Experience Lab

06.15-18.22 MILANO MiCo Citylife District

VALÉRIE KAMINOV – BIOGRAPHY Valérie Kaminov is Founder and Managing Director of the highly successful International Luxury Brand Consultancy. For over 25 years Valérie has been at the forefront of the global cosmetics industry and has worked with a vast array of luxury, premium and niche beauty brands and fragrances. With her extensive expertise, commercial acumen and practical experience IL Brand Consultancy has become one of the most sought after management and distribution agencies specialising in global beauty. Recognised for the breadth of business sectors and extensive distribution channels it works with, ILBC’s international client portfolio spans both well-established names and newly-emerging brands in hair care, make-up, skincare, fragrance, devices and top-to-toe brands. Valérie’s wealth of knowledge in international growth strategies and business development is combined with an inspirational and forward-thinking approach. Through her exceptional insight and understanding of the industry Valérie has helped brands amplify their market reach, elevate their brand presence, improve their business performance and achieve commercial success globally. A further aspect of her business is her skill in brand evaluation, acquisition due diligence, risk assessment and commercial growth which has led Valérie to regularly advise Private Equity Funds, multi-national organizations and financial investors. This capability in combination with her advanced qualifications and proficiency in corporate governance have made her a much-desired Board Advisor and Non-Executive Director. From her CEW mentoring, organisation of the International Manufacturers & Distributors Forum (IMF) and guest lecture programmes, Valérie is a passionate and dynamic advocate of the global beauty industry. Valérie splits her time between her London HQ 74 and her central Paris office as well as managing a satellite network in Russia & China.

BEAuTy AND THE NFT BEAsT

Major beauty brands such as Valdé, Clinique, NYX, Nars, e.l.f., Givenchy, and Look Labs are now minting NFTs, launching products with parties held in virtual worlds, and investing themselves in the metaverse. Their goal? To boost customer engagement and foster brand loyalty by giving each consumer a new way to experience a product of choice. Is the trend just a fad? A glance at the most pertinent data suggests not.

Globally, 106 million people are now using cryptocurrencies. Advisory group deVere found 70% of its 2021 clients, aged over 55, had, or were going to, invest in digital currencies, despite bitcoin and others being strongly associated with younger investors. Today, cryptocurrencies are widely accepted over 87 nations. According to a PricewaterhouseCoopers report published in 2020, blockchain technologies will reach a tipping point in 2025. PWC contends “digital currency will be adopted at scale across the global economy, boosting GDP by nearly $2trn over the next decade”. Furthermore, according to the report, The Metaverse Mindset: Consumer Shopping Insights, one-third of all respondents, (40% of Gen Zers and 40% of Millennials), want to shop for real or virtual products in the metaverse. Additionally, 41% want brands to set up metaverse stores because it would be convenient for buying both physical products and digital goods like NFTs. In fact,74%, of Gen Z participants purchased digital items in games, 52% said they would pay up to $49.99 to buy something for their avatar.

To be ahead of the pack and at the forefront of change, it’s important, now more than ever, to understand what trends are emerging in the beauty metaverse. For those unfamiliar with this world, getting a grip on the terminology is a must. All too often, the words, NFT, bitcoin, Ethereum, and metaverse are little understood, beyond the fact that they might have something to do with cryptocurrency. Therefore, before jumping into a discussion on trends, let’s go over a few basics.

METAvERSE 101

Metaverse refers to a virtual world where anyone can gather, socialize, work, play, and spend money. It’s accessible to all because it’s public. In simple terms, a metaverse is the virtual equivalent to a universe.

Blockchain is the technology that enables the metaverse by guaranteeing the reliability of data and providing proof of ownership. Anything and everything can be recorded on a blockchain. Think of it as an immutable ledger for currency and a copyright for anything anyone might create. Every financial transaction on a blockchain is transparent and visible. Both cryptocurrencies and NFTs are built on blockchains.

