Most of the population has come across the term “metaverse” after Facebook’s revelatory move to change its name to Meta. Little did we know that the term was born in the early ’90s through the fiction novel “Snow Crash” and has been used to describe an alternate reality since then. The buzz around the topic has resulted in a lot of varying definitions of this technology and the market opportunity has grown tremendously in the last two years.
For instance, the below graph shows potential market opportunities in the metaverse realm in 2021. It was based on different scenarios varying Total Addressable Market (TAM) expansion and the share of the digital economy shifting to the metaverse.
Here, we aim to look at the metaverse from the retail industry’s perspective and examine how it will transform the current scenario.
What does metaverse actually mean?
In simple words, metaverse is a virtual world where humans can interact with computer-generated elements or other users akin to real-life interactions. However, this definition leaves most consumers and brands confused.
This is because there are several aspects to this virtual reality (VR)-based universe that go beyond any universal definition. The multifaceted outlook toward the metaverse is because its creation is linked to the integration of multiple technologies and innovations. It is a world brought together by the amalgamation of existing innovations like VR, augmented reality (AR), cryptocurrency, NFTs and blockchain.
The combination of these technologies results in an ever-expanding metaverse. The virtual world consists of real-time, 3D-rendered virtual spaces that show a strong promise of becoming the most interesting selling channels in retail. But even though the metaverse has made a noteworthy entrance, the concept and technology are still in their infancy.
Is it set out to revolutionize the retail world? A 100% yes, as it is aimed at addressing newfound needs and pain points the customers face in the digital world. However, for now, it is a relatively blank canvas that can be used by retailers to explore new possibilities.
Here, we discuss the why and how the metaverse is taking over the retail industry.
Integrated branding through games
As of now, the concept of metaverse has been brought to life through the gaming industry. Several games like Roblox, Fortnite and Pokemon have emerged as pathbreakers so far.
We can see the onset of retail in the metaverse through the most popular example of Roblox. It is a game that comprises interactive and community-building experiences. The platform is the closest anyone has come to building a metaverse. The players can customize their characters or avatars according to their personalities. They can further participate and personalize the game through in-game purchases.
The platform has heavily attracted well-known brands from the fashion industry wanting to establish a virtual presence. Apparel companies like Gucci, Nike and Forever21 have established retail stores for selling their virtual fashion as wearables for the avatars in the game.
Here’s how Nikeland looks in Roblox.
A few other gaming examples include:
- Collaboration of premium luxury brand Balenciaga with Fortnite to create virtual outfits.
- Collaboration between Pokemon and Selfridges to create digital outfits to commemorate its 25th anniversary.
Building out-of-this world experiences
These developments seem quite crazy, right?
So many brands have jumped on the metaverse bandwagon in such little time. The leaps and strides will keep coming and are predicted to be well accepted by consumers. A major reason behind this was the confinement during the pandemic, which led consumers to look for an out-of-the-world experience in the virtual world.
E-commerce stores have managed to break some of these barriers of shopping from home through instant customer service, engaging websites, speedy courier mail services and multiple modes of payment. These have paved the way for successful retail in the metaverse.
The virtual world will build on these advancements and offer end-to-end immersive experiences. The emergence of the metaverse opens the door to unlimited creative options. E-commerce companies can build unique experiences in the metaverse. Consider the following examples:
- A shop for scuba diving gear that is situated underwater.
- An NBA store where you can meet your favorite star while shopping.
- A comic book store where you are greeted by the superheroes you admire.
Instant connection with Gen-Z
While the boomers and even millennials are trying to understand and grasp the concept of the metaverse, Gen Z has already started interacting with this virtual reality. In fact, 60% of Gen Z shoppers think brands should sell their products on metaverse.
This generation looks at the metaverse as the world where they can be anyone or anything they want. And because they are always looking for freedom to interact socially without any limitations, in ways not possible in real life, they are more than eager to dive into the metaverse.
Gen Z gamers perceive the metaverse as an extension of their gaming world, where they can shop, play, learn, create, form friendships, attend concerts, and even make money in games like Fortnite and Roblox. The previous generations could only dream of having this kind of independence.
Facebook’s move to rebrand itself as Meta is also considered a strategy to engage with the Gen Z audience. This is because, in 2012, there were 94% of teens on Facebook. Whereas in 2021, there are only 27% of them.
The appeal for a digital-based reality will only rise as the metaverse advances beyond closed platforms into a collection of interconnected, immersive realms where users can maintain any identity they wish.
Advanced VR technology
The retail industry thrives on providing an exceptional customer experience. Online retailers especially need to deliver more seamless, tempting experiences that eliminate the friction from the customer’s journey and encourage customer loyalty. E-commerce companies have dedicated resources to provide the shoppers with an experience similar to visiting a brick and mortar outlet.
According to a survey, 27% of the respondents want to try clothes on through AR/VR technology.
Such attempts have resulted in several successful virtual reality apps that can loosely be considered the first stride toward creating a metaverse.
For example, Audi partnered with Oculus Rift to provide a virtual try-before-you-buy experience so that buyers can:
- Configure their dream car from millions of models and variants.
- Examine the most minute details in a realistic perspective.
- Participate in a true-to-life experience of sitting in the car.
- Provided an X-ray vision to analyze beneath the surface of the car.
However, the metaverse takes retail to the next level by encompassing much more than virtual reality apps that let you try the product digitally. Shopping in the metaverse is more about virtual fashion and assets. Brands will have to adapt and create digitized versions of their products that the consumer may want to buy. These assets will have their own worth in the virtual world.
NFTs accelerate the revolution
NFTs st (non-fungible tokens) are digital assets of real objects like music, art, videos and other in-app purchases. NFTs are being created and sold, left, right and center. You can buy lifetime passes to Coachella or a designer dress at London Fashion Week as an NFT.
These tokens are creating hype as they bring interoperability and generate scarcity among shoppers. NFTs are an essential component of retail in metaverse. They are essentially the one-of-a-kind digital assets being traded in the virtual world.
The concept and technology revolving around the metaverse are expanding their reach by the minute. The adoption of this virtual world is yet limited due to the lack of hardware that helps break the transformation barrier between the realities. However, the metaverse is here to stay and is poised to change the face of the retail industry as we know it.
Therefore, retailers need not rush to develop virtual stores or apparel for gaming avatars. But incorporating the augmented or virtual reality features and establishing a noteworthy digital presence is a good idea for your store. Irrespective of the impact of metaverse on the retail sector, these technologies are already popular with online shoppers.