Fans are the

new free agent

In our chaotic attention economy, nothing beats live sports. Live sports has been one of the last bastions of linear broadcast media, a tectonic force strong enough to redefine the way our society organizes itself; if you are skeptical of this argument, then consider the way we define Sunday. If we go back far enough in U.S. history, Sunday was designated as a day of rest from work in order to provide enough time for religious observation — that is, of course, until the NFL got big enough to knock God out of game day.

The game on the field alone does not explain this story — it was caused by the rise of television, advertising, and, finally, fan obsession. At the root of this story is a question of what products, channels, features, and experiences can drive the next generation of high volume fan attention. We know how valuable and powerful this attention is and how it used to work, and we also know it is about to change significantly. Welcome to ON_Sport: The Fan Experience. Fans are the new free agent.

What makes fans the new free agents? The answer is simple: unlike prior eras when there were limited choices, today’s fans have to actively opt-out of an infinite feed of personalized alternative sports programming so they can opt-into traditional sport media experiences and leagues. In other words, like MLB players after Curt Flood’s court case, the fans have options.

The once-stable market for America’s primary sports leagues are in a state of flux. The NBA, MLB, NHL, and most importantly, the NFL are leveraging a fading live and regional sports broadcasting model that remains massively profitable, but for an uncertain amount of time. At the same time, an alternative batch of professional leagues, startups, and brands are leveraging new methods of engagement that do not rely on traditional broadcast models and which are showing promising results. Can these insurgent leagues capture market share from the incumbents?

The combination of these forces are resetting fan expectations for how they consume the game, what matters most to their experience, and where the business opportunities lie in an uncertain future. In this issue we will explore the following questions:

How do media rights impact fans?

Media rights have long been the cash cow of professional sports.

We explored whether this system can sustain long-term profitability amidst the changing digital landscape and the unbundling of cable distribution.

The future of live sports may be uncertain, but some believe live sports need to embrace reality TV while others are steadfast that the death of live sports is greatly exaggerated.

Can insurgent leagues capture market share from the NFL?

The NFL is God, who is immune to all the forces challenging other incumbent leagues, like the NBA and MLB.

We explored what makes the NFL so powerful: a better TV experience, a better sport, or simply scarcity.

Can this ecosystem be disrupted? Sports need tribes to survive but better storytelling can bring new audiences to traditional sports.

So, are fans the new free agents?

In the age of data, the role fans play in sports is unclear.

Some argue that sports need to be careful not to turn off traditional fans while others believe sports need to completely reimagine the games and put fans in control.

Sports can go all-in on a future that is controlled by fans or try to innovate without losing traditional fans.

Time for discourse. Throughout this Living Issue, we released a number of pieces from a variety of industry experts. We published provocative positions representing alternative and opposing sides about The Fan Experience. If you think the NFL is going to stay dominant for the next generation of sports fans, for example, expect a piece that challenges that assumption. The same thinking applies If you think F1 can teach the NBA a lesson on how to engage with fans, to pick another example. As with any Living Issue, we will continuously update and we will cover all the angles. Finally, let us know if you have a position you want to add to the discourse.

More

The Future is Fan Controlled

The Future of Golf Will Be Simulated

Game Over? The Uncertain Future of Live Sports

The Death of Live Sports is Greatly Exaggerated

Live Sport Needs to Embrace the Realities of Reality TV

Tech: The Uncanny Valley of Fan Experience

The Fan Experience Event Preview

LIV Golf’s Playbook: Innovating Without Losing Traditional Fans

Home Field Advantage: The Community Experience is Paramount

Fans Are The New Free Agent

Did Tom Brady Really Say That?

An NBA Player Surveys the AI Opportunity

AI: A Goldmine or a Landmine For Athlete Brands?

Intellectual Property Law and AI: The Future of Athlete Branding

How buying our clothes used took over the market, and the conversation, in 2023

Breana Teubner
Try Your Best COO,
Investor and advisor

Out With
The New,

In With
The Old

I couldn’t believe it. I was about to spend $35 to check an empty suitcase at JFK. 

This is when I knew our closets were about to change.

It was 2016, and I was returning to California from a shopping trip to NYC. A frequent visitor to the city, I’d always bring an extra bag for new clothes. But this time, it came back empty. I hadn’t bought anything.

What happened? That was the year I started using Rent the Runway. Almost immediately, my shopping changed. Why spend $250 on a trendy sweater when I could just rent one – or three?

Throw in TheRealReal and a few more upstarts, and today, I doubt I’m the only one leaving NYC empty-handed.

It’s a monumental shift. The secondary fashion market was once just that – secondary. But now, it increasingly seems to come first. Rentals, resales, and vintage are taking over our closets, forcing brands to rethink where and how they operate. So far, they’ve been slow to adapt. But with the $25B+ market predicted to grow 10 to 15 percent per year over the next decade, it’s something they can no longer afford to ignore.

Behind the shift is a radically new mindset around used clothes. In the past, few found value in vintage, rental, or resale. Today, that perception is changing. Now, new doesn’t always equal best.

