Instead, the story continues largely unnoticed in today’s bearish climates, he says.
“Mind you, this is the largest luxury conglomerate in the world.”
Santos recalls a previously very successful foray into NFTs with Tiffany’s CryptoPunk pendants – another luxury brand owned by the LVMH conglomerate. “Louis Vuitton is doing this, it’s a huge milestone” that pushes the space forward, he says.
“When you have a brand like that, you start doing this. It makes a big impression.” Other luxury brands should pay attention, he says.
Why not just use a membership club?
From a consumer retention standpoint, Santos says the blockchain approach “makes a lot of sense.”
The value proposition of this specific ‘phygital’ is exclusive access to unique future products.
Playing devil’s advocate, Yanowitz wonders why Louis Vuitton bothered to make this product as an NFT since it’s non-transferable. “Couldn’t they have just done this with a membership club?”
“Of course they can,” replies Santos. “They very well could.”
While customers may not yet like the idea of recording ownership on a public blockchain, Santos says the concept is poised to gain importance.
He contrasts the benefits of NFTs and blockchain as a “Switzerland in the sky” with the obvious flaws of current loyalty programs – something anyone familiar with the pitfalls of redeeming airline points already understands.
“There are partnerships between certain airlines and you can use those points, but I think it was this week that United or an airline lowered the value of your points on a whim.”
United Airlines decided to significantly devalue their award miles, with inflation as a likely culprit.
According to Santos, it’s all about having options and expanding consumer preferences. By offering the tokens in the neutral environment of a public blockchain, you can do other things along the way, he says.
Santos points out that the portability of NFTs could open up a range of opportunities, as LVMH has a broad portfolio of high-quality brands. “If you have this NFT, you might be able to transfer it to other things.”
It’s not about the money – it’s about the money
Yanowitz suggests that it’s not really about the money, even though the digital tokens are very expensive.
“I think this is them trying to meet this new cohort of very wealthy, younger digital-native people where they are.”
Santos interjects: “What’s the whole point of luxury goods?”
“Flexing,” Yanowitz replies.
“Exactly. Is there a better way to flex than having it on a public record for all to see?”
“If you have this NFT, it’s a flex. It’s free marketing.”
So it’s not about the money. It’s about showing off the money. As a far-reaching boast, a “phygital” might be cool after all.