In our second article decrypting the Metaverse we are taking a deep dive into “the new digital frontier”. As many retailers fear they will miss out an opportunity if they don’t jump on the bandwagon, Retail in Asia has rounded up everything you need to know about the Metaverse so you have a better understanding of this phenomenon and you can assess whether or not to incorporate it into your (digital) strategy.
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What’s the Metaverse?
The Metaverse does not have a solid definition yet, but it often refers to technologies like virtual reality and the idea that people may be playing and living in virtual worlds.
Matthew Ball, a former Amazon director and venture capitalist, summarised the notion of the Metaverse as the next level of the Internet, a collective virtual space, an aggregation of digital and physical reality. It is the combination of the Internet, augmented and virtual reality, that is constantly online and active, with its own economy, job opportunities, shopping malls and media. In other words, the Metaverse is the “complete interactive reality, the connecting tissue between humanity”.
The notion of virtual identity which is independent of the user’s identity in the real world is very important in the Metaverse. Users can be whomever they want to be and they can use a series of digital 3D assets to personalise their avatars, express themselves and socialise.
What’s an NFT?
An NFT, non-fungible token, is a unit of data stored on a blockchain to certify ownership of a digital asset, such as an image, video, tweet, or audio. Anyone can create an NFT.
“NFTs are all about certifying ownership of an asset (such as an image)—receiving something that is personally assigned to you and only you. This is perfect for fashion in the Metaverse. The ability to buy fashion, or ‘NFT clothing’, is equivalent to getting a custom-made dress or suit. These clothing items will not only allow people to build up virtual premium fashion wardrobes to express themselves in the Metaverse, but these digital versions may become more valuable than their real-life counterparts due to their ‘non-fungible’ nature,” said Amrit Dhami, Thematic Analyst at GlobalData.
The value of an NFT can be determined by four elements: its digital scarcity, its creator, its aesthetic and last but not least its utility (if it enables the user to access and do action into different experiences).
What are the Metaverse platforms to know right now?
The landscape keeps evolving and new platforms may emerge in 2022. For now, brands should keep an eye on Decentraland, Roblox, The Sandbox, Fortnite and Zepeto. Luxury, fashion and beauty brands have collaborated with these platforms to engage with a new and younger consumer base. Having a presence in the Metaverse also helps these brands to position themselves at the forefront of innovation.
Which brands have pioneered the Metaverse?
Coca-Cola is the world leader in launching blockchain-based, unique, collectible content on Decentraland. Within the framework of an online event, it was possible to partake in an NFT auction, and obtain things such as a friendship card or a sound player, which simulates the opening of a Coca-Cola can.
In the fashion sector, Gucci and Balenciaga are good examples of brands active in the metaverse. Gucci hosted a digital and immersive exhibition with Roblox in May 2021. While Balenciaga and Havaianas partnered with Fortnite, Gucci, Ralph Lauren, Zara and collaborated with Zepeto last year. Burberry dropped an NFT collection in Mythical Games’ Blankos Block Party in August 2021. More recently, Victoria’s Secret filed trademark applications in the Metaverse, Gucci purchased a plot of land in The Sandbox, and Roksanda debuted an NFT collection at the London Fashion Week.
“Away from avatars, there is also the potential for fashion shows in the Metaverse, with information about the garments overlaid on the runway and viewers able to get a closer look at the fabrics than at a real-life show,” said Amrit Dhami from GlobalData.
Indeed, fashion shows are now held in cyberspace, with some collections selling for over US$130,000. Both Sotheby’s and Christie’s have opened their digital headquarters at Decentraland.
In the beauty sector, Estée Lauder brand Clinique, Beiersdorf’s Nivea, Givenchy Beauty and British beauty name Ciaté London have all entered the world of NFTs. Dior and NARS have partnered with the 3D avatar platform Zepeto in 2021. Earlier in February, L’Oréal has filed 17 NFT and digital trademarks across its brand portfolio, including Maybelline, NYX and IT Cosmetics, that will enter the virtual world.
