Now Luxury Brands Are Eyeing Cryptocurrencies
The luxury industry, which is worth more than $1,000 billion, is booming. Rising demand from the wealthy Chinese, new customers from the growing Silicon Valley and the splurging habits of millennials are giving a boost to luxury brands. To tap into a new pool of wealth, the industry is now looking at cryptocurrency as a form of payment.
According to a new report by CB Insights that examined 18 of the biggest luxury trends, covering everything from connectivity for luxury services, artificial technology to flying cars, luxury brands no longer view virtual currencies as a means to a dodgy end. “Bitcoin is now trading well below its all-time high of almost $20,000, but luxury companies haven’t lost faith in cryptocurrencies just yet,” states Luxury Trends 2019.
After the steep rise in cryptocurrency prices at the end of 2017, a class of cryptorich people quickly emerged. There have been reports of cryptomillionaires spending heavily on luxury cars such as Lamborghinis, as well as cases of lavish residential acquisitions, says the report. Luxury companies accepting crypto-payments are also targeting the fast-growing segment of millennials, with one out of every four American millennials now using or holding cryptocurrencies, adds the report, citing Edelman.
Swiss luxury watchmaker Hublot, for instance, sold a limited-edition watch celebrating the 10th anniversary of the creation of Bitcoin in November last year. Each of the 210 unique pieces cost $25,000, and can only be purchased using Bitcoin.
Adapting it Right
What’s helping the growth of the luxury industry is how century-old brands such as Gucci and Louis Vuitton are adapting to the demands of the new-age shoppers. They are creating more casual collections, partnering with e-commerce platforms, and providing ephemeral experiences such as limited-editions and pop-ups—and these trends are going to accelerate this year, says the report. What’s more, new technologies are going to capture an increasing share of luxury consumers’ wallets, starting with smart accessories and apparel, and expanding into new anti-aging therapies and AR/VR experiences, it adds.
Luxury companies can also think of accepting crypto-payments to create exclusive experiences—and this goes beyond limited edition items that can only be purchased using cryptocurrencies.
Take MORE, for example. The high-end members-only club can only be accessed by those who own MORE coins, the private club’s own cryptocurrency. Once inside, members can decide to pay for expensive bottles of alcohol and other services using cryptocurrencies or US dollars. “Potentially of greater importance, cryptocurrencies can help contribute to the luxury experience with anonymous payments. From wealthy consumers in politically unstable countries looking to prevent their assets from being seized to art collectors wanting to avoid thefts by not disclosing their identity, privacy is a key concern in the luxury consumer world,” the report says.
Accepting cryptocurrencies, however, isn’t a risk-free move. “For this initiative to be successful, luxury companies will have to hedge themselves against high levels of volatility in the value of cryptocurrencies. They will also need to set up stronger compliance processes to make sure they accept legitimate funds.”