- Luxury NFTs could become a $56 billion market by 2030, Morgan Stanley said.
- These high-end tokens could "dramatically" increase in demand thanks to the metaverse.
- The bank gave examples of how luxury brands are already slowly entering the digital asset space.
Luxury-branded non-fungible tokens could become a $56 billion market by 2030 and could see "dramatically" increased demand thanks to the metaverse, Morgan Stanley said in a note published Tuesday.
As a whole, NFTs could grow to a roughly $240 billion market by 2030, with digital collectibles from luxury brands making up 8% of the space by that time, analysts, led by Edward Stanley, said.
"As more aspects of people's lives move to the internet, demand for digital fashion and luxury goods is set to increase dramatically in the coming years," they said.
In 2021, the analysts estimate that luxury NFTs will only account for less than 1% of the transaction value.
"We think this is about to change," the strategists said. "The metaverse will likely take many years to develop; however, NFTs and social gaming present two nearer-term opportunities for luxury brands."
Web 1.0 connected people to information and Web 2.0 represented the social-media iteration, while Web 3.0, more commonly known as the metaverse, is "reserved for personal avatars with which people can use to interact," they explained. And since these human representations can be styled and dressed, it offers luxury brands a "big opportunity," they added.
The strategists gave the example of Roblox, an online game platform and creation system, where one in five gamers change their avatars daily.
"Image is everything in virtual experiences," they said. "Luxury brands are exploring a number of collaborations with gaming and metaverse platforms."
Other platforms such as Fortnite and the digital marketplace in Roblox already offer a glimpse at what metaverse malls might resemble, they said. Revenue share deals are on the rise, and could add $10 billion to $20 billion to the total addressable market for luxury NFTs.
The Morgan Stanley analysts pointed to Balenciaga launching Fortnite outfits in September 2021 priced at 1,000 v-bucks, which equates to approximately $8. Gucci in August 2021 released a digital version of the Dionysus bag on Roblox, which sold for 350,000 Robux, or roughly $4,115.
Among the best-exposed companies in the advent of the metaverse are soft luxury brands, which include ready-to-wear, leather goods, shoes, in contrast to hard luxury items, like jewelry and watches, they said.
"We expect this to change over a relatively short timeframe: even if the metaverse takes some time to gain traction, the collectible market should take off anyway," the strategists said. "NFTs are appealing for both luxury brands and consumers alike."
NFTs will also open up brands to the possibility of earning in "perpetuity" thanks to smart contracts, which capture a percentage of each sale for the owner, as opposed to the physical world wherein the profit only comes from the first and initial sale.
"The metaverse will more than likely allow brands to appeal to an even broader audience," they said, adding that 13 is the average age of Roblox players while women generate 70% of the industry sales. "Luxury brands will gain exposure to ever-younger customers, and more importantly, male customers."