Cryptocurrencies started out as uniquely digital assets, that is, forms of payment that could only be used in a virtual context, such as a video game or virtual world. However, today, Visa, PayPal, Venmo and other payment systems allow an individual to shop for real-world commodities using cryptocurrencies such as bitcoin. How does it work? An individual buys a token of a cryptocurrency on an exchange, much like one buys a share in a stock. And cryptocurrency prices rise and fall, just as stock prices do. Once the currency is bought, it can be held in a digital wallet or even a digital bank. Accounts holding these digital assets can be made available for use with crypto-backed payment systems.

NFT stands for nonfungible token. An NFT is a record of something tangible, such as a work of art, music, or other collectible. That record, or token, both certifies the original file and is a one-of-a-kind, verifiable, asset, easily bought and sold on the blockchain. An NFT, as a digital asset, may also represent digital artwork (such as GIFs, virtual trading cards, images of physical objects, or even tweets).

For some artists, the value of an NFT is much like a copyright, in that it digitally stamps ownership and prevents rights from being stolen. Many musicians, for example, will create an NFT for a part of a melody by recording it, then registering the recording on an NFT. NFTs are “minted” onto a blockchain, such as Etherium or Solana. These blockchains are themselves bought and sold as cryptocurrency on exchanges. In other words, not only can one buy an NFT as an investment, one can buy a token of a blockchain that holds it. With the price of some NFTs fetching millions, a great deal of attention and debate has been focused on the question of whether these tokens may be considered a new form of investment for consumers.

TOP TRENDS

Priced high or low, brands are leveraging hero products, engaging artists, and supporting charities.

Beauty brands (E.l.f., Valdé, NARS, Clinique) are leveraging hero products to tap into an existing fan base and create excitement around their NFTs. Many brands also engage artists and/or support charities or causes, often serving under-represented communities. (Valdé , Givenchy, NARS). While some NFTs are accompanied with corresponding physical products, others are not. Two different strategies are employed in regards to pricing. In a bid to define the NFT beauty marketplace as accessible to all, some NFTs are free or offered at lower price-points. NARS sold its NFTs at fixed prices, with one artwork being given away for free. Nivea and Clinique have also chosen not to charge for their NFTs. On the other end of the spectrum, certain brands (Valdé) offer a more expensive limited edition collectible, but then donate the proceeds to charity.

Though some say that applicability of NFTs to the beauty industry has been hard to define, customer engagement has emerged as a clear trend in the industry’s use of NFTs. A closer look at the specifics of NFT mediated consumer experience elucidates the opportunity this technology represents. A few case studies follow.

VALDÉ

Valdé offers its customers a chance to purchase a coveted spot in its NFT Collective, and 100% of the net proceeds from NFT sales support collaborating artists, as well as fund a beauty grant for Latinx entrepreneurs. As a member of the collective, one receives:

• A limited edition, individually numbered, quartz refillable lipstick case made from one of three quartz crystals (Chevron

Amethyst, Rose Quartz, or White Quartz),

• A unique NFT (based on an interpretive depiction of a woman’s armor made from one of the three quartz stones listed above), each created by emerging Latinx artist Serena Ellis, • The entire collection of refillable shades (11 total, a $440 value), • A one-year supply of the purchaser’s favorite lipstick shade, and • Early access to all future collections.

The launch party for the Divine Collection NFTs and début of the Valdé NFT Collective was held in a virtual location: the Ainsley Gallery in Decentraland. Marie-Laure Fournier-Uder, President of Fournier PR + Consulting which was responsible for hosting Valdé’s launch, explained the vision behind the event: “We chose to host a press launch in the metaverse because it’s a way to reach a wide swath of influential people efficiently. But, unlike others dabbling in virtual events, we were not interested in creating a game or something gimmicky. I envisioned a chic, fun, elevated cocktail party that would appeal to grownups. In my experience, Gen X is just as ready as Gen Z to engage virtually.”

