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Rise of the metaverse: what should retailers and brands be doing about it?

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The metaverse is rising in prominence in 2021 but what is it and what should brands and retailers be doing about it?

The lines between virtual and physical worlds have been blurring since the first items were sold on the internet and commentators tested ecommerce to try and survive in the real world using only what they could buy “on-line”.

To Gen Z, which has never known a world without the internet and smartphones, the thought that this is recent history is astonishing. For many, the boundaries between physical and virtual worlds have already blurred. What’s the point of a physical library? Why would anyone choose to watch a TV show at a set time every week? Who would buy a game or movie as a boxed disk when both can be readily downloaded faster and usually cheaper? As technology continues to evolve, so does consumer behaviour. Augmented reality (AR) has brought digital into the physical world in the form, from a retail perspective, of viewing digital versions of products positioned within a buyer’s room, or as a way for cosmetics to be tested virtually. It is now possible for a virtual outfit to be overlaid over your body while on a Zoom call, or even move with you as you strike a pose for Instagram. Having bought the sofa they’ve sized up using AR, a shopper can then put on a virtual reality (VR) headset such as the Meta-owned Oculus Quest and visit Antarctica or the International Space Station. Worlds can be re-imagined. Why passively watch a movie when you can become part of the action in virtual reality? The metaverse – referring to an amalgamation of meta and universe – is poised to take all this a big step further, although no-one is entirely sure what it will become. One hypothesis is that the metaverse will bring together many different technologies, the internet and gaming to support persistent 3D virtual environments. It will combine VR and AR as access points, payments enabled by smart contracts and ownership rights for digital assets backed by digital tokens or non-fungible tokens (NFTs).

One world with many entry points

“There is one metaverse within which are different ‘verses’ – individual economies connecting across the internet – and now bridging with the physical world,” says Holly Atkinson, head of metaverse technology at Boson Protocol.

In Meta’s words, the metaverse “won’t be built overnight by a single company”. The metaverse will enable people to interact in virtual 3D spaces that, as in the real world, are run and operated by different people or companies. Their ‘avatar’ – virtual persona – will be able to move between the different spaces and be kitted out in the latest designer outfits. More importantly these spaces or games will become platforms for experiences, a parallel reality where people can travel, hold meetings, go to concerts, interact and buy and sell things. Physical and virtual things can be bought or sold, including virtual real estate in the metaverse, with the ownership of virtual items able to be proven in the physical world. For example, a physical raincoat could be bought along with a digital version in a virtual interaction. Or items may only be sold as virtual goods for use in either the physical or digital world. Or a digital overcoat to ensure an avatar’s survival in a digital Arctic environment may come with some AR functionality in the real world, but only when the user is wearing clothing from the same brand. The combined opportunities are endless but, at its simplest, goods bought in the virtual world could cross over. Gucci was among the first mainstream designers to enter the digital fashion space with the introduction of a pair of neon trainers that only exist virtually. For £11.49, anyone can be shown wearing them on social media.

Hints from other worlds

There are glimpses of the possibilities if you look to the games industry. Gaming led with avatars (or skins) so that gamers could adopt different identities, looks, clothing or items that would help them stand out from the crowd in online games. Platforms such as Roblox enable gamers to create as well as play and it’s now moving into hosting more experiences, while Fortnite has also hosted experiences beyond its traditional gaming foundations.

  • In August, Rapper and YouTuber KSI held a launch party on Roblox featuring four of the top tracks from his album, All Over The Place.
  • Ariana Grande’s concert on Fortnite may not have lived up to the expectations of some audience members but it showed how the experience for people as avatars can differ from the real world.
  • For two weeks, avatars in Roblox could enter a virtual Gucci Garden, which echoed real-world locations, as well as buy or discover limited edition avatar items from Gucci’s special Roblox collection. Some of these virtual items were subsequently resold by owners. A Gucci Dionysus Bag with Bee sold for £2,900 worth of Roblox currency Robux. Not only was this far more than the original price of 475 Robux, roughly £4.20 but it was also more than the value of its physical equivalent.
  • In September, Vans launched Vans World on Roblox. Bringing together skateboarding, fashion and community in one experience, Vans World incorporates a shoe customiser, skate shop and Vans silhouettes for avatars to buy and wear. It’s also a 3D space where fans can practice their ollies and kickflips with friends.
  • Films such as Jurassic World now have virtual 3D experiences available for consumers who own VR headsets, while National Geographic allows them to explore Antarctica.
  • Watch the fashion industry closely, particular designers during Fashion Weeks, for special experiences that cross between virtual and physical worlds.
  • Boson Protocol is linking the physical world and the metaverse by enabling fashion brands to sell digital items for avatars on the Decentraland platform. These NFTs will contain a voucher redeemable against real-world items. What many of these developments have in common is that they are leaning towards how Gen Z acts online and how they are expected to continue to interact and shop. Virtual worlds are not new. Linden Labs’ Second Life showed how virtual spaces could be opened up to people from around the world to chat, buy things and interact in real time. By 2007, four million people had entered Second Life while brands including American Apparel had opened stores within it. Maybe the lesson to be learnt from its launch is the importance of the user experience.

Fiction is not hampered by the need for technical development and the metaverse has been popularised since the publication of Neal Stephenson’s 1992 dystopian novel Snow Crash in which people interact via avatars in a virtual world.

Who owns the metaverse?

“There is no clear path to what the metaverse will look like,” says Atkinson, although she hopes that it will be decentralised and open, as is the case with the first fully decentralised world Decentraland. This world is controlled by a Decentralized Autonomous Organization (DAO), so that the people who create and use the world have a stake in it and vote on how it evolves. The DAO owns the assets, such as smart contracts, real estate contracts, content servers and the marketplace, which make up the world. In this way, ownership of data is retained by the individual user. However, Meta wants to become heavily involved and “bring the metaverse to life.” To do so, it is creating 10,000 new jobs across the EU to help in the development of the metaverse. Its ownership of social media and virtual reality software and hardware make it an obvious development for the company. Yet Meta already has pervasive insight into consumers’ lives and there are worries about how it could try to control the metaverse, rather than allowing it to evolve openly and organically. “It could become a very closed metaverse,” warns Atkinson. Meta says it wants to collaborate and that other companies won’t want to be left behind as this area progresses. There are many different technologies evolving currently that will form part of it, with NFTs offering a security point. Consumers will decide how, where and in what way they want to interact. “People will use the metaverse in different ways,” says Atkinson. While the metaverse may take ten or fifteen years to evolve, now is the time for brands and retailers to investigate and experiment to discover what the metaverse could mean for them and their customers. Those that don’t get experience of these real-time, always-on worlds, will be on the back foot by the time the metaverse has evolved to meet its full potential.

This article was originally featured in the USA report 2021. For further insight into the one of the most influential ecommerce landscapes in the world – including population structure, Covid-19 stats and retailer case studies – download the full report here.

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