In December, Ralph Lauren opened its new stores, crossing sprawling metropolises like Milan, Tokyo and New York to an attractive new location: the online world of Roblox, with 47 million daily active users. It has stocked its virtual stores, open 24/7 and accessible to everyone in the world with a few clicks, with virtual down jackets, plaid beanies and other retro ski clothing for the winter season, unless of $ 5.
This is just the latest example of how the fashion industry is starting to delve into the so-called metaverse, with Ralph Lauren, Gucci, Balenciaga and others charging real money for clothes and only digital accessories. As silly as it sounds, it is being touted as a potential new gold mine, with Morgan Stanley predicting that the Metaverse could represent a more than $ 50 billion opportunity for the luxury industry over the next decade.
Right hereis a quick guide to understanding what the metaverse is and why fashion brands are rushing to settle there:
Wait. Remind me what the metaverse is, again?
Frankly, it is still being understood. But the idea is that it could be the next version of the internet, offering a more immersive and three-dimensional experience. In the metaverse, you have a digital character called an avatar who can search for experiences similar to what you might do in the real world – you can shop, eat out, and attend concerts. While it has started to take shape on various online gaming platforms, such as Roblox, it remains largely theoretical.
Is this really a new idea?
Not exactly. People have spent time immersed in online video games for years, and brands have been involved in it as well. Adidas, Armani and Calvin Klein experienced with digital fashion on Second Life, an online virtual world that had around one million members at its peak in 2007. In 2012, Diesel began selling clothing and furniture on The Sims. In 2019, Louis Vuitton developed “skins” – an in-game purchase that changes a player’s appearance – for League of Legends players.
Why do people keep talking about it then?
The pandemic has something to do with it. As public safety restrictions forced millions of people around the world to self-quarantine and socially distance themselves, people began to spend significantly more time online. According to eMarketer, adults in the United States spent 7 hours and 50 minutes a day interacting with a digital device last year, up 15% from 2019.
Facebook also garnered a lot of attention when it announced it was change its name to “Meta” in October, with the ambition to become a major player in the metaverse. It will spend $ 10 billion this year and more in the years to come to make it a reality. Bill gates recently predicted that we will be attending working meetings in the Metaverse over the next three years.
Brands, which moved fashion shows online during the pandemic and gave a lot of thought to how to connect with customers in the digital realm, are now rushing to understand their metaverse strategy. Balenciaga creates a metaverse division. Gucci, Burberry and Dolce & Gabbana sell virtual fashion. Nike has acquired a virtual sneaker designer.
What does this mean for brands?
A number of things. On the one hand, it’s a way to attract the next generation of customers, namely Gen Z, who are digital natives and already used to spending a lot of time online. “Their physical and digital lives are equally important,” says Michaela Larosse, who heads creative strategy at The Manufacturer, an Amsterdam-based digital fashion house.
It also looks like a hugely lucrative new source of income. According to Morgan Stanley, the metaverse could help luxury brands expand their total addressable market by more than 10% by 2030, enough to generate more than $ 50 billion in additional revenue. More exciting, according to the bank, are profit margins, with the possibility that 75% of that income will reach a profit measure called EBIT, or earnings before interest and taxes.
Think about it: with a digital item, there is no need to buy raw materials, spend money on labor, bother to make or ship something around the world. whole. Brands already have a large archive of collections to extract and reuse for the digital domain. Plus, they don’t just profit from the first sale. They can collect royalties every time an item is resold. This is made possible by incorporating terms into a “smart contract” on blockchain technology, which will power the metaverse.
Digital fashion is also inherently sustainable, with the production of a single digital garment requiring 97% less carbon and 872 gallons of water less than a psychic garment, according to DressX, a digital fashion startup. Additionally, there is no inventory left at the end of the season that must be reduced, donated, or destroyed.
Okay, but why would someone spend real money on clothes that don’t exist?
Good question. The answer looks like this: If you spend a lot of time online, you probably care about how your avatar looks. Consider that one in five Roblox users update their avatar daily, according to the company.
“As people spend more and more time in digital worlds, they are becoming more and more intentional about how they present themselves in digital worlds,” says Dylan Gott, Global Head of Technology Innovation at Estee Lauder, who may soon come up with avatar makeup for use in the Metaverse.
There is also the accessibility factor. While few 16-year-olds can walk into Balenciaga on Rodeo Drive and grab the latest runway look, they can spend a few dollars to buy a digital version to show off to their friends online. “This generation is used to spending money on their avatars,” says Simon Windsor, co-founder of Dimension Studio, which helped Balenciaga organize a virtual fashion show during the pandemic.
For others, it is an investment opportunity. If someone buys an NFT – a non-fungible token, which is a type of digital asset stored on the blockchain – and it appreciates in value, it can be resold for a profit. For example, in 2019, The Manufacturer sold a sparkling silver dress called “Iridescence” for 54 Ether, or about $ 9,500; Today it is worth over $ 200,000. “It turned out to be a very good investment for the buyer,” says Larosse.
How much does it cost?
Some virtual modes are inexpensive. For example, in September 2021, Balenciaga launched Fortnite “skins” priced at 1,000 V-Bucks (the currency used on Fortnite), or roughly $ 8. Ralph Lauren sells his winter clothes on Roblox for $ 3-5.
Other items sell for thousands, if not millions of dollars, exceeding the value of any physical product. In August 2021, Gucci sold a Dionysus handbag for 350,000 Robux (the currency used on Roblox), equivalent to around $ 4,100, more than what it charges for the real bag. In October 2021, Dolce & Gabbana auctioned a collection of nine NFT coins, including a digital tiara made of “stones not found on Earth,” for $ 5.7 million.
Where to buy virtual fashion?
There is no single metaverse where you can shop for your favorite brands. Instead, companies have sprung up on existing online gaming platforms like Roblox, The Sims, and Fortnite. They are also starting to sell their wares on a wave of new metaverse platforms, like Zepeto, a Supported by Softbank popular business in Asia.
As a general rule, an item can only be worn on the platform where it was purchased. A big unanswered question is whether buyers will eventually be able to port their virtual fashion to different platforms.
How could this change the fashion industry?
Designers will have more freedom to push the boundaries. In the Metaverse, a jacket can be on fire, made of water, or change color during the day or depending on the owner’s mood. “You can forget about the laws of physics in the metaverse,” says Windsor. “Anything you can design can be delivered. “
It can also give brands a new way to test products, launching them in the digital world first, collecting feedback and assessing demand before selling them in the physical world. Buyers who like the digital version can click a button to order the physical version.
“We think there should be a strong link between digital and physical,” said Franck Le Moal, chief information officer at LVMH, a luxury powerhouse that owns brands like Louis Vuitton, Dior and Givenchy.
It could also open up the industry to more designers from diverse backgrounds. For example, Zepeto allows anyone to create their own digital clothes and sell them on the platform. The Manufacturer launched a new initiative in September, where anyone can design digital clothing, list it for sale, and share the royalties.
Granted, there is still a lot to be discovered in the Metaverse, and critics argue that it will never become mainstream. Anyway, meanwhile, the biggest fashion brands in the world are taking it seriously and moving fast. “It’s a huge opportunity,” says Le Moal. “It has become a regular topic of conversation. “