Once considered a way to save money, for example, rentals are now a great way to move quickly and stay on trend. Meanwhile, vintage is all about being more creative. Why limit yourself to the cadence and style of global fashion brands, the thinking goes, when you can express yourself more authentically via the vintage market – which is larger and far more diverse. Now, primary is almost “basic”, while secondary is seen as unique. 

Though the mindset is important, we wouldn’t be here without technology. Startups like TheRealReal have brought much-needed confidence and trust, assuring buyers of both quality and authenticity. Particularly when it comes to luxury, the value of these platforms can’t be overstated, and their growth (predicted at 25-30 percent annually) is in many ways driving that of the sector.

To be fair, this has not gone unnoticed, with brands already changing the way they make clothes. Mass fashion retailers, for example, typically deal in three types of garments: basics, which they sell year-round; seasonal basics, for roughly half the year; and “quick trends”, which last only a few months. With rentals increasingly taking over seasonal and quick trends, brands are leaning more heavily into quality-made basics. Soon, we may even see them creating specific lines just for rental, like the outlet-only lines of the 90s. 

But this is only the tip of the iceberg. With technology bringing the secondary market out of stores and onto the web, brands can finally participate in – and capture – a share of the value created beyond the original point of sale. The opportunity is significant. While those that wait on the sidelines will continue to see their products traded secondhand, says a recent McKinsey study, “done prudently, brand entry should not erode margins, and would result in only limited cannibalization.”

Of the many ways brands can monetize the secondary market, the most obvious is taking some percentage of value from transactions involving their products. Many are beginning to explore this, particularly through take-back and trade-in programs. DÔEN’s “Hand Me Dôen”, for example, helps shoppers trade in used items, with the brand facilitating shipping, inspection, and providing store credit once approved. Members are even rewarded, gaining early access to new collections. As DÔEN puts it, the program is an integral part of its commitment to moving past linear business models, helping customers find “joy and value – both financial and emotional – in wearing and sharing pre-loved garments.”

For all its upside, the secondary market is not without its risks. Brand control is particularly challenging. Today, more and more customers buy luxury primarily (or even only) through these channels. This creates a problem: spend five minutes on eBay and you’ll find countless luxury items being sold, for lack of a better word, cheaply. Think bad photos with harsh lighting, or LV sunglasses in a Chanel case. Compare that to the billions spent crafting the perfect image at the original point of sale – on models, photographers, advertising, and expensive retail stores – and the gap becomes painfully clear.

Succeeding in this new environment means adapting to both sides of the coin. Leading brands will take steps not only to seize the value presented by this longer lifecycle, but to protect themselves as their garments work their way through it.

Do you agree with this?
Do you disagree or have a completely different perspective?
We’d love to know

More

The Fashion Industry Treats Tech Like a Seasonal Trend

Ownership Has Fallen Out of Fashion Recap

Out With The New, In With The Old

The Future is Authenticated, Brands Risk Missing the Opportunity

Brands that AI forecast, fall. Brands that react, rise.

IP Law Applies to Physical and Digital Fashion Goods

Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival
Michael Treff
Code and Theory CEO,
Co-Founder of ON_Discourse

The Fashion Industry
Treats Tech Like
a Seasonal Trend

The fashion industry prides itself on being on the cutting edge. What is fashion if not trendsetters deeming what is worthy to grace our collective bodies? And yet, while fashion companies dictate and forecast what’s next, they mistake truly seismic shifts in technology, which can fundamentally change not just business operations but also consumer experiences, for just another seasonal trend.

On the back end, the fashion industry structurally embeds technology everywhere. Fashion companies constantly leverage a variety of tech wherever consumers are not present: from materials creation to factory logistics, to supply chain management, to shipping and delivery. When there’s potential for profit—be it through addressing labor concerns, enhancing material durability and sustainability, or simply uncovering new cost efficiencies—the latest technology is reluctantly embraced.

However, on the front end, where technology has the ability to change the way a consumer and the brand interact, the fashion industry treats technology like a seasonal collection, opting to ride hype cycles and use innovative tech as hype engines vs. using new technology to find opportunities to solve for consumers. Rarely does the consumer-facing, marketing-driven sides of fashion organizations adapt new technology in a systemic, structural way, rather than opting for the tech version of disposable fast fashion. Although products are created with the latest cutting-edge innovations, they are sold by whatever tools happen to be available. These tools range from what appeared to work in another industry last decade to whatever happens to be on everyone’s lips this week in Silicon Valley.

The fashion industry is like a dog and its owner. The owner makes sure the dog has water, is fed, has toys, gets plenty of attention, and attends its regular veterinarian appointments. Then the dog goes to the park and chases squirrels.

A few years ago, fashion companies discovered AR, for a few months. There was a collective excitement about making billboards come to life on your phone, which, as we know, solves many consumer problems and drives bottom-line ROI in unparalleled ways. This AR blitz achieved absolutely nothing. AR didn’t affect their bottom line in any way, was a frustrating consumer experience, and peaked as merely a neat activation—yet another gimmick. Fashion companies went in with a short-term focus: “Hey, AR looks cool. Let’s try AR, and we’ll be cool too!”

This happens repeatedly.

