The pandemic has accelerated our immersion into the digital world, and nowhere more interestingly than in the world of fashion and luxury goods. But why, asks Maria Bain, Head of Audience Intelligence at iCrossing UK…
The metaverse. A word, a concept, that might once have seemed dystopian, has fast established itself as a regular piece of the marketing language and toolbox. What’s more, for brands wanting to reach Gen Z and Millennials, dismissing the trend might soon no longer be an option.
It’s a marketing tool not limited to ‘younger’ or edgier brands more commonly associated with more advanced digital trends however, with high-end brands such as Louis Vuitton, Gucci and Ralph Lauren already getting involved. So what are the key reasons why luxury brands – typically more traditional and cautious in their marketing – are getting on board with the metaverse?
Luxury: the impact of digital trends
Looking closely at recent trends helps here. The luxury industry is always in a state of recalibration; balancing profit with purpose and continuously evolving and transforming in line with consumer and digital trends. We’ve seen technology, globalisation and shifting consumer values have an incredible impact on luxury and its grounding across business, culture and identity. But, as the world stayed at home during the pandemic, there was still somewhere to go to get dressed up – welcome to the metaverse, the biggest and latest digital trend transforming the luxury industry!
The metaverse is immersive and social, it’s where people play, but also where they build their digital identities. Simply put, the metaverse is a virtual reality world where users can interact, game and experience things as they would in the real world. Brands such as Gucci, Balenciaga and Burberry are recognising this consumer desire and have already started digitising the real world and putting it into the virtual. In the metaverse, NFTs [Non-fungible tokens] are the biggest revenue opportunities and drivers for luxury brands. An NFT is a unique digital asset stored on a blockchain. It may be in the form of digital art, game items or collectibles, or a luxury good. NFTs give consumers a stake in the digital world, they are secured by blockchain technology, giving a consumer true digital ownership of a one-of-a-kind asset.
The end goal here is for the metaverse to use new standards to track and trace digital items like NFTs, and allow users to move their virtual identities seamlessly between different virtual worlds.
A trend born from gaming?
So how can the luxury industry tap into something that came from the gaming world? Gamers already spend $100bn annually on virtual goods; 3bn people play video games, which is more than a third of the world's population, and what’s more 46% of these gamers are women. Recent studies have also shown that across generations, gaming is the preferred entertainment format globally, overtaking video streaming services throughout the pandemic.
Clearly huge potential, but how can the luxury industry tap into the opportunity? The dematerialisation of luxury is here, and it’s going to change business as we know it. The business opportunities available in this fast-evolving convergence of digital and physical worlds are real. And brands need to capitalise on the moment, but also mature with them, this won’t be overnight, but a gradual change in consumer behaviour and purchasing priorities.
Key trends we’ve seen recently include:
- Screenwear is the new streetwear an elite group of consumers are investing in their digital avatar clothes and accessories
- Matching real life purchases with a digital twin: high-street and luxury retailers alike are offering up digital twins of their physical products in the first instance so that customers can start to collect virtual goods easily. This is critical to building demand and a place for virtual goods in their consumers lives
- Hyped digital assets driven by scarcity are crypto status symbols Much like limited luxury good stock there is power in the rare that even digital goods are capitalising on
The metaverse: more or less eco?
The production of a digital product produces 97% less CO2 than a physical, according to new research by DRESSX. Coupled with the devastating reports of the impact on both the planet and workers in the production line, surely fashion in the metaverse has to be more ecologically sound than even the smaller scale production of luxury goods.
But, and it’s a big but, the actual process of minting and mining NFTs requires huge energy consumption in the real world. And so even the metaverse needs to shift to more environmentally friendly methods.
Ways to engage in the metaverse
Currently the metaverse has entered the luxury industry in the following ways:
- You can wear it on your real self through an AR filter – technology is still a work in progress
- You can attend a digital bespoke fitting – even getting dressed by a digital tailor
- You can take it into a computer game and wear it on your avatar. This is the opportunity where big luxury brands are making huge sums of money selling NFTs and collaborating with creators across the world. There’s a really interesting psychology link here. A user’s avatar is part of their personality, and that very identity is something users around the world are happy to spend a lot of money curating!
The future of luxury and the metaverse
And so what’s next? As regular people transition more and more into the digital world – spending more time in digital environments – then the merging of digital and physical will start blurring even more than before; and a wider emergence of digital fashion, makeup etc will appear. Work needs to be done on making the access to digital goods more accessible for regular people. Buying an NFT now is complex, and you need to understand how the technology works. There’s a need to minimise the complexity to the bare minimum so people are not required to understand how the whole crypto world works before they can participate.
The real-world application will likely only really come to fruition when virtual reality glasses go mainstream. This will enable consumers to actually see these virtual garments or who is wearing an expensive NFT-based fashion item. But once this moment arrives, luxury brands will have to find creative and unique ways to compete with the digitally native entrepreneurs defining the space.
Maybe at some point in the distant future luxury brands will only need to sell virtual products, but for now brands should wait. NFTs have taken off this year because we now have NFT marketplaces – but if consumers don’t have a place to display these things then they don’t exist. So the progression needs to be that we start to get a collection of digital goods with our physical goods, that we are then able to start taking into our digital metaverse. Users need the place for virtual goods to live in the digital world first before brands start selling just digital. Luxury brands need to work at getting digital with physical at scale, then the other side of that marketplace will show up (virtual only), and only then will digital goods truly make sense.