NARS

NARS celebrated its blush product, Orgasm, by commissioning a collection of three NFT artworks by artists Sara Shakeel, Azéde Jean-Pierre, and Nina Kraviz. As with many NFT initiatives, some of the NARS digital tokens were accompanied by something physical, in this case, makeup.

NFT art created by contemporary collage and crystal artist Sara Shakeel was made available for free in an unlimited number. However, the open-edition piece created by fashion designer and multimedia artist Azéde Jean-Pierre was priced at $50. And, electronic music artist Nina Kraviz created a $500 limited-edition piece. The $50 NFT buyers received a limited-edition jumbo Orgasm blush and lip balm. The $500 piece included a makeup set for cheeks, lips and eyes called “The Ultimate Orgasm Bundle.”

“We believe that NFTs will ultimately empower a deeper connection with NARS’ highest-value and most passionate consumers, empowering selfexpression and creativity in immersive digital environments including the metaverse. “ - Dina Fierro, VP of Global Digital Strategy and Social Engagement for NARS

GIVENCHY

Givenchy Parfums has teamed up with London gallery owner Amar Singh and the Rewind artist collective to create, “Pride,” a series of limited edition NFTs. In support of the LGBTQIA+ cause, the proceeds of 1952 copies in the series, sold on the Veve platform, were donated to Le MAG Jeunes (Movement for the Assertion of Young Gay, Lesbian, Bi & Trans people) association. The artwork is based on photos that were reinterpreted in the colors of the Rainbow Flag. The result is a series of animated depictions, supporting diversity and the fight for equal rights in all forms of sexual identity assertion.

e.l.f.

e.l.f.’s NFTs are gold renditions of its cult classics, Poreless Putty Primer, 16HR Camo Concealer, and Ride or Die Lip Balm. The NFTs were sold for the same price as its retail counterparts. Gayitri Budhraja, Chief Brand Officer for e.l.f cosmetics explained that their NFTs are a, “…new way for super fans to be a part of the brands they love.” Three NFTs of each product (a total of nine) sold out in under ten minutes.

CLINIQuE

Clinique created three editions of its first NFT, “MetaOptimist.” The NFTs were awarded, rather than sold, to winners of a contest. A social media campaign asked members of Clinique’s Smart Rewards reward program to share their stories of optimism and hopes for the future via Instagram, TikTok or

Twitter. At the end of the competition, Clinique selected three winners with “the most inspiring” content. The winners were to receive, their physical Black Honey product, an annual assortment of other products for ten years, as well as a copy of the three NFTs available.

LOOK LABS

Look Labs founder Jordan Katzarov created a digitized version of his brand’s fragrance Cyber Eau De Parfum using the GC-MS (gas chromatography-mass spectrometry) fragrance testing method. Near infrared spectroscopy was used to imprint the scent Cyber Eau de Parfum in the art piece itself (in the form of spectrum data). Each NFT comes with an actual collector’s edition bottle of Cyber Eau de Parfum.

Ten fragrances, available in an NFT format, will be accompanied by a physical collector’s edition of the perfume in a bottle that lights up when touched. A example bid on Rarible, which trades the NFT, was 0.4 wrapped etherum. Given that etherium’s price has swung between $2,600 and $4,500 per token in the last six months, the purchase as a worthy investment is definitely in the eye of the beholder.

NYX

NYX Professional Makeup minted an NFT based on a painted look, created in real life by special-effects makeup artist Mimi Choi. A digital version of an avatar, created via a hologram capture of Choi modeling the makeup look, was featured in the “Meta Gala,” a virtual fashion show streamed live on YouTube and Twitch. Viewers could enter to win the NFT in a giveaway.

NIVEA

Partnering with Italian artist Clarissa Baldassarri, who suffered from a temporary visual impairment early in her career, Nivea uses its first NFT to highlight the value of touch. Research found that 88% of people ranked sight as their most important sense, followed by hearing. Nivea is said to be the first mass brand to offer copies of this digital work for free.

METAVERSE NOTABLES

In the beauty industry, NFTs have proven a new medium for creative expression, a means to increase customer engagement and/or brand loyalty. There are also other metaverse initiatives worthy of noting.

