The beauty industry market is expanding at a rapid rate. Over $500 billion is the estimated global market value of this industry. However, the industry has difficulties, such as high competition, a lack of transparency, and sustainability concerns. Web3 technologies can address these challenges and provide new opportunities for businesses to create value.
Web3 is the third major evolution of the internet and is anticipated to have the same impact on fashion, business, and culture as e-commerce and social media. In addition to digital product IDs, NFT collectibles, cryptocurrencies, token-gating, DAOs, and POAPs, the fashion industry is an early adopter of blockchain technology.
Cosmetics companies can ride the wave of the Metaverse’s innovation and community engagement opportunities. It’s the most cutting-edge, up-and-coming digital space, giving fashionistas and beauty consumers a voice unrestricted by geography.
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Current Challenges in the Beauty Industry
The beauty industry’s three major concerns are high competition, transparency, and sustainability.
- Due to high competition, it is difficult for new businesses to enter the market and for existing businesses to differentiate themselves.
- Lack of transparency is also a significant problem in the beauty industry. Many consumers need clarification about the ingredients used in their products or the ethical business practices of the companies they patronize.
- Sustainability is another obstacle, as the beauty industry generates considerable waste and uses resources in an unsustainable manner.
Web3 technologies provide decentralized and transparent solutions to address these obstacles. Decentralized marketplaces can give small businesses new opportunities to enter the market and compete with larger firms.
Potential Of The Web3 In The Beauty Sector
Reviving Online Shopping
Smart apps like Rimmel’s Get the Look, L’Oreal’s Virtual Try-On, and Chanel’s Lipscanner give customers a taste of the products and styles available from these companies without requiring them to visit a store or endure a stuffy fitting room physically.
In the Metaverse, users can take their virtual makeovers to the next level by customizing an avatar that may or may not be based on their likeness. Online stores now offer 3D virtual fitting rooms where customers can virtually try on an entire outfit, new hairstyle, and makeup to see how it all looks together.
Build Real Estate
Metaverse is home to virtual communities with residences, parks, and businesses. Metaverse Fashion Week was held in March 2022 in the virtual world of Decentraland, where users create and own their environments protected by blockchain technology. Octopus waiters served virtual drinks to guests as they watched catwalk shows of 50 different brands, including Dolce & Gabbana, Hugo Boss, Roberto Cavalli, and more up-and-coming designers. Estée Lauder was the only cosmetics company to secure a booth at the event.
With Metaverse, there’s no need to open a store every few blocks in every major city on the planet
Create And Sell Virtual Products
Buying and customizing a 3D avatar in a virtual world is the idea behind “virtual first” or “virtual-only” sales. There is a growing demand among the early adopters of the Metaverse for bespoke looks, much like real-world influencers, celebrities, and models who want to be seen wearing the latest looks and styles and changing them constantly.
The market for high-end digital goods and services is expected to reach $50 billion US by 2030, according to a recent estimate by Morgan Stanley. Limited-edition footwear from designers like Jimmy Choo and brands like Puma and Campus is a prime example of this trend in the fashion industry.
Web3 Opportunities for Beauty Sector
Decentralized marketplaces, blockchain-based supply chain tracking, and individualized virtual makeup try-on are just a few of how Web3 technologies can benefit the cosmetics industry.
Digital Identities for Physical Garments
Garments can be given digital identities stored in a blockchain, providing information about each garment to buyers, sellers, new owners, and recyclers. In February 2020, Gabriela Hearst collaborated with the software platform Eon to include a QR code on the garment tags that would activate information about the garment’s materials, country of origin, production process, carbon footprint, and the story behind the design.
Provenance and Authenticity
Product authenticity and provenance can be verified, and brands can track shipments using blockchain-based identifiers.
Accepting Cryptocurrency Payments
Luxury brands that accept cryptocurrency payments include Farfetch, Off-White (Farfetch’s New Guards Group), Gucci, Philipp Plein, Tag Heuer, and Balenciaga. The online shopping service Farfetch now supports the use of six different cryptocurrencies, and it does so in 37 other countries. Gucci currently accepts over ten different currencies at its US locations.
