What retailers need to know about the metaverse

The metaverse for retailers

Should retailers get a foothold in virtual worlds to sell their digital wares, or sit tight until the technology matures? Nik Nicholas, Head of Sales at Radically Digital explores the issues 

Less than two years after renaming itself, Meta has noticeably de-emphasised that vision for the future. CEO Mark Zukerberg, while not completely shelving his Metaverse dreams, is dropping key elements of the project, and seems now to be ploughing all his energies into generative AI. So, is the metaverse dead in the water?

Not quite. According to research by DappRadar, nearly $2bn (£1.75bn) was spent on virtual land grab during 2022, as companies hedged their bets on platforms including Roblox, Sandbox, Epic Games, and Decentraland. 

Global sportswear and luxury brands with big development budgets at their disposal have had actual successes in the digital domain. From Balenciaga selling character skins on Fortnite, to Ralph Lauren launching a digital clothing line on South Korean platform Zepeto, luxury players have given us a glimpse of what’s possible. A virtual Gucci Dionysus handbag sold online for $4,115 in 2021, when the real thing sold for $700 less. 

Meanwhile adidas unveiled its first NFT (non-fungible tokens) collection of wearables, adidas Virtual Gear last November. Described as “a new, interoperable product category”, we’re told owners of adidas Virtual Gear can style their metaverse profile pictures (PFPs) with the unique digital assets they’ve invested in. Nike sold an NFT sneaker for $134,000 last year. 

Collectable NFTs are one thing, but will there be a future for mainstream purchasing of virtual wardrobes? Another possibility discussed is products with digital twins stored in the metaverse, so that consumers can interact with brands long after the purchase of the physical item. In which case, should digital storefronts be launched before all the virtual real estate gets snapped up? Rightly, retail clients ask us these questions all the time. 

In the metaverse waiting room

My gut feeling is that the technology isn’t ready yet. Meta spaces are clearly at an early stage, tailored more to tech fanatics and gamers than regular web-users. The user experience is very basic and glitchy. Some virtual worlds look stark and unwelcoming, and regrettably, issues like sexual harassment and grooming of minors is casting a shadow over this brave new world. A lot more work is needed regarding cyber security, and the regulations required to protect both retailer and consumer. 

Tech experts say the transition to a more immersive online experience will take years. And indeed, we at Radically Digital are at pains to tell retailers, wait for all the bugs to be ironed out by others, and adopt the technologies that work, when they work. In a few years’ time, protocols and codes of practice will be properly mapped out. 

Cost is another barrier. It’s incredibly expensive to develop the 3D technology required for decent VR experiences, say, a virtual fashion show. In an economic downturn, only the best-off brands have cash to spare on this kind of R&D. There is also a low level of interoperability across the platforms, so if you design for Decentraland, you’ll have to start from scratch for Roblox. In time, cross-functionality between platforms will bed in, but again, we’re talking five years at least for that to happen. 

Who’s your customer in the metaverse?

Take-up by consumers has also proved slower than expected. According to the Wall Street Journal, Meta revised down its target of monthly active users for its virtual reality Horizon Worlds platform in the autumn of 2022.  Globally, household budgets are stretched to breaking point, so expensive VR headsets probably aren’t a priority for many. 

User-intent is sketchy too. It’s still not clear whether people will want to engage solely with virtual wearables, which bear no relation to real-world garments, shoes and homewares, or if the content should reflect physical inventory. If it’s the former, most retail brands surely question the value of creating all this new virtual content, distinct from their mainstream business. 

We also point out to retailers thinking of opening a virtual store front, that the target demographic (Gen Z and Gen Alpha) tend not to have much disposable income, and will be restricted financially for most of their lives. Will they seriously want to spend on NFTs and wearables in the virtual world above other real-life items and leisure pursuits? 

Going shopping in the metaverse 

Despite all the negatives, it’s too risky for retailers to completely ignore the metaverse. It’s worth keeping an eye on platform developments, and your competitors’ activities. The most obvious foray for a retailer would be a virtual store front. Here you might sell NFTs, or market real product in immersive ways. You could provide enriching or entertaining experiences for loyal customers; perhaps facilitating the personalisation of items, or loyalty-point gathering through gamification. 

Community activity could take off. A retail brand might showcase how to recycle its jeans or support an environmental charity in the virtual space, opening up a host of social marketing opportunities. There may be tech advances around avatars and digital twins, so that virtual fitting rooms become sophisticated and accurate enough to help shoppers find the perfect fit, and allow retailers to address e-commerce returns and textile waste. 

The metaverse could be used internally too, so that VR enhances staff onboarding and customer service training. 

The reality though, is that so much of this can be achieved with what we have today: e-commerce websites and digital apps. For now, our advice to retailers is to focus on the UX of your website, loyalty schemes, payment options, order processing and after-sales interfaces, before venturing into the metaverse. Like Mr Zuckerburg, a focus on generative AI might make more sense for retailers and brands right now, as the likes of ChatGPT could solved existing business challenges and costs, rather than pile on new ones.

My advice is to spend no more than an hour a week researching the metaverse, and monitoring who’s setting up shop, where. This is still a fringe technology, and could well be superseded by more useful, commercially-astute innovations.