Whether tech-savvy or not, you may well have seen the word “metaverse” cropping up more and more in the context of fashion, retail and/or entertainment. With well-known fashion brands embracing it (for example, one high-end fashion house dropped a digital collab' collection with a leading online game this year, with the line hitting select physical stores as well as being available for characters within the game sphere), it seems that anyone operating in the sphere of retail and luxury brands needs to be alive to the opportunities created by the metaverse and thinking about how they might be able to leverage those opportunities for the benefit of their business.
The metaverse is hard to define and a quick search shows a range of contradictory definitions. Put simply, it’s where the digital and physical world meet – literally taking us beyond our universe and a number of commentators suggest this combination of virtual and real life is poised to change our lives in the same way as the adoption of the web. In this article, we discuss what the metaverse really is, how it works, and what it might mean for brand owners in the retail and consumer industries.
So what’s the metaverse?
The metaverse seeks to build upon the internet and embody individuals within it. Currently, the internet is accessed through multiple specific platforms, each with their own USP, through a physical barrier such as a screen – and is generally a 2D experience. The metaverse is different. It allows individuals to immerse themselves amongst the multiple layers of the virtual world, with these layers mapped onto the physical world, creating a much more 3D experience. It is the natural evolution of how people interact online, coming at a time when the internet forms a much greater part of everyday life. The metaverse seeks to broaden the current virtual experience: it offers a new space for every aspect of the everyday world. There are already examples of how entertainment, media, fashion, sport, work and commerce can interplay with the metaverse. In a post-pandemic world, it’s a new and immersive way to bring people together.
Digital commerce has undoubtedly transformed how we shop and brands have had to react accordingly. However, digital commerce has not yet been able to offer a comparable, or even improved, in-store “experience”. This is arguably particularly relevant to luxury brands where the experience is part of what shoppers buy. The metaverse has the power to change that. It offers untapped opportunities to reach an ever-growing community, filled with different subcultures and demographics, allowing creatives to customise their brands to engage, reach and inspire those that they may not have previously accessed offline. It provides community-based commerce, in the online world. The metaverse lets people meet and socialise, bringing brand awareness as avatars acquire and change different skins or items of clothing, allowing brands to avoid the need to actively place product advertisements.
Imagine being in London and being able to “meet” at a digital shopping mall with a friend in New York and another friend in Singapore. That might even involve trying on digital clothing, being able to get those trusted friends’ opinions on a potential new outfit before clicking to purchase, and the physical clothing then being at your door shortly after – that’s the power of the metaverse.
Whilst merging the physical and digital world might sound like science fiction, lots of us may already be active in the metaverse without even realising it. Take the explosion of several home training cycling brands during the pandemic lockdown. They blend video games (the virtual world) with cycling training (the physical world). It pulls data from a turbo trainer connected up to a user’s real-world training bike and relays that into a virtual race shown on screen, where other live users appear as personally customised avatars. The ability to race friends, live, virtually, but depicted as oneself, is the metaverse in action.
The metaverse therefore opens the door to the sale of “digital twins” of physical goods – what if a user wants to buy a digital version of their real world bike and perhaps pick a pro-team kit for their digital-self to ride on screen? Those are all new revenue streams for the bike and kit brands, and the opportunities are, of course, not only available to fitness businesses.
So why do brand owners need to know about the Metaverse?
The perception that the Metaverse is only relevant to gamers is outdated – its relevance is now recognised as being so much wider than that. One social media giant’s CEO, recently announced that their newest objective is to ‘bring the Metaverse to life’. In some industries, the move to the metaverse has already started. Immersive experiences are beginning to materialise amongst many different platforms. The rap artist Travis Scott, for example, held a live concert inside an online game in August 2020, which more than 12 million players attended across the globe, breaking the limits and restraints of an offline world.
Digital assets are also becoming increasingly valuable, with one company selling virtual real estate, selling a plot of ‘land’ for almost $1 million USD. A world-famous auction house bought a plot of virtual real estate in the virtual destination’s Art District (its prime art hub) to create a digital version of its auction house that the company’s users can visit to view and buy artwork (including Non-Fungible Tokens (NFTs)).
So what are the retailers doing in the space? Some luxury brands are already leveraging existing virtual platforms and building their immersive brands. The aim is to facilitate people expressing themselves online just as they would in the offline word, but through skins and digital items of clothing. The dynamics seen in the fashion world, especially with limited edition drops, can and are being replicated in the virtual worlds, with limited skins for avatars creating scarcity and, accordingly, value. By way of example, the collaboration between a global fashion brand and an online game platform saw the fashion house sell a virtual handbag for $4,115 USD, more than the $3,400 USD value of its real-world equivalent. Other brands are also playing in the Metaverse. For sneaker heads, digital sneakers can be earned or ‘won’ by playing an online game and amassing real-life step-counts. It doesn’t stop there. Users pay with cash to acquire the rarest shoes within the game and often shoes that would be difficult to source in the real world are purchased as digital shoes – with a real-world cost. By partnering with metaverse platforms, brands can therefore merge physical and virtual commerce in a whole new way. And, of course, the general upshot is raising brand awareness - which can also drive traffic to traditional bricks and mortar shops.
Is the metaverse a ‘good’ thing?
Another important theme in discussions about the role of the metaverse is sustainability. Sustainability and climate change are at the top of many agendas right now. The metaverse, by its very nature, is not restrained by offline resourcing and ecological constraints. The Metaverse economy allows for sustainable growth through multiple layers that the real-world is struggling to meet.
Further, metaverse-based retail can be ‘greener’ than traditional retail. To first experience items of clothing digitally is more environmentally friendly than the current consumption of clothes. And advertising might also be more ecologically sound, as brands can work with influencers to sell digital fashion without the need to send actual goods. The metaverse also allows brands to experiment with different product lines before deciding which products to launch in the offline world, based on how well they land in the Metaverse. This reduces over-supply risk and waste.
With the technology being so nascent, brands have the opportunity to create and define the space.
Brands can seek to understand the new marketplace, different demographics within the space, and reimagine the value they can provide. By adopting early, brands can entrench and build credibility with the growing communities. Brands should be thinking of how they can instil brand loyalty through the real world and virtual touch points, and the metaverse provides the space for both.
Deloitte’s Commercial & Technology and Disputes Legal Services
Technology moves much faster than the law. So as we move ever more quickly into the realms of the metaverse, we will face the challenge of applying conventional laws and regulations to answer the new legal questions raised by the metaverse. The metaverse will also raise conventional legal issues that may well need to be revisited in this new context. Familiar legal fields of ownership, licensing, use and piracy will meet new data sets (personal or otherwise), goods and content, ledgers and tokens, creating questions for those looking to benefit from the metaverse. Deloitte’s expert tech lawyers are here to support in helping clients identify and prepare for the opportunities and risks in this rapidly changing technological and IP landscape.