As brands and retailers look to the future, a new frontier, called the Metaverse, holds opportunities that are largely unknown. Now at a tipping point, some experts project this new reality of virtual goods, gaming and entertainment could represent more than $82 billion by 2025, with consumers already showing interest and a sure comfort to take part.
According to experts at Scalefast, the global e-commerce solution, this holiday season will likely propel retailers even further into the metaverse and jumpstart the revenue potential of virtual worlds with expectations for consumers to gift virtual products and events (in part due to ongoing supply chain issues).
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But as companies navigate this new world, what can they expect in the near future?
Here, Dan Wallace-Brewster, senior vice president at Scalefast, talks to WWD about understanding the Metaverse, its impact on retail, the value proposition of NFTs and how brands should be incorporating the Metaverse into strategies.
WWD: In your own words, what is the metaverse?
Dan Wallace-Brewster: My generation can probably best relate to the metaverse through the Matrix movie franchise — removing the dystopian themes, it’s an artificial environment for humans and computers to interact without the limits or definitions of the physical world. It has been around for decades but is only now reaching a tipping point with the broader market because of widely available high-speed broadband and processors that support a realistic, bug-free experience.
WWD: How could the metaverse impact retail in the near future and how are shoppers already displaying comfort with purchases in the advanced digital reality?
D.W.B.: The growing acceptance and value placed on cryptocurrencies is just one factor of consumers gaining comfort with the entire concept of intangible cash and goods. While gaming and entertainment has been at this for a while, retailers are at the beginning of their metaverse journey.
First, there had to be a credible market that demanded this gap be filled. Second, platforms had to enable safe transactions between buyers and sellers (or creators) of marketable products — almost like virtual malls. Roblox, for example, has started to navigate this around their own virtual currency, Robux, and brands that are eager to sell a virtual version of their existing products.
More importantly, gaming has hit a critical mass of cross-demographic players that will buy that product.
WWD: From your perspective, what are the opportunities for retail in the metaverse?
D.W.B.: Eventually, themed or branded metaverses could exist side-by-side, bridged by retail platforms that provide portability of virtual goods and currencies from one world to another. After a period of mass corporatization, entrepreneurs and creators will have access to millions of users from which they can build virtual products, creating something unique that the public has never seen before. Without manufacturing and distribution, creators will be closer to their customers than ever. Selling through third parties will become the exception, not the rule, and business models will change to better suit the new marketplace.
WWD: How should brands be incorporating the metaverse into their strategy for the future?
D.W.B.: As with any shopping experience, the focus must always begin with the customer. Brands and retailers need to assure consumers of an excellent experience from start to finish — an old concept that will face new challenges in the metaverse. Avatars in virtual reality don’t have the same physical attributes that define their real-world style or preferences. Without limitations set on them by society, geographical location or genetics, consumers will be able to create and operate as beings outside of their physical reality. As they spend more time socializing, learning, shopping and experiencing life within the metaverse, individual avatars will develop their own needs, interests and styles.
There is no question that the metaverse will present a lot of opportunities for abuse. It’s logical to think that if online anonymity and the power of social media has accelerated society’s ills, a metaverse that makes it all the more real and pervasive could only make it worse. But many people say the biggest societal problems we have are rooted in a lack of empathy. A metaverse is a path for someone to virtually walk in someone else’s shoes with incredible realism, hopefully leading to more understanding and acceptance. The opportunities in entertainment, job training and education alone are astounding and it will be here before you know it.
WWD: What about NFTs? What makes an NFT valuable for a brand?
D.W.B.: NFTs are cryptographically unique tokens that are linked to digital (and sometimes physical) content, providing proof of ownership. It’s this information that makes each NFT unique, and as such, they cannot be directly replaced by another token. Each NFT is unique and valuable because they are one of a kind (meaning you can’t trade one NFT for another identical one) and blockchain tracks authenticity and ownership, which with scarcity are key components for appreciation on the secondary market.
By establishing or offering a product as an NFT, brands increase the value of a physical product because it can be authenticated and traced all the way back to the place, time and date the item was manufactured, purchased and registered to a new owner. The result is an air of exclusivity that increases value, whether financial or sentimental and therefore contributes to its social currency in social networks and communities, both digital and offline.
WWD: How are NFTs tied to physical items versus being purely virtual?
D.W.B.: The secondary market can be greatly enhanced by digital assets and their classifications including NFTs that can build and authenticate a life cycle or history of a good. For example, a piece of art can be more or less valuable based on its history. It may be a sequence of collectors or museums that the art has been featured in that adds value to the piece, which influences the market value and the same can be said for everyday common goods.
A handbag, for example, can and will increase in market value based on its experiences. Almost like a game-worn jersey of the MVP in a championship game, who wore it and where becomes an instantly and singularly unique attribute for that item. A purse held on the red carpet by a celebrity is inherently more valuable than the same bag, bought by a suburban housewife and kept in the closet for years.
NFTs provide an opportunity to create and authenticate a history of the unique events in the lifespan of a product. If the perceived value goes up based on that history, the brand benefits across their entire product line for seasons to come.
A stand-alone NFTs is decentralized, meaning that it is not exclusive to any one platform or system and can be listed and traded on the open market, free from traditional market constraints like supply chain or distribution problems, the potential for counterfeits or even theft. In these cases, a physical asset without it’s matching NFT would depreciate in value — discouraging fraudsters from entering the market. The bottom line is that brands don’t need to abandon what they know and start from scratch. Instead, they can use this opportunity to make the products they already sell better, with more retained value.
WWD: Do you expect to see an increase of gifting and receiving virtual products and events during the holiday season and in the new year?
D.W.B.: We will certainly see an increase of gifting and receiving virtual products over the holidays this year, as both a consequence of their growing popularity and of the supply chain challenges retailers and brands have been facing.
One thing that doesn’t exist in a metaverse is supply chains and port bottlenecks, and virtual products allow for consumers to skip the unnecessary headache. Virtual concerts that don’t require travel, parking or waiting in line has appeal, especially to someone on another continent. Virtual luxury handbags or sneakers that carry the same real-world exclusivity and possibly an element of your own creativity will have a market, too. The metaverse is the escape from real-life with an augmentation to their physical world and companies that are afraid to embrace it, risk falling behind their customers and ceding market share to forward-thinking competitors.