The author of the column is Alexander Savinkin, our investment expert and co-founder of Howtotoken. It’s #icobusted, where we scan the market for the newest and most remarkable upcoming ICOs and analyze them in-depth, with a focus on the viability of the business concepts behind these projects. This won’t concern pre-ICO/ICO price gaps, no gasps and groans about the team, and no code checking. Here, we will try to break everything down to see if there are any market prospects for the product if, and only if, that product can be delivered.
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Even if you’re a real crypto whale, there are a lot of inconveniences when spending your loot. Sure, one day you will be able to easily buy a latte, book a presidential suite, or get a concierge service in every city worldwide with crypto. But today is not that day, and probably not tomorrow either. So, to tide you over until crypto becomes easier to spend, Luxreum promises to help speed that process along and let you splash big crypto with comfort and ease.
Luxreum Global is a marketplace for premium-segment products with cryptocurrency affluents as a major target group. The main drivers for the creation of this platform are growing the premium and upper-end goods and services market and fostering the emergence of a new wealthy category of early cryptocurrency adopters. The service will provide an easy way of spending crypto on goods with low transaction fees. There are also plans for developing multi-cryptocurrency wallets, escrow services, API integrations for third parties, establishing a global partner network of goods and services providers, as well as opening crypto and fiat exchange right onto the platform. The plans seem quite ambitious to say the least. There are several companies such as Boatingo (a luxury boat rental company) and Eaglerider (a motorcycle rental company), listed on the project’s website as a partners.
The problem is, however, that there is no strong need in implementing the blockchain to develop a marketplace. The majority of issues they try to solve, like ensuring the authenticity of products, instant financial transactions, ensuring platform security, and integrity aren’t crucial and do not require the blockchain. The only thing we consider that the blockchain would be well-suited for is escrow services, however, the escrow mechanism described in the whitepaper looks like just a standard payment system. Once again it seems like the team is just making strong statements, similar to that of a politician during an election campaign; full of promise, but perhaps no delivery.
The global luxury goods and services market is steadily and continuously growing at the 5% per year, having reached $1.4 trillion in 2017. The e-commerce segment climbs to 9% of the market share and is currently worth approximately $128 million. Luxury cars, luxury hospitality, and personal luxury goods together account for more than 80% of the total market. Wholesale remains the largest channel for luxury goods, accounting for roughly two-thirds of all sales. Yet the retail channel has continued growing steadily—rising 8% in 2017 alone—as companies increasingly seek to control the experience they deliver to customers. Online sales continue their relentless climb, increasing by 24%.
Although the project proclaims it is the first of its type, there are already some competitors offering the functionality close to what Luxreum is aiming to provide. The White Company has its own token, wallet, built-in exchange platform, and a luxury item store. This sounds suspiciously familiar. However, The White Company’s website usability and variety of goods are extremely poor, so with proper development and a decent number of partners, Luxreum can be a viable competitor to The White Company.
In addition to those crypto-oriented projects, there are several traditional luxury marketplaces such as the Asian platform Luxify, the old and well-performing DuPont Registry, and the global platform JamesEdition, these being considered the most popular. As all the companies are privately owned, they are not in a hurry to disclose financial information. However, there is some data available, showing that companies’ average annual revenues vary from $5M to $35M.
In this context, Luxreum’s $30 million hard cap is an extreme overvaluation (especially with only the 30% token crowdsale rate).
It is reasonable to meet the demand for spending crypto directly on goods and services without converting it to fiat money. However, splitting efforts to create a built-in wallet, exchange platform, and a global net of dealer stores is a bit too ambitious, at least at the start. The project should first provide a convenient way of spending cryptocurrencies on real-world goods. In order to do this, the platform should widen their variety of items available for purchase in cryptocurrency as well as improve the website’s usability.
Pros and cons:
(+) Global and prosperous market
(+) Sought-after service
(-) No MVP yet
(-) Adoption of crypto payments by existing market leaders can kill Luxreum
(-) Too many of the platform’s features are without obvious market need
Luxerum is aimed towards a not too big (on the luxury market scale) but wealthy group of people, and it should meet their expectations 100% in order to become successful. In case the team establishes partner relationships with a variety of goods and service providers, the project has a chance at success. However, the project’s strategy is trying to be everything for everyone, and that is simply not possible. Likewise, we can’t justify the $30 million hardcap (let alone the modest 30% crowdsale in the token distribution). We would rather wait and see the working MVP, established partnerships, and adoption speed.
- Global luxury goods market study by Bain
- JamesEdition financials by Owler
- DuPont financials by Owler
- Luxify financials by Crunchbase