Phygital’s Fashion Takeover: Are Web3’s Digital Twins Necessary?

When it comes to luxury, there’s nothing quite like having the superior service that comes with a high price tag, or feeling the physicality of an object in your hands — things that cannot be captured by an NFT. Therefore, that’s why fashion brands are betting on a very specific strategy for their tokens, one that combines digital ownership with physical goods.

Coined one of the leading concepts of Web 2.5, phygital describes the process in which the realms of reality and digital intertwine, offering consumers both a tangible and virtual experience. For many entering the metaverse, this is now a well-trodden way to gauge demand for virtual initiatives: shoppers buy an NFT and receive a limited-edition, IRL twin, which in theory allows them to experience the best of both worlds.

From Tiffany’s Cryptopunk pendants to Nike-owned RTFKT’s “Cryptokicks,” the concept of partnering tokens with their own physical counterparts is being used to appeal to consumers the world over and generating a new era of hype in the process. Morgan Stanley predicts that the metaverse could bring the fashion and luxury goods industry an additional 50 billion dollars in sales by 2030.

Whatever you want to call these objects (badges of honor, certifications of authenticity, or golden tickets), they are signifiers that you are part of an exclusive online community. The fact that they can be flaunted offline makes them all the more desirable. “Phygital, as a marketing tactic, should prioritize how to holistically humanize the customer experience both online and offline,” says Wenny Huang, business developer at digital transformation company, UNIFI3D.

If brands don’t carve out strong, future-proof digital roadmaps, it’s likely that an influx of digital twin concepts will enter the market with no real intentions other than to generate a quick profit. With one NFT transaction using around the amount of energy a typical American household uses in a daythe negative implications for the planet are dire. Plus, bridging the gap between the physical and virtual also means incorporating new, additional avenues of manufacturing and distribution that could be costly.

However, there are promising prospects for phygital. In order to make the digital twinning process greener, brands like digital luxury label Cult & Rain are opting for a made-to-order strategy to avoid overproduction. “We don’t want to flood the market and end up with loads of stock that gets marked down,” George Yang, founder of Cult & Rain explains. “We’ve seen this happen in the fashion business, where the whole industry is led by a wholesale system that’s broken and we end up with this excess of clothes. Now, we’re seeing direct-to-consumer models starting to prosper, or in our case, a strategy that means we have no stock whatsoever.”

This limited-supply, scarcity ideology may answer fashion’s — and potentially the metaverse’s — overproduction problem. “The bigger opportunity phygital fashion unlocks is for NFTs to be sold before the physical garments, which allows brands to gauge demand for physical goods before actually manufacturing and distributing them,” Jessie Fu, Co-Founder of digital fashion house Altr_ explains. “This should reduce overall consumption, production and the shipping costs that come with it.” Companies cannot afford to contribute further to already overworked supply chains, so eco-friendlier alternatives like these should be considered for players looking to enter the virtual space.

Many are still dubious over the concept of a new virtual world, but the “redeem-and-retain” model, as venture capitalist Nic Carter puts it, may accelerate the mainstreaming of NFTs and offer consumers a more palatable entry into Web3. Moreover, community benefits that come with some digital twin drops — take Italian brand Hogan, which released a series of physical products as redeemable NFTs through its Decentraland-based retail space — as well as customization options leverage a product’s lasting value and utility, distinguishing it from the other commodities that we purchase off the internet.

Hogan teamed up with five digital artists to launch the Untraditional NFT Collection, a re-edition of its first-ever sneaker. Photo: Hogan

When new trends surface, there will always be opportunities and obstacles for those involved. For brands looking into the virtual realms, producing NFTs to coincide with an exclusive product isn’t necessary (they could simply release the product as a standalone item). But with the metaverse continuing on its upwards trajectory, it makes sense for companies to experiment with the medium and test out consumer demand. The key is to consider how these ventures can fit into the wider, long-term DNA of the brand — as they would a physical project — rather than being a short-lived marketing tactic.

“Many people still have a presence in virtual worlds that somewhat mirrors the offline too, making emotional and financial investments in communities and products just as they would do in reality,” strategist and researcher Precious Osoba, outlines. With more and more brands taking note, the future of phygital has only just begun.