LOLLI

Lolli, an online shopping platform lets you earn free cryptocurrency rewards when you check out. Lolli not only has a waiting list, but also has over a thousand partner merchants. Thirty percent of Lolli’s users are female, and the platform’s Health and Beauty category boasts hundreds of well-loved brands, from Amorepacific, Fenty Beauty, EM Cosmetics, Glossier and Foreo, to retail giants Sephora and Ulta. Lolli’s wait-list is a testament to its success.

BENEFIT COSMETICS

According to consumer insights data by Niko Partners, Google and Newzoo, around half of the world’s gamers are women, with 500 million from Asia alone as of 2019. Championing gamers with a predeliction for beauty, Benefit Cosmetics asked users to create their game face with the brand’s products. Gamers, identifying themselves as women were also encouraged to speak up on topics from harassment and bullying to underrepresentation. Giving over 500 million women (from one continent alone) an opportunity to have their voices heard is a success in and of itself!

MAC

MAC Cosmetics hired Perfect Corp., industry leader in artificial intelligence, augmented reality and e-commerce, to create an AR try-on lens via Snapchat, allowing users to put on filters of different lip and eye products, browse product categories while on Snapchat, then purchase them. In the first month of its implementation both online and in-stores, MAC saw a 200 percent increase in customer engagement. According to Deloitte’s Snap Consumer AR Global Report 2021, there are 100 million consumers shopping with AR online and in-stores, and 94 percent agree that they’ll use AR when shopping in 2022.

THE RISE OF META-SHOPPING

Many beauty brands are merging gaming with shopping, taking a hybrid approach. For example, Charlotte Tilbury sponsored the Girl Gamer Festival in 2021, L’Oréal-owned YSL Beauté partnered with streamer Talia Mar for a sponsored stream promoting the Black Opium Fragrance, and within Estée Lauder’s microsite Anrcade, users play arcade-style minigames while learning about the brand’s Advanced Night Repair serum. Drest, a mobile gaming app in which users complete styling challenges, launched a Beauty Mode featuring both Gucci Beauty and Nars. According to CEO Lucy Yeomans, their users see themselves as creators. “I see a demand from the next-generation customer to actually be part of a kind of creative experience,” she says. “The experimentation and discovery are incredibly important, because it’s so immersive...Branded challenges offered on Drest are most popular, with the highest engagement,” she adds.

THE NEED FOR SELF-EXPRESSION

According to cultural critic and PR sprecialist, Afshan Hussain, the human need for creation is driving a confluence between the beauty industry and metaverse engagement, as a tool for self-expression:“We are all born with the oldest blockchain in history, that is DNA, and yet, one’s DNA does not define who we are. If the last century has taught us anything as humans, it’s that bio-essentialism is a myth we need to outgrow. The myth says, You can’t be this/You have to be that because you are a woman, or a of a certain skin color, or a certain sexuality. This is a lie. We create who we are.”

For Afshan Hussain, beauty products have always been a part of our toolkit, some would even say, arsenal, that we can use to take what’s given (by our DNA) and reshape it into who or what we want to be. In this sense, beauty products, like art, Hussain contends, can truly represent and hold our identities. “What’s really interesting about the NFT space is that both artists and beauty brands are now minting individually shaped identities onto another blockchain, that of a cryptocurrency. And in this way, NFTs have the power to bury the last existing relic of bioessentialism: DNA,” she added.

Clinique’s Optimist campaign asked users to post their stories of Optimism on Twitter, Tiktok, and YouTube. There’s a potential for every brand to ask consumers to post before and after photos on social media, using their products (in context to some theme or simply to remake themselves), and then to incorporate a selection of these submissions into an NFT. An artist might even interpret the selection and create the NFT. If it were to happen more and more, it wouldn’t simply be a trend or fad. Rather, it would be yet another means realized to fulfill the human need for self-expression.

