The secrets to a successful NFT drop

When Tiffany & Co. issued 250 “NFTiffs” earlier this month, they immediately received sold out, even at a whopping 30 ETH each – or around $51,000 at the time. Only available to holders of CryptoPunks NFTs, they entitled buyers to custom pendants of their punks.

A week later, the auction of an NFT version of Jason Wu’s 2009 Inaugural Ball gown for Michelle Obama, created in collaboration with virtual fashion brand DressX, ended without receiving the minimum bid of 8.5 ETH. The buyer would also have received two tickets to Wu’s upcoming show at New York Fashion Week. (The dress was sold almost two weeks later for 6 ETH(according to DressX, which said via a representative that offers came in afterward and Wu’s team took some time to accept one.)

Since fashion brands across the spectrum from Adidas to Diesel to Givenchy and Prada began releasing NFT collections, some have had unprecedented successes, such as Dolce & Gabbana’s nearly $6 million sale of nine NFTs last October. Others have fallen flat or missed expectations. Several NFTs from Rebecca Minkoff’s second collection, titled “Dunamis,” remain unsold months after being listed.

Measuring the success of these projects is difficult since each tends to release different numbers of NFTs at different prices and with different goals, such as short-term sales versus long-term branding. Some clearly resonate, others may generate some money but quickly fade from memory, and others may not sell at all.

But the best NFT projects have a few things in common, such as creativity, appeal to a clear audience and value beyond price. Where brands may have gotten away with selling just about all NFTs during last year’s frenzy, today their quality and utility matter more as NFT prices and trading volumes plummet and their novelty has long worn off.

Despite the decline, more brands continue to jump into the market. Lacoste introduced NFTs in June, Puma just revealed his own project and NYFW have announced a new NFT collaboration with a number of designers.

While brand recognition plays an undeniable role in connecting, experts say there is much more involved in a successful fashion NFT collection. (Among the most popular fashion NFT collections is the Adam Bomb Squad, created by niche streetwear brand The Hundreds).

“I don’t think web3 is made just for big brands with established audiences,” said Brian Trunzo, the metaverse manager at Polygon Studios, the consulting arm of the Polygon blockchain.

Collectable NFTs are over

One variant of NFT that struggles to maintain interest is virtual renderings of clothing intended primarily as collectibles.

“Collectability for collectability’s sake … I think those days are more or less numbered,” Trunzo said.

He described that model as “NFT 1.0.” While they sold back well enough as speculators snapped up all they could in hopes of flipping it for a profit, the crypto downturn wiped many of those buyers out of the market.

Now brands must ensure that their NFTs offer more utility and value, such as the ability to claim an exclusive physical item or use in the brand’s wider ecosystem of products and experiences. RTFKT, for example, releases virtual goods to be worn by the CloneX avatars it created with artist Takashi Murakami or redeemed for a physical version. Brands such as The Hundreds and Adidas use NFTs as a form of loyalty program. 9dcc, the new fashion line from NFT figure Gmoney, has NFTs baked into its business model.

The value must match the price

Of course, that added value must also justify the price tag. Even entry to an event like a fashion show may not be enough if buyers don’t feel it’s worth the price. Before the pandemic, an offshoot of the organization that runs NYFW was selling show tickets to the public that topped out at $1,500 — about a tenth of the minimum bid for the DressX and Jason Wu NFT that included tickets to Wu’s show.

“Everyone is looking for ‘Why am I getting that NFT, how is it increasing in value and how am I getting more out of it than I paid for?'” That’s fair, says Juergen Alker, head of Highsnobiety’s NFT studio, which recently released its own small NFT gathering, called “Not In Paris”, advising brand partners on web3 projects.(Members of Highsnobiety’s Discord have generally responded well to the NFT project.)

