We have explored the pros and cons of cryptocurrencies in multiple previous posts on this site. In some of such posts, we wondered how long we'd had to wait till a major fashion house started accepting cryptocurrencies or launched their own crypto coin. Well, looks like the wait is over, at least for what regards cryptocurrencies transactions in the fashion industry.
A few days ago, Gucci announced indeed that, at the end of this month, it will start accepting cryptocurrencies for a pilot programme in five US stores - Wooster Street in New York, Rodeo Drive in Los Angeles, Miami Design District, Phipps Plaza in Atlanta and The Shops at Crystals in Las Vegas. The pilot will then extend in summer to all directly operated stores based in North America. Gucci will accept 12 cryptocurrencies - Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Wrapped Bitcoin (WBTC), Litecoin (LTC), "meme" cryptocurrency coins Shiba Inu (SHIB) and Dogecoin (DOGE), and five U.S. dollar stablecoins.
To accept crypto payments QR codes or NFC readers are usually employed. Customers going for this option will be sent a link via email to a QR code that will allow them to execute the payment from their crypto wallet. After the payment is done, the store will be able to automatically convert the payment to fiat currency (US dollars, for example) or keep the payments in the form of cryptocurrency.
Gucci, owned by Kering SA, has been expanding into Web3 - a new iteration of the World Wide Web based on blockchain technology - with a variety of projects.
Last year it launched its first NFT, a 4-minute film inspired by its "Aria" collection, sold at an online auction hosted by Christie's. This year, the fashion house launched "SUPERGUCCI", a three-part NFT collaboration with Superplastic, creator of animated celebrities and digital vinyl toys, and, more recently, the "Gucci Grail" NFT collection, developed with digital artist Wagmi-san and targeting owners of existing blue-chip NFT projects such as Bored Apes, Pudgy Penguins and World of Women.
Besides, the house also launched the Gucci Vault Discord server, an online community where you can read news, information on future drops and rare vintage selections. In February this year, Gucci purchased virtual land in blockchain-based real estate platform The Sandbox to develop a digital property.
Gucci is not the first fashion house to accept cryptocurrencies: Hublot luxury watches launched crypto payments in February of this year, while in March, Off-White announced that its flagship stores in Paris, London and Milan had begun accepting payments in Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Ripple (XRP), and stable currencies Tether (USDT) and USD Coin (USDC) with no payment limit. Philipp Plein started accepting digital currencies last year, but there is a wide range of companies and brands that accept cryptocurrencies including Microsoft and coffee chain Starbucks.
Companies offering this payment option are not just trying to build a high-tech community and embrace new technologies, but they are actively attempting to expand their clientele and attract younger consumers, in particular Generation Z investors. Quite a few teenagers have become well-versed in the language of cryptocurrencies and some of them have built small empires from their bedrooms in their parents' house, becoming crypto influencers. Such consumers may be eager to splash their cryptocurrencies on trendy luxury products, even on extremely expensive ones (well, actually, any consumers with a crypto wallet would be eager to invest in luxury a fraction of a Bitcoin they may have mined rather than some hard-earned money...).
Luxury houses deciding to accept cryptocurrencies are doing so to reach out to new markets also after considering the endless Covid-19 lockdowns in China and now the sanctions in Russia imposed after the war in Ukraine started, events that dealt financial blows to many brands and fashion houses.
Companies who want to offer their customers these options will have to keep in mind quite a few things: first of all, they will have to keep their prices in cryptocurrencies constantly monitored and updated as their value rapidly changes. This means that brands will not be able to establish a fixed price say in Bitcoin for a specific model of a luxury item because, if the value of that currency sinks, the brand will incur in losses (Off-White uses the Lunu POS terminal that accepts payments in cryptocurrencies and finds the best currency-to-crypto exchange rate at the time of sale). Besides, given the volatile value of the various cryptocurrencies and the declines they suffered in the last few months, brands will have to consider refunds, conversions and the crypto-to-fiat exchange rate at the time of transaction.
Refunds may indeed be tricky: Off-White offers refunds as store credit in local currency; Gucci plans instead to offer returns for cryptocurrency purchases in cryptocurrency. Companies accepting cryptocurrencies will also have to decide if it will be worth for them to convert the payment immediately in fiat currency to avoid losing money in case the value of that cryptocurrency goes down, or if it is worth maintaining the earnings from the sales in cryptocurrencies in the original currency used by the consumers.
Like other companies opting for cryptocurrencies, Gucci will have to try and offer special benefits to consumers buying in cryptocurrencties: NFT collectors expect a sort of VIP treatment (think about the Bored Ape Yacht Club and the fact that, when you buy a Bored Ape, you gain membership access to a club with benefits and offerings). The owners of Gucci NFTs have special access to pre-order a Gucci collection before it is released to the general public, and maybe consumers paying in cryptocurrencies may want to have access to special capsule collections or drops.
Another point to consider for Gucci is the fact that the company has an Environmental Policy in which it states that it is committed to enhancing its efforts in the environmental field. Yet cryptocurrencies and NFTs are definitely not environmentally friendly as you mine the former and mint the latter, operations that consume energy. This may prompt fashion fans who want a greener industry to question Gucci's current fixation with NFTs and cryptocurrencies. In February 2021, Tesla announced indeed it was selling its cars in Bitcoin, but suspended the offer a few months later, highlighting that the company was "concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions".
Last but not least, we should bear in mind that other businesses selling items in cryptocurrencies, realised they had to consider money-laundering concerns and tax implications for U.S. residents.
So, cryptocurrencies may be the future (Bitcoin has become legal tender in two countries - El Salvador and the Central African Republic - who knows who else will join them in a few years' time), but at the moment we are still in a testing phase of accepting payments in digital currencies, therefore it is still too early to say if it will be a complete success. As for designer coin, will we have a Gucci "Doge" or Prada "Coin" one day, as we wondered in a previous post? Time will tell, but it may just be around the corner.
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