Luxury brands experiment with sales in the metaverse Grupo Milenio

In December last year, as Christmas approached, the teen fashion brand Forever 21 tested a number of new products. “Y2K-style” (2000s style) items were all the rage, as were flared pants, strappy crop tops, and puffy accessories. But the most popular design, by far, was a pink beanie hat with the word FOREVER on it. It was only 75 pence.

In fact, the beanie did not exist in the sense that most of us understand it. It was a virtual item that could be purchased at Roblox, an online gaming platform created in 2006which now has nearly 60 million users and is considered to be one of the earliest iterations of the metaverse.

The beanie hat was remarkably successful: It cost around $500 to design and launch. and over a million units were sold, making it one of the most popular F21 items in its history. His presence was also felt offline, when, in November, the brand released a collection from the metaverse to the real worldwith a limited-edition ($14.99) version of that pink beanie, so consumers could have a look similar to their avatars.

The beanie’s journey from the metaverse to reality is a trick the company is keen to repeat. As Jacob Hawkins, F21’s director of marketing and digital, explains, Roblox and its competitors can act as research and development testing laboratories in which consumers are guinea pigs. “We can spot trends our customers love and find totally new ways to design and sell our products,” she says. A word has already been coined to describe this mix of the physical and the digital in fashion and other industries: “phygital”.

Goldman Sachs estimates that the metaverse economy could reach 8 billion dollars (mdd) in 20 years, and fashion brands got down to work to experiment. Eager to win over younger consumers, even the most revered luxury houses are trying to make a name for themselves in this curious new world, fearful of being caught asleep, just like in the early years of e-commerce.

In early 2022, Gucci was the first luxury house to announce that had acquired a digital space in the Sandbox metaverse for a store space, in which he created a gallery featuring NFT artwork and vintage fashion pieces. He’s also released a $12.99 pair of virtual sneakers, which can be “put on” via augmented reality on a phone.

In November, the prestigious Burberry also targeted the Generation Z audience, partnering with the popular online game Minecraft. The brand’s signature tartan checks were the perfect fit for a product famous for its boxy graphics. The collaboration consisted of two parts. Players could download digital skins for freeor outfits, to wear in-game, and Burberry too released a royal collection inspired by Minecraft, which included a nearly $470 scarf with pixelated Burberry lettering. Phillip Hennche, the brand’s director of channel innovation, says the partnership generated “enormous” interest.

These experiments are key to understanding how the concept of luxury can evolve in the metaverse. “If you can’t buy a Gucci bag in the real world, you can spend five dollars to buy it in the metaverse,” says Alison Bringé, Launchmetrics’ director of marketing. Brands expect that, once consumers own the virtual product, they are more likely to buy the real version when they have more money. “It is a gateway to build that relationship with the consumer,” adds Bringé.

Balenciaga, Prada and Thom Browne are among the designers offering outfits for metaverse avatars for less than $10. And while many image-conscious companies remain wary of web3 opportunities, some are taking the plunge.

The brand appeal is clear, but why would consumers want to spend money on virtual sneakers or handbags? One answer might lie in the luxury shopping experience itself, with its security guards, its beautiful interiors, and its beautiful, but terrifying, personal, where the products are to be looked at but not touched, unless one can buy them. Compared to exclusive environments like these, the metaverse is a less intimidating setting, for younger consumers accustomed to interacting and spending digital money.

Another trend is augmented reality collaborationswhere consumers can try on 3D versions of clothing or accessories from their bedroom before ordering the product.

through apps, users can use their smartphone cameras to overlay 3D digital versions of products onto your face or body, similar to the popular Snapchat filters. Snap says that Estée Lauder, Mac, Gucci and Dior launched augmented reality campaigns to try sneakers and makeup that resulted in direct sales. Dior’s digital sneakers, for example, were viewed 2.3 million times and were six times the return on ad spend.

But not all are advantages for luxury brands. Many are concerned about Intellectual property and compliance issues on these new platforms, as well as the possibility of blurring your carefully preserved images. “If you have a well-dressed avatar in Sandbox, that’s great, but if Gucci or Balenciaga fashions appear in ‘adult’ content, that would pose an image problem,” says Gaetan Cordier, a lawyer at Eversheds Sutherland in Paris. At the moment, it is not clear how, or even if, these problems could be solved.

Some of these dangers have already been illustrated by another digital space: NFTs. Last summer, Tiffany & Co gave owners of a CryptoPunk NFT access to a custom necklace sale. These “NFTiffs” sold for 30 ether each •about $50,000 at the time• and the owners also received a physical pendant, encrusted with diamonds and made with the image of the pixelated characters of CryptoPunk. The collection sold out in less than half an hour and the jeweler is estimated to have earned more than $12 million. Currently, the lowest resale price of an NFTiff is around 9 ether, around 13 thousand dollars, according to CoinGecko analysts. The value of the diamond pendant has likely held up considerably better.

Even so, Ian Rogers, director of experience at crypto Ledger, is clear that there is no going back. “People in the luxury sector should understand NFTs and digital ownership better than anyone”. After all, she says, “nobody buys a fancy watch to tell the time. You buy it because you appreciate the aesthetic, it gives you status and makes you part of a small group of people who appreciate the same things.”

Financial Times Limited. Disclaimer 2021

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