QR codes? Fashion companies decided they were the future and the only thing consumers could ever want, so for a little while, they put them everywhere.

NFTs? Rinse and repeat.

Because the excitement always lasts just one season, there’s no need to invest for the long term. As we discussed at our recent NYC event, the fashion industry is fundamentally hype-driven and thus cannot sustain new tech forces beyond a single seasonal trend cycle.

Fashion companies go all in on non-structural, non-systemic, activations-leveraging, flavor-of-the-month tech. Because technology is seen as a fad rather than a systemic differentiator for the customer experience, there’s no lasting impact on the company’s data, infrastructure, ability to drive personalization, or sales enablement. All those areas are entirely separate from the marketing department that got wind of web3.

Fashion’s tech trend phenomenon goes back decades.

At the beginning of the shift to the direct-to-consumer (DTC) model, traditional fashion brands didn’t know what to do with e-commerce. First, they tried to ignore it. In some ways, this was understandable. Fashion brands are simply dominated by forces that are antithetical to structural technology adoption. The industry is built on hype and disposability–it’s not built for long-term structural change. Non-native digital fashion businesses didn’t want to even accept e-commerce because it would “erode the brand".

When that didn’t work, brands tacked e-commerce onto their existing operations. That was only a slight improvement. While fashion companies had finally accepted online shopping as necessary, they didn’t embrace it. The budget for their e-commerce environments compared to what they would spend on their physical retail environments was minuscule.

This was ridiculous.

Obviously, your online store is going to be your biggest store. Obviously, your online store is uninhibited by scale and reach and foot traffic. And obviously, your online store has a lower cost of entry than a store on Fifth Avenue. So obviously, brands treated their online store like a campaign.

The e-commerce budget across the technology infrastructure, UI, and UX would typically be less than what they would spend on a billboard for 2 markets.

The incumbents had left the runway wide open. Eventually, a crop of DTC-based fashion brands and companies leapfrogged the traditional players in their e-commerce footprint. For the newcomers, e-commerce was their only footprint. They didn’t have retail stores. From Warby Parker to Everlane to name your favorite mattress or beauty company (I’m looking at you, Glossier), they all started with a digital-first, technology-first, e-commerce-first mentality, which let them build completely differentiated businesses.

When the legacy companies finally realized their mistake, they eventually caught up. They caught up, but only in terms of understanding the need to invest, not the magnitude of the investment, or the subsequent ROI. Today, the budget that luxury brands will spend on campaigns, social content, influencers, and marketing versus what they will spend on infrastructure and technology to drive high-conversion, high-margin sales, remains fractional.

It’s likely that fashion brands have simply decided that their customers don’t need to be wooed and wowed. People who want to buy a $10,000 purse are going to do so regardless of the digital consumer experience. And so, fashion brands don’t see the value in investing in tech because they already reach some customers and believe the group of people they could win over with tech is infinitesimally small. This is precisely why these companies were too slow to react to the internet and e-commerce: they couldn’t grasp the potential outside of their existing revenue stream.

Ultimately, this is a cultural problem of siloed departments. There’s a clear bifurcation between the people who make and market the products and those who own the most important touch point: the digital properties. These are not the same people. They’re not even in the same organization. They operate as if they have different competing goals. Someone owns the tech and the platform, someone else owns product development, and a summer intern who owns marketing.

This internal division exacerbates the problem, creating a blocker for any adoption of technology and innovation. Fashion brands aren’t interested in extending the latest tech across back-of-house, product development, marketing activation, and sales. They view technology as an inhibitor, rather than an enabler, of brand and product value.

As long as companies in the fashion industry continue to operate under this premise, and organizationally bifurcate the various touchpoints within a consumer’s experience, they will be playing catch-up and opening themselves up to disruption.

Do you agree with this?
Do you disagree or have a completely different perspective?
We’d love to know

More

The Fashion Industry Treats Tech Like a Seasonal Trend

Ownership Has Fallen Out of Fashion Recap

Out With The New, In With The Old

The Future is Authenticated, Brands Risk Missing the Opportunity

Brands that AI forecast, fall. Brands that react, rise.

IP Law Applies to Physical and Digital Fashion Goods

Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival

ON_Discourse, Inc. Terms of Service

Last updated on May 18, 2023

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Event Recap

Matthew Chmiel
Head of Discourse

On the last day of New York Fashion Week, ON_Discourse convened a breakfast event around our recent ON_Fashion release: The Secondary Market Issue. Let’s recap…

Overlooking Governor’s Island from the elegant confines of Casa Cipriani, fifteen C-suite experts, investors, and ON_Discourse members engaged in rigorous dialogue about the technology and platforms that are redefining the concepts of ownership in the fashion industry.

Toby Daniels and Michael Treff served as primary provokers representing ON_Discourse. Toby stopped me in the hallway before the session to tell me his game plan: “Fashion Week is underway and I want to redirect all of that attention away from design trends and into the technology advancements that are opening up new markets for this industry. On top of that, I want to get real opinions from the group,” he said, a fire in his eyes, “more finger pointing and less head nodding.”