Images, videos, and even virtual or augmented reality (VR/AR) products can all be used by companies to sell and connect consumers to their brands.
Creating a Discord community
Communities in Web3 have surpassed audience, consumer, and fan as the most important metrics for measuring success. Twitter and Discord are two of the most popular places online to connect cryptocurrency wallets and join specific communities of users. Digital natives like Rtfkt, 9dcc, and Cult & Rain use these channels to share drop information, solicit community feedback, and answer questions about the mechanics and roadmap of Web3 strategies.
Decentralized Autonomous Organizations
By requiring participants to invest a minimum amount and providing them with voting tokens, DAOs facilitate collective ownership and decision-making.
Tokens built on the blockchain can be used as customer loyalty incentives, prompting users to engage with the brand, provide feedback, and make purchases.
Famous Brands Using Web3
L’Oréal commissioned five female artists in December 2021 to create NFT pieces based on the brand’s new lipstick, Reds of Worth, which comes in six shades of red. The NFTs were auctioned off on the OpenSea platform, with all the proceeds going directly to the artists. Half of the proceeds from secondary market sales for up to a year were given to Women of Worth, an initiative by L’Oréal Paris that recognizes and celebrates women who have made significant contributions to their communities. This is a perfect illustration of how NFTs help stores not only make money but also tell customers what they stand for as a brand.
Nike has always been ahead of the curve in digital innovation, and in recent years they’ve made strides to cash in on the buzz surrounding emerging technologies like NFTs and Web3. The company’s 2021 purchase of RTFKT Studios, a maker of digital sneakers, showed how seriously it took the concept of NFTs at the time. When RTFKT sold $3.1 million worth of NFT sneakers in seven minutes in February 2021, it sent shockwaves around the globe. As a result of Nike’s purchase of the studio, the American sportswear giant is now a Web3 frontrunner thanks in large part to the studio’s efforts.
The largest luxury goods company in the world, LVMH, is looking into Web3 technology to expand into the online gaming and entertainment industries. In 2017, LVMH’s Rimowa collaborated with Nike’s RTFKT to promote NFTs through limited-edition hard-sided suitcases. The Rimowa x RTFKT Space Station had been “hacked,” Consumers had to work together to reactivate it to mint one of the limited-edition NFTs. Those who acquired one of the rare NFTs could exchange their fake luggage tag for a real one.
Charlotte Tilbury is using the virtual world, too. The cosmetics company has created a digital paradise for its customers to explore and enjoy. A 3D model of the company’s founder stands at the entrance to the online shop and welcomes customers. There, patrons can peruse a variety of cosmetics and even take expert makeup application demonstrations.
Valdé Beauty is one of the brands expanding into the virtual world. The company released Crystal Armor, a physical, refillable lipstick only available in virtual reality. The actual product will be shipped to you after you make the purchase. You get 11 lipsticks, original NFT artwork, and private consultations with makeup artists when you purchase.
Combining The Real And Virtual Worlds In Beauty Retail
Connecting Web3 with the real world’s retail sector will ensure these digital goods are noticed. At the Decentraland fashion week event, where Tommy Hilfiger debuted its spring collection, the brand sold NFTs that could be redeemed for physical goods. By doing so, we can encourage even fleeting visitors to Web3 to investigate its possibilities for online shopping.
Virtual mirrors, readable face masks, and digital packaging exemplify how beauty technology adapts to seize these new opportunities. There has never been a more promising time to pioneer new ideas in the beauty industry and established cosmetics companies are in a prime position to take the lead in this field.
It may be too soon to tell, but there are ways that companies of all sizes can test the waters. Improved efficiency and transparency, improved customer experience, and increased trust and loyalty with consumers are some tangible benefits that could result from the use of web3, NFTs, and blockchain technology in the beauty industry.