Opportunities for the brands and their ecosystem
Euromonitor found that 38 percent of consumers took part in online video gaming at least weekly last year, up from 29 percent in 2015. Augmented reality (AR) and virtual reality (VR) headset sales climbed 56 percent between 2017 and 2021, reaching US$2.6 billion last year.
It may be hard to determine exactly the current size of the market because the industry itself is not clearly defined. However, Bloomberg estimates the Metaverse market will reach US$783.3 billion in 2024 vs. US$478.7 billion in 2020 representing a compound annual growth rate of 13.1 percent. As video game makers continue to elevate existing titles into 3D online worlds that better resemble social networks, their market opportunity can expand to encapsulate live entertainment as well as fighting for a share of social-media advertising revenue. According to Bloomberg analysis, the total Metaverse market size may reach 2.7x that of just gaming software, services and advertising revenue.
For the brand themselves, though NFTs can bring a concrete revenue stream, having a presence in the Metaverse is rather an alternative way of marketing, branding as well as consumer engagement.
“The metaverse should be seen as an opportunity for brands to expand their existing universe in this virtual world. I see the metaverse as a new territory where brands can explore new types of activations but also where they can interact with a different and younger audience to introduce their brand values,” said Julien Gaubert-Molina, Partner & CEO Asia of Digital Influencer Marketing Agency YKONE.
“The possibilities for digital fashion NFTs are vast. Designers can unleash their creativity without physical barriers like gravity or practicality. Moreover, designers can use NFTs to build up private communities that get exclusive access to upcoming NFTs—such as Dolce & Gabbana’s ‘DG Family’. The mystique around NFT communities has already spurred extensive media coverage, and there’s no reason why fashion houses can’t use their own Metaverse communities to bolster sales,” said Amrit Dhami from GlobalData.
Looking closer at the China market
Although the concept itself originated from the West, China actually represents a very big opportunity as it is now leading the way for digital transformation and gamification.
On the Tmall Luxury Pavilion, dozens of merchants display hundreds of products using 3D and AR technology, including shoes, bags, watches and glasses.
“Watches are great examples of the technology in action,” Janet Wang, Tmall Luxury Pavilion’s General Manager, told Alizila.
Tmall LP customers can try on the watches virtually, and the technology makes sure that the watches fit snugly on the customer’s wrist and move in sync with the wearer.
“We found this new form of product display is very attractive to young users between the ages of 18 and 35,” said Wang, either in the interactive section of Tmall LP or on the site’s product browsing page where an algorithm makes recommendations tailored to the client’s preferences.
Users typically spend more than 31 seconds in Tmall LP’s interactive section, 12 seconds higher than the average time spent browsing for products on static pages. The marketplace also found that users are willing to watch more if products are displayed using 3D and AR technology.
During the 6th edition of the Luxury Symposium: All Eyes on China, industry experts pointed out that brands will need a very specific metaverse strategy for China, different to the rest of the world.
CNBC also reported that China’s development of the Metaverse is likely to be highly regulated and is unlikely to feature cryptocurrencies. China recently set up an industry body designed to develop the country’s metaverse applications.
Is it a sustainable trend?
As luxury brands are embracing the Metaverse, some business leaders remain cautious and are in no hurry to sell virtual items. In January, Bernard Arnault, LVMH Chief Executive said that the Metaverse could become a business opportunity for the luxury giant, but he was wary of the Metaverse “bubble”.
However as the Metaverse race is in full swing, brands should monitor closely how the Metaverse evolves and what their competitors are doing so they are not left behind.
Where to start?
“I would suggest a brand or retailer to explore a campaign activation first instead of fully investing in this virtual world. Renting a space in a virtual mall for a new pop-up experience could be a way to enter this new universe. The metaverse is now becoming more open among all the platforms which can help individuals to navigate this virtual world more freely and then access to different games through their own avatar. Gaming can then also be seen as an opportunity for more traditional brands to engage and attract new younger audiences,” concluded Julien Gaubert-Molina from YKONE.
SEE ASLO: Exploring the Metaverse in China
One way to launch in the Metaverse could be to link NFTs with brands’ physical products to bridge the virtual world with reality and to give fans another way to engage with the brand.