The metaverse economy is expected to be worth billions of dollars
and the world’s largest fashion labels are already trying.
Forever 21 was trialling new products in December last year, including Y2K-style items, flared trousers, strappy crop tops and fluffy accessories. The most popular design was a bubblegum-pink beanie hat emblazoned with the word FOREVER, which cost just 75p.
The beanie was a virtual item available to buy on Roblox, an online gaming platform launched in 2006. It is regarded as one of the most successful early iterations of the metaverse.
F21’s limited-edition pink beanie sold more than one million units, making it one of their most popular items ever. In November, the brand launched a Metaverse Collection featuring a version of the beanie to match consumers’ avatars.
Jacob Hawkins, F21’s chief marketing and digital officer, explains that Roblox and its ilk can act as R&D testing labs where consumers are the guinea pigs. This blending of the physical and digital in fashion and other industries has been coined as “phygital”.
Goldman Sachs estimates the metaverse’s economy could reach $8tn in 20 years, and fashion brands are experimenting to find a foothold in the new world.
Gucci became the first luxury house to purchase digital real estate in the Sandbox metaverse for a store-cum-event space, creating a virtual gallery displaying NFT artworks and vintage fashion pieces. It also released a pair of $12.99 virtual sneakers that can be worn using augmented reality on a phone.
Burberry partnered with Minecraft in November to create digital “skins” and a real-life collection inspired by the game. Phillip Hennche, the brand’s director of channel innovation, said the partnership generated “huge” interest, and Launchmetrics estimated the project generated a $5.2mn return on investment in advertising.
Launchmetrics’ experiments are key to understanding how luxury might evolve in the metaverse, with brands offering outfits for metaverse avatars for under $10 a go. Brands hope that once consumers own the virtual product, they’ll be more likely to buy the real version when they have more cash. Balenciaga, Prada and Thom Browne are among other designers offering outfits.
Metaverse gaming and NFTs (non-fungible tokens) could account for 10% of the luxury goods market by 2030, representing a €50bn revenue opportunity and a 25% increase in profits. Some companies are taking the plunge, while others remain cautious.
Around half of French luxury brands are experimenting with the metaverse or NFTs, according to a 2022 report by Comité Colbert and consultancy Bain. Kering, the family-controlled group that owns brands including Gucci, Saint Laurent, Alexander McQueen and Bottega Veneta, has created an in-house “lab” to cater to these spaces. Keeping up with developments is crucial as younger consumers have less loyalty to particular brands. Connecting with this group on multiple platforms is becoming more important.
The appeal of virtual sneakers and handbags is clear, but why would consumers want to spend money on them? One answer is the luxury shopping experience, with its security guards, beautiful interiors and terrifying staff. The metaverse is a less intimidating setting, particularly for younger consumers used to interacting and spending money virtually.
Augmented reality collaborations allow consumers to try on 3D versions of clothing or accessories before ordering.
Snapchat users can use their smartphone cameras to create 3D digital versions of products, similar to Snapchat filters. Estée Lauder, Mac, Gucci and Dior have all run AR try-on campaigns for trainers and make-up that have resulted in direct sales. Dior’s digital sneakers were viewed 2.3 million times and resulted in a sixfold return on advertising spending.
Luxury brands have concerns about intellectual property and compliance issues on these new platforms, as they cannot design separate spaces to comply with country standards on data, consent and privacy. Additionally, if Gucci or Balenciaga fashions are appearing in ‘adult’ content, it could pose an image problem. It is unclear how or even if such issues could be resolved.
Hermès won a landmark lawsuit against a digital artist who had sold a collection of “MetaBirkins”, fluffy virtual bags based on the French fashion house’s iconic Birkin bag. Hermès claimed the artist had copied its design to make hundreds of thousands of dollars, and was awarded $133,000 in damages.
L’Oréal worked with industry and major players to ensure brand safety on social media, and Web3 is coming. Tiffany & Co gave owners of a CryptoPunk NFT access to a sale of custom necklaces and pendants for 30 ether each. The collection sold out in under half an hour and was estimated to have made the jeweller more than $12mn. Today, the lowest resale price of an NFTiff is around 9 ether, around $13,000, and the value of the diamond-studded pendant has held up considerably better.
Ian Rogers, chief experience officer at Ledger and former chief digital officer at LVMH, believes that luxury people should understand NFTs and digital ownership better than anyone, as they don’t buy luxury watches to tell the time.
“Buying something for its aesthetics, craft, or resale value gives you status and makes you part of a small group of people who appreciate the same things.”