IIn December, Ralph Lauren opened his brand new stores, passing through sprawling metropolitan cities like Milan, Tokyo and New York to a seductive new location: the online world of Roblox, with 47 million active users every day. It has stocked its virtual stores, open 24/7 and accessible to anyone in the world in just a few clicks, with virtual duvets, checkered hats and other retro skiwear for the winter season, priced under. $ 5.
It’s 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 digital-only clothing and accessories. As foolish as it may sound, it is heralded as a potential new goldmine, with Morgan Stanley predicting that the metaverse could present a more than $ 50 billion opportunity for the luxury industry over the next decade.
Hereis a quick guide to always being in the know about what the metaverse is and why fashion brands are rushing to open a shop in it:
Wait. Remind me what the metaverse is, again?
Frankly, this is yet to be 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 person called an avatar who can look for experiences similar to what you might be doing in the real world: you can shop, eat in restaurants, and attend concerts. Although it has begun to take shape in various online gaming platforms, such as Roblox, it remains largely theoretical.
Is this really a new idea?
Not exactly. People have been spending time immersed in online video games for years and brands have also been involved. Adidas, Armani and Calvin Klein pioneered digital fashion on Second Life, an online virtual world that had nearly 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 are people talking about it again then?
The pandemic has something to do with this. As public safety restrictions have forced millions of people around the world into quarantine and social distancing, people have started spending much more time online. According to eMarketer, adults in the United States spent 7 hours and 50 minutes per day interacting with a digital device last year, up 15% from 2019.
Facebook also garnered a lot of attention when it announced it would change its name to “Meta” in October, with the ambition of becoming 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 business meetings in the metaverse within the next three years.
Brands, who moved fashion shows online during the pandemic and thought a lot about how to connect with customers in the digital realm, are now racing to understand their metaverse strategy. Balenciaga is creating a division of the metaverse. Gucci, Burberry and Dolce & Gabbana sell virtual fashion. Nike has acquired a virtual sneaker designer.
What’s in this for brands?
A pair of things. For one thing, it’s a way to attract the next generation of customers – Generation Z, who are digital natives and are already used to spending a lot of time online. “Their physical and digital lives are equally important,” says Michaela Larosse, who leads the creative strategy at The Fabricant, a digital fashion house based in Amsterdam.
It also looks like a hugely profitable new revenue stream. According to Morgan Stanley, the metaverse could help luxury brands expand their total addressable market by more than 10% by 2030 – good enough for over $ 50 billion in additional revenue. More exciting, the bank says, are profit margins, with the potential for 75% of that revenue to reach a profit measure called EBIT, or earnings before interest and taxes.
Think about it: with a digital item, there’s no need to buy raw materials, spend money on labor, worry about manufacturing, or ship anything around the world. Brands already have an extensive collection archive to draw from and reuse for the digital realm. 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 the 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 liters less water than a psychic garment, according to DressX, a digital fashion startup. Additionally, there is no remaining inventory at the end of the season that needs to be discounted, donated, or destroyed.
Okay, but why would anyone spend real money on clothes that don’t exist?
Good question. The answer goes something like this: If you spend a lot of time online, you probably care what your avatar looks like. Consider that one in five Roblox users update their avatar every day, according to the company.
“As people spend more and more time in digital worlds, they are becoming more and more intentional about how they portray themselves in digital worlds,” says Dylan Gott, head of global technology innovation at Estee Lauder, who may soon offer the trick for the avatar for use in the metaverse.
There is also the reachability factor. While a few 16-year-olds can enter Balenciaga on Rodeo Drive and grab the latest runway look, they can spend a few dollars to purchase a digital version to show their friends online. “This generation is used to spending money on their avatars,” says Simon Windsor, co-founder of Dimension Studio, who 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 increases in value, it can be resold for a profit. For example, in 2019, The Fabricant sold a sparkling silver dress called “Iridescence” for 54 Ether, or about $ 9,500; Today it is worth more than $ 200,000. “It turned out to be a very good investment for the buyer,” says Larosse.
Some virtual fashion is 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 is selling his winter clothing on Roblox for $ 3. for $ 5.
Other items sell for thousands or even millions of dollars, exceeding the value of any physical product. In August 2021, Gucci sold a Dionysus bag for 350,000 Robux (the currency used on Roblox), equivalent to about $ 4,100, more than it charges for the actual bag. In October 2021, Dolce & Gabbana auctioned a collection of nine pieces of NFT, including a digital tiara made from “gems that cannot be found on Earth,” for $ 5.7 million.
Where can you buy virtual fashion?
There is no single metaverse where you can buy 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, such as Zepeto, a Softbank-backed company popular in Asia.
Typically, an item can only be worn on the platform on which it was purchased. A big open question is whether shoppers will eventually be able to wear their virtual fashion on different platforms.
How could the fashion industry change?
Designers will have more freedom to go further. In the metaverse, a jacket can be on fire, made of water, or change color during the day or according to the owner’s mood. “You can forget the laws of physics in the metaverse,” says Windsor. “Anything you can conceive can be delivered.”
It could also offer brands a new way to test products by launching them first in the digital world, gathering feedback and assessing demand before selling them in the physical world. Buyers who like the digital version may be able to click a button to order the physical version.
“We believe there should be a strong connection between digital and physical,” says Franck Le Moal, chief information officer of LVMH, a luxury powerhouse that owns brands such as Louis Vuitton, Dior and Givenchy.
It could also open up the industry to more designers from various backgrounds. For example, Zepeto allows anyone to create their own digital clothing and sell it on the platform. The Fabricant launched a new initiative in September where anyone can design digital clothing, put it up for sale, and share royalties.
To be sure, much remains to be understood in the metaverse, and critics argue that it will never go mainstream. Regardless, meanwhile, the biggest fashion brands in the world are taking it seriously and moving fast. “This is a huge opportunity,” says Le Moal. “It has become a regular topic of conversation.”