I was in the room and can testify that Toby’s game plan was successful. By the end of the session, several people were trying to double-dutch their final word before starting their business day. I saw more than a few notable head shakes and heard enough sighs to tell me that this room experienced some heat. And like clean-up time in preschool, there was an undeniable disappointment that our time together had ended. This has always been our goal at ON_Discourse.  Check out the key takeaways and moments from this morning and let me know if anything here makes you want to push this thinking forward. And members, the good news is that we are still here, ready and willing to hear your follow up arguments and positions on this matter. The Secondary Market Issue is always open for a follow up.

As always the pull-quotes are not and will never be attributed.

Key

Provocations:

The fashion industry has a strange relationship with technology (strong backend innovation, and unnecessary hype around CX).

The fast fashion industry wants to destroy what you own.

A brand has no right to your resale revenue.

Discourse

Rating

Disagreeable — there were productive moments of low boiling and some unresolvable ambiguity in the room. We believe that these moments are the strongest opportunity to develop original insights that can help you make better decisions.

Key Takeaways, Quotes,

and Moments:

In the fashion industry, the backend always powers the next innovation.

  • The fashion industry is fundamentally design-driven. This explains the curious relationship it has with technology - on one hand the industry is introducing cutting edge technology to advance item tracking and authentication, while on the other hand, every year we see it chasing a new CX trend like NFTs or AR items. The design ethos cannot sustain new tech forces beyond a single seasonal trend cycle.

The secondary market is creeping up on the luxury market.

  • Luxury brands don’t have to think about the secondary market because the ultra-net-worth buyer is never going away. Their reliable purchase activity is a certainty that keeps the luxury market viable.. Nevertheless, the secondary market is inadvertently expanding luxury brands into wider audience segments. The implications of this expansion are not yet known.

Brands have a right to authenticate their products.

  • The implications of authentication quickly segmented the room into two opposing opinions. There were strong objections to adding extra costs added to newly authenticated items. These costs amounted to a new vig to fund a brand’s expansion into the secondary market. This concept led the group to question the very notion of ownership, prompting one participant to say “If you make money on my resale, I don’t fully own the product.”

“But I don’t think you should pay rent on authenticity.”

  • The implications of authentication quickly segmented the room into two opposing opinions. There were strong objections to any extra costs added to newly authenticated items. These costs amounted to a new vig that powers the secondary market. 
  • On the other hand, the marketing, design, and manufacturing effort that accumulates into brand value is the primary source of resale value; there were several advocates for this fact in the room who were comfortable shooting down these defensive claims about rent.

Brands have to earn the right to secondary market revenue.

  • The discourse concluded on a crescendo; the secondary market represents a new dimension in the relationship between brands and their customers. This dimension will drive immense and growing value for both sides but the path to revenue requires transparency and shared values. It is not enough to pad retail prices with authentication taxes that can cover resale value; the primary path to resolution involves a deeper level of community and communication between brands and their customers. The brands that will succeed in this space will earn the trust from their customers that will shape and define a more mature version of the secondary market. The one thing the room agreed on was that the secondary market is not going anywhere.

How do you react to the takeaways from the event? What have you been thinking about in this issue? Let us know and join the discourse. Reach out to me at chmiel@ondiscourse.com and we can keep the discourse flowing.

More

The Fashion Industry Treats Tech Like a Seasonal Trend

Ownership Has Fallen Out of Fashion Recap

Out With The New, In With The Old

The Future is Authenticated, Brands Risk Missing the Opportunity

Brands that AI forecast, fall. Brands that react, rise.

IP Law Applies to Physical and Digital Fashion Goods

Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival

It’s not news that luxury fashion has woken up to the potential importance of the secondary market. As the CEO of One of None, I have spent the last two years talking to fashion companies about the issue of authentication. Brands primarily see the problem through the lens of reputation protection and address it via litigation. But the missing provenance from luxury resales is much more than that. 

DeShone Kizer
Founder and CEO of One of None, a marketplace for digitally-linked limited editions across fine art, fashion, & collectibles.


The Future is
Authenticated, Brands
Risk Missing the
Opportunity

Provenance – or the lack of it – lies at the heart of a radical, transformational shift in the marketplace. Solve the provenance conundrum and you shape the future of luxury sales – and positively impact every player in the creator-collector-consumer-investor nexus. Continue to kick the can down the road, and the secondary marketplace doesn’t go away, it simply grows disfigured and misshapen. (Cue the Darth Vader music.)

Provenance has dramatically increased in importance because the secondary market is now unrecognizable from even just a few years ago, upended by a convergence of new buyer preferences and new technology platforms: think peer-to-peer digital exchanges such as Poshmark and eBay, and curated marketplaces such as StockX and Goat. 

Secondary markets are

becoming the primary place

for buyers

Driving this change are investors and collectors who have passionately embraced the secondary market despite the brands they love staying on the resale sidelines. Stats from the 2023 thredUp Resale Report show that younger buyers increasingly look to the secondary markets to make a purchase before checking the primary market. The same study shows that 9 in 10 luxury resale buyers end up making a full-price purchase from the brands they shop in the secondary market – and 75% of luxury resale buyers have also contributed to the market as sellers.