With Givenchy or Valdé, the brand is further defining itself by conceptualizing its NFT, choosing a cause to support. Consumers then decide to identify themselves or not. Clinique and Benefit Cosmetics, on the other hand, ask the consumer to put a part of themselves out on social media, to voice who they are, what they feel, and ultimately connect it back to the brand. What’s portrayed, what’s happening, and/or what’s supported

isn’t chosen by the brand, but by the consumer. Christina Wootton, Vice President of Brand Partnerships at Roblox, the online game platform and game-creation system, reminds us: “It’s important for brands to remember that the younger consumer doesn’t want to be told what to wear and what to do. They love it when a brand is listening to them, and they’re being a part of that process.”

I asked Marie-Laure Fournier-Uder, President of Fournier PR + Consulting, what she thought about consumer driven versus brand derived use of the metaverse and creation of NFTs. She responded, “There’s really room for everything in the metaverse. It’s a place you can be anything you want. There’s no one strategy or one box you can put trends into. The space isn’t defined. And therein lies the opportunity for extra-ordinary evolution and outreach. What I love about it [the metaverse] is that it democratizes a world of possibility. It opens up all ends of the spectrum, for both brand and consumer. Getting back to your question. Clinique’s mass-market approach is in line with its target market. That said, a more high-end luxury brand might employ a very different strategy, more in line with the history of what that brand represents, maybe a collaboration with an artist whereby a more expensive NFT is created and sold. In exchange for purchasing the NFT, the customer might have the first choice of pick in a limited edition collection of products, for example. What’s important for brands to offer is true value and belonging to a community. It’s often an experience, not a gimmick, that people want.”

FINANCIAL, ENvIRONMENTAL, AND OTHER CONCERNS

ENVIRONMENTAL

A significant proportion of NFTs rely on the ‘proof-of-work’ model to verify each transaction on the blockchain, which consumes vast amounts of energy. Beauty brands built on clean credentials must be aware of the problem and its solution. Blockchains using proof-of-stake validation with low power consumption make for a much more environmentally friendly option. Nivea’s NFT was minted on Polygon. Offsetting emissions from an NFT, is another option. Gucci partnered with Offsetra to purchase carbon offsets auctioned via Christie’s, reducing the negative environmental impact associated with its NFT.

FINANCIAL RISK

NFTs are considered a type of cryptocurrency and this market is highly volatile. A token can be worth thousands or even millions in one month before losing over 90% of its value the next month. Additionally, hackers constitute a real problem for all metaverse spending. Whether purchasing an NFT or shopping in a metaverse mall, hackers can steal from users in a variety of ways.

CuSTOMER CONFuSION

Customer confusion, over what one owns when owning an NFT, is also an issue. When someone buys a digital artwork that is authenticated by an NFT, they are not buying the artwork itself. Instead, they are purchasing a digitally authenticated note that proves the physical version exists or existed without actually owning the physical asset. If they own the asset as well, the NFT can serve as a copyright in that NFTs do guarantee rights to the original idea, product, or artwork, but this does not stop the original from being copied and distributed elsewhere. And hackers that gain access to the server where an NFT is stored can also endanger its integrity.

Brands will therefore need to inform customers about what they are actually getting for their money. In accordance with the transparency requirements under the Consumer Rights Act 2015, any terms governing a customer’s purchase must be in plain and intelligible language. This means that brands should provide a document setting out what rights the purchaser has with regards to the underlying digital asset. Furthermore, brands considering entering the NFT space for the first time must verify whether their existing trademark registrations extend to digital tokens.

STORAGE

Where the NFT is stored can be an problem if the platform that issued the NFT stops hosting the digital media. If a brand is selling its NFTs through a platform, it should seek clarification as to where the assets are stored. Platforms which publish the digital artworks to the IPFS (which stands for an InterPlanetary File System) may offer more protection. The IPFS is a peer to peer network for storing and accessing files and data in a distributed file system. Brands have the option to pin the artwork themselves on the IPFS, rather than relying on the platform, thereby granting the brand more power and the consumer more security.