NFT itself does not literally have to provide a financial profit and may not even be the main attraction. A common way fashion companies add value to their NFTs is by allowing holders to claim physical goods, such as the tracksuits and other items Adidas gave to its “Into the Metaverse” NFT holders or the ceramic figurines that accompany Gucci’s NFTs with collectibles manufacturer Superplastic. In the case of Tiffany’s NFTiffs, the token was a tool for CryptoPunk owners to purchase a unique item made with Tiffany’s materials and craftsmanship that they would not otherwise have had access to.

Even the promise of future rewards can be enough, as long as customers believe that what they will receive over time will be worth the starting price of the NFT.

Reach the right audience

Because the market for NFTs remains niche, fashion brands have often seen better results by appealing to the crypto community. The non-web3 crowd also faces barriers to purchase due to the steps typically required, including obtaining a crypto wallet, acquiring cryptocurrency, and going through what can be a complex minting process to claim them.

“Without the web3 community, we would probably only sell 10 percent or 20 percent of the NFTs,” Alker said of Highsnobiety’s NFT collection. “I think all brands have the same problem.”

One way brands have appealed to these buyers is with a perfect fashion playbook: collaboration. Adidas partnered with Bored Ape Yacht Club and Gmoney on their NFTs. Gucci has teamed up with 10KTF, known for creating unique digital accessories, and now Puma is following suit. Nike went a step further and bought RTFKT.

Trunzo said that making their first connections with web3 customers can be a great short-term strategy for fashion brands, although they need to show that they are genuinely interested in learning and being part of the space.

Still, brands shouldn’t forget their core “web2” audience. Alker pointed out that bringing loyal customers into a room filled with buyers interested in making money, rather than the brand itself, can help build a stronger foundation. While it may be difficult to include them due to web3’s laborious user experience, Trunzo offered the example of MAC Cosmetics’ Keith Haring NFTs, which allowed shoppers to shop with a credit card and then receive an email that let them claim NFT.

Storytelling is important

“If you just drop an NFT and have no story and no imagination around it, it’s not going to do much better than a boring collection that you drop without a story,” Alker said.

Gucci and RTFKT have successfully teased launches in ways that left customers eager to learn more. Gucci’s 10KTF collaboration centered around creative director Alessandro Michele visiting an artisan called Wagmi-san in the fictional city of New Tokyo. RTFKT had fans solving puzzles for weeks to reveal what was inside a mysterious cube called MNLTH. (It was the brand’s first digital sneaker with Nike.)

“The best projects are the ones that take an existing brand to a new but recognizable place,” said Ian McMilan, head of growth at Mojito, a technology platform that specializes in helping brands like Sotheby’s launch web3 projects. “Show me something new about you that still feels like you.”

McMilan added that brands see results with a well-thought-out marketing plan that includes what he calls “crescendo moments.” A short-term campaign might have two or three, as the disclosure of additional benefits NFTs will provide, while brands using NFTs as long-term loyalty programs might want five or so a year. However, he warned that brands should be careful not to over-promise and under-deliver or risk disappointing customers.

Don’t just do it for the hype

Perhaps the worst course fashion brands can take is to release NFT collections that just look like a cash grab. Indeed, one of the biggest challenges for brands is what happens after the first sale. If they have positioned NFT as the key to getting into a community, they need to keep that community alive and engaged.

“You have to constantly inject energy into this community by creating new value, and so you need a constant drip of content, of new NFT drops, of new utility,” McMilan said.

Trunzo highlighted Adidas as a brand that has done a good job, even if it has stumbled along the way. In his view, it worked out a step-by-step plan and executes it regularly, providing regular rewards without being fixated on the short-term incentives other brands can get caught up in, such as the value of the NFTs on the resale market.

It does not mean that the only successful projects are open. McMilan said more brands should think about how to use NFTs for a single, defined campaign, as Tiffany did. The point is to have a clear goal and to communicate it to the intended target group.

“If you think NFTs are a marketing tool, then it’s going to fail,” Alker said. “If you think NFTs and web3 are going to be part of your future business model, then you can succeed.”