The financial scale of the secondary market has correspondingly changed, too. The global luxury resale market is estimated to be nearly $33 billion today – and is expected to balloon to $52 billion by 2026. That’s an eye-popping 62% increase in just three years that’s simply too big to leave to the lawyers. 

At the same time, the lines between consumers, collectors, and investors have increasingly blurred. Those Hermes Birkin Bags or Nike Travis Scott Air Jordan 1’s not only appreciate exponentially in value – they are resold again and again in future years. And as they do, the same doubt about provenance – and opportunity for savvy counterfeiters to enter the stream – reemerges at each new transaction point. 

Brands are

fighting

the wrong

counterfeiting battle

Consensus estimates place the impact of counterfeiting in the luxury goods market above $600 billion annually. It’s no wonder counterfeiters are digging in their Louboutin heels and feeling confident they can win at legal whack-a-mole. 

LVMH employs over 60 lawyers and spends nearly $17 million each year on legal fees related to anti-counterfeiting lawsuits. Chanel won an $11.5 million settlement with TheRealReal over counterfeits sold as authentic Chanel pieces. Nike is also currently working through several lawsuits with StockX for selling digital products marketed as 100% authentic. It’s a good fight, but ultimately a drop in the bucket.

Instead of fighting these counterfeiting battles in the courts they could simply make it easier for consumers to know what they’re buying is real. A focus on working with secondary marketplaces on using unbreakable digital certification would not eliminate counterfeits entirely but make them far less valuable and sought after.

By creating a unique digital ID – essentially a digital counterpart or certificate – for every luxury physical item, creators forever ‘mark’ the item as a one-of-a-kind. 

In the fine art world, physical works are sold with paper Certificates of Authenticity that validate a work’s origins and buyer history. Digital authentication does the same, but via a mechanism that cannot be lost, copied or hacked – and is portable to any digital ecosystem. 

The resale

royalty opportunity

Importantly, these digital certificates are already ‘future-proofed’ in anticipation of the next phase of the digital secondary marketplace – resale royalties. This is the concept of a creator customizing the digital certificate at the outset so that for every future resale, whether public or private, they receive a predetermined fractional royalty payment. 

This option can be existentially important to an emerging solo artist or creator who is just beginning to make a name for themselves. For large, mega-brands, they’ll need to weigh the pros of royalty revenue vs the cons of buyer push-back – but at a minimum it’s something that must be discussed in C-suites given the market’s new dynamics.

Like a song royalty, fractional payments add up. In the near future, these royalties can increasingly become critical components of business plans and revenue streams. 

Our internal models at my company, One of None, predict that in the next decade – if major brands overcome the authentication challenge – they will be generating at least 20% to 30% of their limited edition sales revenue from precisely these digitally-linked secondary marketplaces. And that’s the conservative estimate.

Brands need to get off the sidelines and play an active role in shaping the future of secondary marketplaces. Digital transformations happen when they make good business sense. The authentication solution is the latest example of this – and it’s about to reach its tipping point and rapidly scale.

Do you agree with this?
Do you disagree or have a completely different perspective?
We’d love to know

More

The Fashion Industry Treats Tech Like a Seasonal Trend

Ownership Has Fallen Out of Fashion Recap

Out With The New, In With The Old

The Future is Authenticated, Brands Risk Missing the Opportunity

Brands that AI forecast, fall. Brands that react, rise.

IP Law Applies to Physical and Digital Fashion Goods

Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival

Brands

that AI

forecast,

fall.

 Brands

that react,

rise.

Dr. Ahmed Zaidi
Co-Founder and Chief Executive of Hyran Technologies,
Visiting AI researcher at Cambridge University

Artificial intelligence is more and more frequently being used by brands for trend forecasting, taking into consideration variables such as consumer behavior, runway trends, and various trends in fabrication, colors, and other themes. What many do not realize, however, is that AI trend forecasting is contributing more to our textiles waste crisis than many other waste-generating culprits, like post-production disposal by consumers. I am deeply familiar with this issue, as I come from a family of textile manufacturers that have directly felt the consequences of inaccurate forecasts. 

AI forecasting is a noisy guess masquerading as an objective analysis — and manufacturers know it. My family suffered from not only an excess waste problem but was often put in financial distress when the forecast against which we bought and planned our raw materials was inevitably wrong. 

Attempting to predict the future with AI technologies is futile — particularly for production cycles exceeding more than a few seasons. Human behavior is largely unpredictable, and a virtually infinite number of unforeseen variables may impact the success of products once they reach stores, contributing to excess inventory and thus waste. That’s before we even account for everything that happened before those products were available for sale.

While predictive AI forecasting is a massively imperfect system, AI systems still can vastly improve sustainability efforts for brands by instead mitigating inventory risk. This can be achieved by narrowing production lead times, and allowing cross-collaboration between brands and their suppliers by unlocking agility and flexibility in the supply chain. To drive a sustainable and efficient supply requires multi-dimensional optimization, something humans struggle with but AI systems thrive at.

