Could the future of fashion be clothes that don’t exist?

Two weeks ago, Fortnite signed its first-ever luxury brand partnership with Balenciaga. Image credit: Balenciaga.
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How many fashion brands consistently generate over $5bn in revenue and $3bn in profits each year? Reading through the list of the top ten fashion retailers in 2020, Nike, Inditex and H&M are predictably top – but there is one retailer missing from further down the list. This multi-billion dollar retailer launched in 2017, and now sells more product than Next. What sets it apart from its peers, however, is that it doesn’t sell or manufacture any physical garments.  

I’m talking about The Item Shop – a digital store embedded in Epic Games’ Fortnite, where players can purchase new outfits and matching accessories in which to dress their avatars. For anyone doubting that digital fashion presents a real, long-term opportunity – it’s difficult to argue with $5bn in annual revenue.  

It’s true that the physical and digital spheres have never been closer in fashion. Gaming universes and other online spaces – known as ‘metaverses’ – have become primary social settings, and brands are racing to reach consumers in these digital realms. But what’s the opportunity? What does this mean for businesses? And what are the priorities for leaders as they steer their companies into these new virtual waters? 

As previously mentioned, gaming is perhaps the most obvious digital channel utilised by fashion businesses. During lockdown, Fortnite was the place that my son hung out with his friends. Why shouldn’t his desire to look good and wear his favourite brands be translated digitally?  

If brands were hesitant to explore the possibility of games collaborations two years ago, now the question is how to make their partnerships stand out in a crowded market. Gucci alone has linked up with Animal Crossing, Roblox, Pokémon Go, The Sims, Genies, Tennis Clash and League of Legends all in 2021, producing digital versions of its outfits to fit the avatars in the digital world. Two weeks ago, Fortnite signed its first-ever luxury brand partnership with Balenciaga. While Fortnite has forged successful collaborations with Nike and the NFL, its first foray into premium fashion feels overdue.  

“It seems like such an obvious opportunity that it begs the question of what took them so long,” said Matthew Drinkwater, Head of the Fashion Innovation Agency, when I caught up with him this week. “What we’re seeing now is a real recognition of the size and scale of the opportunity. Through these sorts of collaborations, brands are talking to a typically younger consumer base who are going to be critical in the future. Is there any better way to engage with customers than being in the space that they’re inhabiting each and every day?”   

“Through these sorts of collaborations, brands are talking to a typically younger consumer base who are going to be critical in the future. Is there any better way to engage with customers than being in the space that they’re inhabiting each and every day?”  – Matthew Drinkwater, Head of Fashion Innovation Agency 

Matthew makes a vital point: most gamers are between 18 and 34, an age bracket that global brands are racing to reach. Monetising digital products through games opens up new revenue streams based on lower-cost products for a younger audience. A teenage gamer may not be able to afford a £675 Balenciaga hoodie, but could happily spend £15 on 2,800 V-Bucks, to dress themselves in the virtual version and gain the same credibility. 

Aside from gaming, the last few years have also brought about the emergence of the fashion that exists exclusively on social media. Just as Instagram users take no issue when an influencer poses in front of a house that isn’t their own, virtual fashion is growing in popularity. Tribute charges up to $665 for fascinating, futuristic digital garments that can be edited on to photos to post on social media. Like every other brand looking to create hype, Tribute sells a limited number of each item, and when they’re gone, they’re gone.  

DressX is another example. The etailer collaborates with traditional and digital designers and has in-house employees who edit digital garments onto a customer’s chosen photo. Unlike physical garments, these can’t be reworn – but they also can’t be thrown away. 

Indeed, one critical draw to digital-only fashion is this complete elimination of waste. “More than 40 billion items generated by the fashion industry end up in landfills each year,” reads the opening slides on DressX’s About Us video. The business sells itself as a sustainable alternative to traditional fashion, providing an eco-friendly service for a generation of consumers used to buying outfits for the sole purpose of posting photos online.  

Image credit – Dress X

The next revolution in online fashion could be NFTs. Non-fungible tokens, NFTs are a digital file whose ownership is recorded on a digital ledger, or blockchain. Ever the trailblazer, Gucci linked up with Sotheby’s in August to release a four-minute video clip as an NFT, with the starting bid at $20,000. Most recently, TikTok has entered the NFT game, lining up its own NFT drop, leveraging content from some of its top creators, including Lil Nas X and Grimes. 

While the scarcity of and ability to accrue value from NFTs through royalties closely mimics elements of the luxury market, but there are a number of questions around their feasibility as category long term. Firstly, it is at this point unclear how luxury brands would use NFTs. Brands have released unique digital files in the form of art, but they so far can’t be utilised beyond that. NFTs are also bought and sold using Ethereum, the currency of choice for the crypto-wealthy. But can cryptocurrency marketplaces be developed to handle the quantity of transactions of luxury fashion? And will luxury customers be willing to set up complex cryptocurrency wallets?   

“Can cryptocurrency marketplaces be developed to handle the quantity of transactions of luxury fashion? And will luxury customers be willing to set up complex cryptocurrency wallets?”

Across the sector, and the different digital channels, the innovation we’ve seen so far is certainly exciting. Not only is it demonstrative of fashion’s evolution and democratisation – who’d have thought the likes of Gucci would be developing shirts for the miniature characters of Animal Crossing? – but it has opened up an entirely new world in which businesses can drip-feed their brand to a very targeted customer base.  

Gucci has made versions of its garments for Animal Crossing.

The winning organisations will be those that truly understand their customers, know how to monetise virtual products and experiences and are committed to long-term digital transformation. As our lives move steadily more online and the world wakes up to the fashion industry’s serious impact on the planet, products on offer are going to have to evolve. Digital fashion solves the conundrum held by brands about wanting to grow, but having a social responsibility to produce less product and waste. Finally, remember that 20 years ago naysayers told us we’d never sell fashion online. And look what happened there…  

[email protected] | @TheMBSGroup

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