What The Metaverse Means For The Future Of Retail

If you are wondering what the metaverse is, you’re not alone. No one can give you a complete answer because it hasn’t been totally invented, it’s still in development. Its fully-built form is not yet known.

What we know is this: It’s a virtual, immersive world. It’s like the experience you have on the web but more so. Unlike your computer screen, it’s three-dimensional and much more absorbing and sensorial. You’ll be able to interact with people more like you do in person.

Since it’s not widespread, you may be wondering why everyone is talking about it. It’s because enormous investments are being made and that implies a high likelihood that something real, new and different is coming. (A good primer on the subject by Forbes writer Lauren Debtor is here.)

What The Metaverse Is For Retail, So Far

For now, brands are experimenting. They are using the early metaverse to develop awareness, engagement, loyalty and to learn. Luxury brands like Burberry, Dolce & Gabbana, Hermes and Gucci are using NFTs to generate interest.

(If you’re not familiar with NFTs, they’re digital pictures that are verified as the original and are therefore one-of-a-kind. They’re being treated as art and a small number have gone for very high prices. Some brands have bundled them with limited edition products to increase uniqueness and interest in the products.)

Most experts I talk to say the closest existing thing to what the metaverse will be is the gaming world. The way in which games like Fortnite and Roblox create virtual worlds for players to interact when they cooperate or compete is conceptually similar to the future metaverse. Games also use immersive, virtual reality headsets (like the one pictured above) that can give a more 3D experience to the user which is also very metaverse-like.

But headsets, and the metaverse, are not just for gaming, they can also facilitate one-on-one or group meetings among far-flung people in the metaverse. The challenge is that there is no commercially viable technology yet for conveying facial expressions via a headset. Today in metaverse meetings people are presented as avatars, usually cartoon-like characters, and that’s too primitive to convey facial expressions even as well as a zoom call can.

The potential for retail in the metaverse, once the technology is better, is to make online shopping more engaging and useful. A tool that would allow consumers to explore and discover better than they can now would bring online shopping closer to what consumers can accomplish in stores, without ever leaving home. If that could happen, then the process of converting visitors into customers, which today is much less effective online than in-store, could make online retail a far more viable, and valuable, business. It would also have an enormous impact on the viability of many physical stores.

According to Nancy Berger, SVP at Hearst Media and Publisher of Cosmopolitan, Seventeen, Men’s Health and other publications, the metaverse will become the next social network. It’s how people will interact one-to-one in ways that social media now can’t accomplish. Once that happens, it will likely displace existing forms of social media and that’s why Facebook is spending so much on developing the metaverse, they don’t want to see their revenue stream get taken by another developer of the technology.

What The Metaverse Isn’t, Yet

There’s a lot of talk about digital fashion products that could be worn by avatars in the metaverse. But the opportunity for avatar fashion has a few problems that I haven’t heard anyone talk about.

First, there’s currently no interoperability on the metaverse. That means something you buy in one metaverse environment is not transferable to another metaverse environment. That can change but for the moment, any “garment” or “accessory” you buy for an avatar can only be used in one metaverse location and that limits its usefulness.

Second, for most garments or accessories, the key basis for the price is the cost of making the product. Since a virtual garment has an incremental cost of about zero, the price is likely to be pennies compared to prices for real-world garments. So the estimates for metaverse fashion that you read about being in the tens of billions are likely far overstated.

The only exception might be if high-end or luxury brands made virtual products for the metaverse. If they did, the price could go higher, much higher for super-luxury brands, but it’s not clear now that consumers will want the same brands in the metaverse as they have in the physical world. Also, because the metaverse is still unformed, it’s possible that people’s investment in how they present themselves in the metaverse could be higher than I’m assuming.

The discussion about the metaverse is often conflated with NFTs. But not every NFT is worth anything, in fact very few are. Think about the number of images that show up randomly just in your inbox every day. The original version of almost all those images isn’t worth even one penny to you.

Beauty companies like NARS and Clinique have experimented with NFTs but the ability of the beauty industry to have products for the metaverse is ambiguous at best. It appears right now that the beauty industry can use the metaverse for promotion and brand-building but there hasn’t been a beauty product created yet for the metaverse and it’s not clear that there ever will be.

Although the gaming environment is most like the metaverse right now, there is no game right now that can link you to a shopping environment. No doubt that will change but how that will work, and whether it will be effective or not, has yet to be determined.

Where This Is Going

Until technology improves, the metaverse will still be mostly talk. For the metaverse to be impactful, it needs hardware that’s less burdensome to wear and less expensive than current models and software capable of conveying individual facial expressions. Although these are formidable obstacles, they are just the kind of thing that investment and research can overcome. But no one can say exactly when that will happen.

The most likely early adopters of the metaverse are gamers because they are accustomed to the fully-surrounding, three-dimensional visual and auditory experience the metaverse is bringing. As with so much new technology, it will be most natural for people who are children today and whose entertainment experience, beginning with Roblox now, is most like what the metaverse will be. The metaverse will be natural for them.

The toy market will be a natural for early adaptation to the metaverse. James Zahn, senior editor at The Toy Insider told me, “the metaverse has a lot of potential to be fun, entertaining and educational … [and] the way a kid perceives the world around them is vastly different than adults.”

No one knows how much non-gamers will use the metaverse. Like internet and online shopping adoption, it will depend on how easy it is to use and how beneficial it becomes. At the moment, it’s gimmicky and a novelty.

Experts I speak with tell me that almost no one will live their life in the metaverse. For retailers and brands, it will be one more channel for selling, not the only channel. Like TikTok and Instagram today, it will be important but it will be just as important to be in multiple channels to reach consumers in all the places and times you can catch their attention.

For the metaverse to work, it has to make your physical life better, cheaper, faster and more connected. When you think about it, that’s what the internet did for us, the metaverse is just the next step in the process and like the internet, it will present opportunities and risks for all retailers and brands.