 

Cutting

pre-production

waste

Macro- and micro-trend forecasting have faced scrutiny by sustainability advocates who argue ever-changing seasonal textile trends and fast fashion are contributing to our waste crisis. But few have argued that AI modeling for predicting consumer behavior months or even years into the future is at fault, and even fewer have provided a clear alternative to this industry-wide practice. 

We have the tools to use AI for multi-dimensional supply chain optimization to shorten production lead times instead of using it for predicting future demand, which is a huge contributor to our tens of millions of tons of manufacturer-generated waste each year. Overproducing generated by AI forecasting — a kind of crystal ball system for attempting to predict unpredictable consumer behavior — is not only hurting our environment with textile waste, but it’s also detrimental to manufacturers and their working conditions. Inaccurate forecasts force manufacturers to make last-minute changes and work longer hours to meet the changes demand.

Regulators in regions of the US and abroad have proposed that brands pay up for their contributions to our global waste crisis, including by funding textile recycling programs by paying for the volume of products they produce. These policies, or “extended producer responsibility” (EPR) regulations, could look similar to programs used to reduce waste for things like batteries and mattresses — among other materials that can be difficult to recycle. They attempt to mitigate overproduction by holding the brands of these goods responsible. But as noted by Bloomberg, and as is often the case with these types of fees, it’s likely these companies would attempt to offset such fees by passing the costs to consumers.

That’s another way that AI could work to overhaul the production process and ultimately curb waste in ways that regulatory fees may not: this kind of modeling could help eliminate production waste before products reach consumers. By harnessing AI to eliminate waste and excess costs to brands from the earliest stages of product development, brands could potentially avoid damaging price-gouging to consumers while also minimizing the fees they pay for any waste they generate under such policy frameworks. 

Each year, around a trillion dollars is lost to markdown programs, making the economic benefits to brands using AI in this new, more proactive way clear. Furthermore, using AI for multi-dimensional supply chain optimization could also have far-reaching benefits to the fashion industry at large, including contributing to greater sustainability efforts and redistributing those costs to improving workers’ wages. For instance, if enough small- or medium-scale brands buy into this collaborative AI-driven information sharing at the earliest stages of product development, they stand to benefit tremendously from their combined spend at the materials level — perhaps even meeting or exceeding the spend of a singular large-label brand.

Forecasting

versus reactive

modeling

Convincing brands to break tradition with industry-wide practices is a clear hurdle, particularly for established heavyweights for whom change to existing systems is a slow process. Fashion houses with long-established manufacturer relationships may be more reluctant to explore alternative methods to supply chain navigation. But again, I’d argue there’s tremendous potential to smaller and medium-level brands as well as lower margin brands who, through collaboration and transparency made possible with AI optimization modeling — rather than futile forecasting — could see significant gains and recaptured profit by eliminating potential markdowns or post-production waste.

By viewing production from a risk perspective, it’s possible to approximate a brand’s carbon footprint not only from a single-product lifespan, but rather multiple lifespans: circular, remaking and secondary, and re-owning. As our textile waste crisis comes under increased scrutiny, brands have new opportunities to harness AI to ethically produce, both to their own benefit as well as to consumers and the environment.

Do you agree with this?
Do you disagree or have a completely different perspective?
We’d love to know

More

The Fashion Industry Treats Tech Like a Seasonal Trend

Ownership Has Fallen Out of Fashion Recap

Out With The New, In With The Old

The Future is Authenticated, Brands Risk Missing the Opportunity

Brands that AI forecast, fall. Brands that react, rise.

IP Law Applies to Physical and Digital Fashion Goods

Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival

IP LAW

APPLIES TO

PHYSICAL AND DIGITAL

FASHION

GOODS

Tony Iliakostas
Adjunct professor of Entertainment Law and IP at New York Law School

Why the Metaverse Creates Brand Identity and Authenticity Issues for Fashion Companies

Have you ever scrolled through eBay, StockX, Facebook Marketplace, or some other secondary marketplace and come across a pair of sneakers that catches your eye? Maybe there’s that luxury handbag that is normally outside your budget but a seller is selling the item for a significantly cheaper price. You pull the trigger and make the purchase, only to wait a week for the item to arrive and realize that the product was not truthfully advertised. In fact, upon further inspection, you realize that you bought a “dupe” – a fake.


The Battle Against Counterfeit Goods in Secondary Marketplaces is Significant

This is the unfortunate reality of secondary marketplaces. Some sellers will blatantly sell fake versions of real fashion products under the façade of the product being genuine. A 2018 study by the US Government Accountability Office found that about 40% of goods purchased on e-commerce websites are counterfeit products. This same study also determined that of the 32 million shipments processed by US Customs and Border Protection (USCBP) in the year 2016, over 31,000 of them were seized containing products that infringed on the copyright, trademarks, or other IP rights belonging to major brands, including fashion-oriented brands. The estimated value of these seizures was over $1.3 billion. That’s nearly 3 times the valuation of the top 10 luxury fashion brands in 2023.

