Over the past few weeks, Italian luxury giant Gucci (a real jewel in Kering’s portfolio) announced that it would accept crypto payments – in more than 10 cryptocurrencies – in five US stores starting this month. It also plans to extend the pilot to all of its directly operated North America stores in the next few months.
From NFTs and digital fashion to real-world consumption: how luxury brands are moving towards crypto payments by accepting them in all their marketplaces
In-store crypto payments will be made via an email link sent to the customer, which contains a QR code for them to pay from their crypto wallet. In other instances, payments occur through an NFC reader on a terminal connected with a customer’s cryptocurrency app, much like mobile credit card payments.
Balenciaga's latest fashion show at the New York Stock Exchange may have signalled the brand's interest in cryptocurrencies
Other famous fashion brands have already made the same choice (e.g. Off-White, Kering-owned Balenciaga, Philipp Plein, but also LVMH-owned watchmakers Hublot and Tag Heuer), which marks a crucial step toward blending brands’ physical presence with their emerging Web3 efforts. However, given the recent cryptocurrency boom, there are several aspects that a company should consider before launching a similar project.
Are there any risks involved for a brand dealing with cryptocurrencies? There are if exchange rates are not constantly monitored
First, crypto payments can be harmful to brands if exchange rates are not constantly monitored. A retailer can decide to convert the amount received in crypto to fiat currency, such as Euros or US dollars, or keep it as crypto coins. If a brand opts for the former – as it usually happens, since storing cryptocurrencies may pose tax and regulatory risks – they should consider crypto price volatility.
In this respect, fashion brands usually resort to external providers, which act as automatic converters, find the best crypto-to-fiat exchange rate at the transaction time and pay the amount converted to fiat to the company. In addition, since cryptocurrency is subject to wild price swings, it is also crucial to establish the exact point of time to assume as a conversion parameter.
What happens when you buy physical goods with crypto and then want to return them? The relative volatility of Bitcoin, Ethereum, Litecoin and Shiba Inu prices might be a big issue for fashion houses
Secondly, crypto coin volatility is also strictly related to product returns: the cryptocurrency may tank even within the short term granted to customers to return their purchases – usually, 14 or 30 days depending on the country – exposing the brand to possible losses.
Some brands only offer refunds as store credit in the local currency (e.g. Off-White) to address this problem. Still, others like Gucci plan to offer cryptocurrency returns for cryptocurrency purchases, so they will need to keep it under watch.
But here are some reasons why offering in-store payments via cryptocurrency could be more than a win-win for the brand-customer relationship
This latest crypto move often targets Gen Z consumers, who see fashion, particularly sneakers and limited-edition items, as an alternative asset to invest in.
Especially when NFTs or digital twin items are involved, this reportedly results in customers purchasing just to obtain the digital asset in their wallet without redeeming the physical product.
It might seem hard to believe, but brands have access only to the customer account linked to their wallet and not to the related personal details when they buy online in crypto. As a result, companies are sometimes unable to deliver the physical item purchased. By allowing customers to pay in cryptocurrencies in physical stores, fashion brands might be able to avoid this risk.
Valentina Mazza
Law for the Fashion Product Lecturer, Three-year Courses, Milan