Though the metaverse remains a fuzzy concept, a growing number of brands and retailers are jumping on the bandwagon. While the promise of the metaverse for retail holds great appeal (shopping experiences integrated seamlessly throughout immersive digital worlds), the development of the technology to support it is still in the very early stages. We take a look at the factors driving the surge of interest, key opportunities and challenges for brands and retailers presented by the metaverse, and what actions can be taken now to prepare.
Still confused on what the metaverse is? Click here to read our primer on the metaverse.
What’s driving interest in the metaverse among brands and retailers?
Fear of missing out (FOMO) has been a major factor fueling brand participation. While there are several competing visions of how the metaverse could materialize, a growing number of brands have boldly embraced the concept. Facebook’s rebrand to Meta in October 2021 unleashed a tsunami of hype and excitement, piquing strong interest among brands, followed by some subsequent backlash.
Underpinning all the buzz is the very real potential for virtual and augmented reality to fundamentally change how consumers interact with brands and shop, both online and in-person.
The possibilities will take on greater importance as Gen Z and Gen Alpha consumers come of age, since these digitally native generations are growing up immersed in online experiences—largely through gaming—and are spending money on virtual goods and services within these environments.
What are the metaverse opportunities and use cases for retail in 2022?
A retail component already exists on gaming and nascent metaverse platforms, both of which are marketplaces for a variety of virtual goods. These can range from inexpensive digital skins to unique nonfungible tokens, or NFTs, that command tens of thousands of dollars apiece. The marginal cost of these virtual goods is essentially zero, and NFTs can increase in value.
Fashion brands have taken the lead on metaverse participation. This makes sense given how central avatars are to interactions within games and metaverse platforms, where participants clothe their digital doppelgangers to project an individualized sense of style. In games alone, the market for skins was estimated to be worth $40 billion in 2021.
An expanding list of fashion names has been getting involved with gaming and metaverse platforms. Notable brands include Nike, Ralph Lauren, Louis Vuitton, Tommy Hilfiger, Balenciaga, Burberry, Gucci, Vans, Zara, and Forever 21. While most have taken an experimental approach—think one-off campaigns more about marketing than sales—some are staking claims to become metaverse pioneers in “direct-to-avatar” commerce.
- Nike stands out as the biggest brand to commit most fully to a virtual future. The sportswear giant has been busy filing metaverse-related patent and trademark applications, establishing a Metaverse Studio, launching Nikeland on Roblox, and acquiring the virtual fashion startup RTFKT.
- Luxury brands are making a strong showing as well. Balenciaga plans to launch a metaverse business unit, expanding on digital initiatives that include developing a video game to present its Fall 2021 collection and a more recent collaboration with Fortnite on virtual and physical apparel.
- Gucci is proving that there is real money to be made in virtual goods. The Italian fashion house has offered a wide range of digital items for sale over the past year, from $13 virtual sneakers to a unique Roblox handbag that resold for more than $4,000 and a video NFT auctioned by Christie’s for $25,000. Robert Triefus, Gucci’s executive vice president for brand and customer engagement, told The Business of Fashion, “We have proven to ourselves through these collaborations that the virtual world can create a very significant new revenue stream.”
Brands in other consumer sectors are experimenting with using virtual spaces to showcase their products. While apparel, footwear, and accessories offer the most obvious use cases, others are exploring new ways of connecting with consumers online, even though the direct revenue opportunities are less evident.
- In November 2021, Dyson launched a virtual showroom available as an app through Meta’s Oculus store that featured consumer products such as its cult favorite hair styling tools and vacuum cleaners.
- Samsung launched an immersive experience on the metaverse platform Decentraland that re-created the brand’s high-tech flagship store in New York City’s meatpacking district and offered NFTs for sale.
Augmented reality (AR) represents another entry point into the retail metaverse. Beauty, fashion, and home furnishings are three categories with clear applications for shopping-related AR.
- According to Shopify, interactions with products featuring 3D/AR content had a 94% higher conversion rate than those without it. Consumers value the ability to try on real-world goods through AR and to visualize products in 3D, and these are features that can be transferred to more immersive digital settings.
- Snapchat is betting on AR as the future of ecommerce, building on the popularity of its Lens AR features. In November 2021, it launched the Snap Holiday Market with six major brands (Amazon and Walmart among them) featuring virtual stores, immersive product showcases, and AR try-ons.
- Apple’s anticipated entry into the AR/VR market through an eyeglass product will accelerate consumer interest and generate more widespread adoption of these devices, potentially changing the game for the development of the metaverse.
Investing in the metaverse is a play for future generations of consumers. More than two-thirds of Roblox’s users are under 16, while Fortnite players are more concentrated in the 18 to 24 age group. These platforms are primarily used for gaming, entertainment, and socializing, and their users are not necessarily looking to go shopping in the metaverse. However, they are willing to engage with brands and spend money to acquire virtual goods while there, as long as the experiences offered are capable of authentic engagement that meet the needs and expectations of specific audiences.
What are the key challenges of the metaverse for brands and retailers?
Technology hurdles stand in the way. What the metaverse promises is still very far from what is possible given current technology. Existing VR headsets are cumbersome, no interoperability exists across platforms, and there are numerous limitations on the ability to make purchases within virtual spaces.
Consumer awareness of and demand for metaverse retail is still nascent. More than a third of Americans polled by YouGov and the Drum at the end of October 2021 had never heard the term “metaverse.” Just 14% of respondents in a December 2021 Bizrate survey for eMarketer said they used AR or VR while shopping, and 35% are at least somewhat interested. However, an even larger share, 41%, is not interested in using the emerging technologies for shopping. And though VR headset use will grow at a steady pace, the audience is concentrated in a segment of dedicated gamers who don’t mind wearing the uncomfortable equipment.
Younger demographics make authenticity a must. Recent backlash has erupted within the gaming community over the introduction of NFTs perceived as being “money grabs” that fail to serve the needs of players. Likewise, metaverse marketing campaigns seen as overly commercialized have drawn jeers on Roblox. These cases speak to the importance of understanding audiences across different platforms and developing tailored approaches that incorporate community input and collaboration.
Attempts to re-create the physical world in digital form may fall flat. Virtual stores are just a starting point for new forms of digital commerce, and the metaverse could allow retail to be reimagined without physical boundaries. Metaverse platform Decentraland’s focus on creating virtual districts, such as a shopping street that resembles Rodeo Drive, seem unnecessary in the digital realm, where the constraints of physical space do not exist.
What can brands and retailers do to prepare for the metaverse future?
Brands and retailers looking to develop a metaverse strategy should embrace a willingness to experiment, learn, and iterate in this fast-moving space. Even those that are not ready for a full-fledged presence in the metaverse as it exists today can take several steps to lay the foundations for the future.
- Retailers will need to move beyond the current 2D focus of ecommerce to prepare for a more social and immersive future of shopping. Investing in talent for applications such as AR will be most important for brands in beauty, fashion, and home furnishings. But across the metaverse future, 3D engineers will be in high demand, so brands should consider how to nurture talent in-house and start researching vendors and potential partners.
- Embrace a willingness to engage in co-creation. Giving users a say in what digital experiences look like poses some risks for brands and retailers, but on platforms such as Roblox—where independent developers are responsible for almost all of the content—partnerships with established creators can result in more engaging products and experiences that speak to users’ needs and interests.
- Take steps to protect intellectual property in metaverse spaces. Ensure that trademarks are up to date to include metaverse applications and monitor filings for potential infringements.