The sale of counterfeit goods has been a battle USCBP has consistently engaged in for years. USCBP recognizes the transport and sale of counterfeit goods as a federal offense that is punishable by a fine, prison time, or both if one is convicted of engaging in criminal copyright infringement or criminal trademark infringement. But aside from government intervention and enforcement, secondary marketplaces have come to recognize the growing trend of counterfeit goods sales on their platform. Thankfully, they have addressed this issue front and center. In addition to having a counterfeit goods policy, eBay has created authentication protocols that would ensure that any watch, handbag, or piece of jewelry sold is authenticated by a professional. Similarly, StockX (a marketplace known for selling sneakers) has its own verification process to ensure that any sneaker sold is legitimate. 

The biggest victims of counterfeit goods sales on secondary marketplaces are brands. In particular, fashion brands have been prone to infringement-worthy activity for decades. Behavior like this is well documented in “House of Gucci” when counterfeit Gucci products were being sold for a significant fraction of the cost during Gucci’s meteoric rise to fame. Fashion brands recognize that people are quick to flock to secondary marketplaces or even take a walk to places like Canal Street and get a fake product and compromise quality for the sake of saving money. 

New Media = New Opportunities for Infringement Activity

The culture of counterfeit fashion product sales has taken a new turn in recent years, as the budding NFT marketplace has become the new home of alleged “dupe” product sales. Many recent headlines have brought this matter to the forefront. Last year, Nike accused StockX of trademark infringement after StockX sold NFTs of sneakers to consumers who had purchased the same sneaker on their website. In the same allegation, Nike accused StockX of selling counterfeit Nike sneakers that were verified to be authentic. As significant as this Nike/StockX lawsuit is, it pales in comparison to a recent lawsuit involving the iconic Birkin bag.

When you think of Hermes, one of the most powerful and dynamic high fashion brands in the world, you think of its most popular and recognizable product: the Birkin bag. The price tag ranges anywhere between $10,000 and $40,000, with even diamond-covered Birkin selling at a robust $2 million. 

But what if you could buy a Birkin (well, maybe not a real one) for an extreme fraction of the cost? Enter stage left, MetaBirkins. MetaBirkins was conceived by artist Mason Rothschild in late 2021 during the NFT (non-fungible token) boom. The appeal of MetaBirkin NFTs is that they weren’t as expensive as actual Birkin bags. Priced at $450, these digital collectibles closely mimicked the Birkin’s design and generated a reported $450,000 in sales. However, Rothschild unknowingly violated Hermes' trademark and trade dress.

In January 2022, Hermes pursued a trademark and trade dress infringement lawsuit against Mason Rothschild. In their lawsuit, they alleged that Mason Rothschild’s use of the word “Birkin” violated the trademark rights to the Birkin name that is registered in the US Patent and Trademark Office. They also alleged that Mason Rothschild’s recreation of the Birkin bag in NFT form infringed on the trade dress of the Birkin bag that is also registered in the USPTO. According to the argument set forth by Hermes, Mason Rothschild’s use of the Birkin name and his recreation of the Birkin bag is enough to cause consumer confusion. 

Consumer confusion is a core element in trademark infringement lawsuits because it boils down to whether an infringer’s use of an existing trademark could lead people to believe that the infringement came from the original trademark owner. Here, Hermes provided actual data showing consumer confusion, especially because it was around the time that other fashion brands were jumping on the NFT bandwagon. Also, while MetaBirkins were considerably cheaper than an actual Birkin bag, it definitely was an expensive NFT, which seemed to be congruent to Birkin’s typically high price tag.

Mason Rothschild, on the other hand, argued that MetaBirkins was not trademark infringement but rather an exercise of free expression that is afforded to him as an artist under the 1st Amendment. In trademark infringement matters, a defendant can raise a 1st Amendment defense that came about thanks to the iconic Rogers v. Grimaldi decision. Rogers v. Grimaldi determined that an alleged infringer is not liable for trademark infringement if their use of someone else’s trademark was used in creative works of expression. Mason Rothschild argued that as an artist, he was expressing his vision no different than Andy Warhol did with his Campbell’s soup can series.

Unfortunately, though, the odds were not in Mason Rothschild’s favor, as the Southern District of New York found that MetaBirkins was not subject to protection under the 1st Amendment. Mason Rothschild sought an appeal from the SDNY, asking for a new trial and a re-review of the facts of the MetaBirkins case. However, the court quickly denied the request and even permanently enjoined Rothschild from profiting off of MetaBirkins NFTs and even owning any MetaBirkins-oriented domain names. This was essentially the last nail that sealed the coffin for MetaBirkins.

HERMES V. ROTHSCHILD

TAKEAWAYS FROM THE METABIRKINS LAWSUIT

There’s a lot to unpack from the MetaBirkins case, but there are so many valuable lessons to learn from this lawsuit that fashion brands should be aware of with the evolving landscape of newer media and intellectual property law:

#1

The Law Doesn’t Discriminate Between Digital and Physical Universe

While current IP law is a bit antiquated, it’s safe to say that the language of the Lanham Act (federal law governing trademarks), the Copyright Act of 1976, and other IP legislation is broad enough to cover existing media and media that are to come in the future. And yet, with the dawn of NFTs, the metaverse, generative artificial intelligence, and other newer media, people fail to understand that intellectual property law governs the digital universe as much as it governs the physical universe. 

#2

Brands need to protect their IP

While current IP law is a bit antiquated, it’s safe to say that the language of the Lanham Act (federal law governing trademarks), the Copyright Act of 1976, and other IP legislation is broad enough to cover existing media and media that are to come in the future. And yet, with the dawn of NFTs, the metaverse, generative artificial intelligence, and other newer media, people fail to understand that intellectual property law governs the digital universe as much as it governs the physical universe. 

#3

NFTs are a new breeding ground for infringements

Perhaps the biggest lesson to be learned is newer media like NFTs and the metaverse are highly unregulated. Existing law contains broad enough catch-all phrasing that could apply to them. The reality though is that NFTs and the metaverse are still the wild west. NFT creators are mindlessly using other people’s trademarks without thinking of the big-picture issues. In the same vein, brands have their hands full trying to inhibit infringements of their IP in real life and these alternative universes.

The MetaBirkins case scratches the surface of the abundant number of legal issues facing major brands who are seeking to protect their IP from infringements in these emerging technology ecosystems. Fashion brands must remain proactive in registering their trademarks, registering design patents, and continuously protecting other aspects of their IP portfolio in such a way that they have full latitude to go after anyone who infringes on their products. 

For many fashion brands, their legal battles are no longer limited to going after the manufacturers of counterfeit goods, whether the product is sold on eBay, DHGate, or elsewhere. With the dawn of NFTs and new media, infringements like the ones evidenced in the MetaBirkins case are very likely to happen. Fashion brands must recognize that battling “dupe” product culture has reached new dimensions; if they’ve combatted counterfeit culture all these years, addressing it in new terrain like the metaverse should be straightforward.

Do you agree with this?
Do you disagree or have a completely different perspective?
We’d love to know

More

The Fashion Industry Treats Tech Like a Seasonal Trend

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The Future is Authenticated, Brands Risk Missing the Opportunity

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Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival

THE

SECONDARY

MARKET

ISSUE #003

Ownership

has fallen out of

FASHION

The relationship between fashion and technology has always been a curious one. Early hesitations from high-end fashion brands about embracing online storefronts, the influential role of social media, and the rush to hop onto trending bandwagons like NFTs and the metaverse highlight the dynamics of their interaction. Yet, technology has also paved the way for market expansions, ushering in the era of direct-to-consumer (D2C) models and influencer-driven retail.

A rapidly evolving landscape is the secondary market. Changing consumer behaviors challenge traditional ownership ideals. Technology is swiftly introducing new authentication methods, from innovative material designs to more advanced techniques. Legacy platforms such as eBay are vying for dominance in this secondary market alongside newer disruptors like TheRealReal.

Brands grapple with their place in this secondary market. Some, like Patagonia, Levis, and DOEN, are reclaiming, authenticating, and reselling products. Others destroy surplus inventory to artificially create scarcity and elevate value. Strategies are emerging that leverage the secondary market’s appeal to boost primary sales, as seen with Nike and Supreme. Legal battles ensue over intellectual property rights, such as the StockX vs. Nike case. Innovative startups, like One of None, are reimagining ownership concepts, while established ventures, like Rent-The-Runway, question the notion of ownership altogether. Not to mention, social media platforms are enabling individuals to bypass traditional avenues, building personal followings to directly sell secondary products.

JOIN US FOR ON_FASHION,
A DISCOURSE FILLED EVENT DEBATING THE FUTURE OF THE SECONDARY MARKET.

CASA CIPRIANI
SEPTEMBER 13TH
9AM-11AM

Inquire about attending:
memberships@ondiscourse.com

This evolving landscape demands fresh technological solutions to tackle emerging challenges and uncover new opportunities. We're confronted with both time-tested queries and novel contemplations:

  • How can products be accurately authenticated?
  • How can consumers ensure the authenticity of their purchases?
  • Should brands be entitled to receive royalties in secondary sales?
  • Is the concept of ownership still as revered?
  • If products are viewed as assets, shouldn't they be tradable like financial commodities?

Such inquiries present unique opportunities to harness or innovate technology, be it materials science, blockchain, generative AI, or advanced personalization.

In ON_Fashion, The Secondary Market Issue we will explore these trends from a multitude of angles, driven by articles from some of the world’s leading experts in fashion, tech and business. Over the course of the coming days and weeks we will publish provocations and new perspectives that will unlock new ways to think about this fast growing and hugely disruptive segment of the market.

On September 13, we also host ON_Fashion a discourse-driven event, during New York Fashion Week to debate these topics with a group of C-Suite leaders, investors and tech entrepreneurs.

Interested in attending? Inquire about membership here: memberships@ondiscourse.com

Do you agree with this?
Do you disagree or have a completely different perspective?
We’d love to know

More

The Fashion Industry Treats Tech Like a Seasonal Trend

Ownership Has Fallen Out of Fashion Recap

Out With The New, In With The Old

The Future is Authenticated, Brands Risk Missing the Opportunity

Brands that AI forecast, fall. Brands that react, rise.

IP Law Applies to Physical and Digital Fashion Goods

Ownership has fallen out of fashion

AI forecasting is essential to fashion’s survival

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