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Luxury fashion houses are funneling millions into the metaverse. But to what end?

Luxury fashion houses are funneling millions into the metaverse.  But to what end?
Written by ga_dahmani
Luxury fashion houses are funneling millions into the metaverse.  But to what end?

Oscar Holland, CNN

When a virtual Gucci Dionysus bag sold online for the equivalent of $4,115 last year, it wasn’t just the price that made headlines, but the fact that you could have bought the real bag for $700 less.

The four-figure sum, paid by a user on the Roblox gaming platform, was relative pocket change for a label that generated $9.7 billion in revenue in 2021. In fact, the Italian luxury giant had initially sold digital bags for just 475 “Robux ” (equivalent to less than $6) each, with astronomical prices only achieved later on the resale market.

What the moment showed, however, is that there are people who place just as much value, if not more, on their digital wardrobes than their physical ones.

This is an idea that has transformed the Fashion industry in the last two years. From Balenciaga selling character skins in Fortnite to Ralph Lauren launching a digital clothing line on the South Korean platform Zepeto, luxury brands have rushed into these hugely popular new digital worlds.

Regardless of whether these platforms are part of the so-called “metaverse” (a term that rose to prominence when Facebook rebranded itself as Meta last year) or simply online gaming, millions of people spend their time in immersive, interconnected digital environments. As such, major brands are setting up stores with virtual events, exclusive releases, and avatar clothing collections.

The industry is full of hyperbole about the opportunities in the emerging digital landscape, with a recent report by consultancy McKinsey saying that fashion is “at the forefront of changing the metaverse.” According to Charles Hambro, whose firm Geeiq (pronounced “Geek”) helps companies like Tommy Hilfiger and Farfetch “navigate the metaverse,” this enthusiasm may stem from past mistakes.

“Fashion brands were particularly slow on social media,” he said on a video call from London, explaining that in the mid-2000s brands were disdainful of new platforms like Facebook. “They don’t want to be late again.”

“There are 3.2 billion people playing games now, and they’re not just going into these virtual worlds to play games, but also, crucially, going to socialize,” he added, comparing the fashion industry’s recent efforts to its attempts of “aligning with R&B and hip-hop culture” in the 1990s. “If a brand wants to be culturally relevant, it’s very important that it connects with this audience.”

experience matters

At first glance, digital clothing is just another source of revenue for luxury brands. Dolce & Gabbana’s first NFT series, a nine-piece collection featuring dresses, crowns, and a men’s suit (more than half of which were simply digital versions of physical items), sold for a reported $5.7 million last year through the luxury market UNXD.

The margins are unquestionably attractive: the cost of creating, say, a pair of virtual sneakers that can be infinitely replicated for free will be drastically less than the cost of manufacturing and distributing thousands of their physical equivalents.

But, perhaps most importantly, the metaverse gives brands access to an entirely new generation of customers: demographics that are often younger than traditional luxury shoppers and may never have interacted with high fashion. In fact, what was remarkable about Gucci’s Roblox experience, Gucci Garden, wasn’t necessarily the headline-making bag sales, but the fact that the virtual space was visited by a staggering 20 million users.

This kind of brand-building exercise could ultimately push new customers toward real-life goods, either now or when they have more disposable income. A report by consultancy Bain found that 70% of luxury purchases are influenced by online interactions in some way (meaning shoppers had at least one digital interaction with the brand or product before deciding to buy).

However, according to Hambro, the brands that will succeed will not be those that treat virtual worlds as advertising space or revenue streams, but those that create fun and meaningful experiences for users.

“Facebook makes money from brands, Instagram makes money from brands, but Roblox makes money from gamers,” he said. “So when a brand enters these virtual spaces, they need to enrich the experience, because it’s a completely different model. The model is about digital goods and services, not buying (ads) and putting your logo in front of their eyes as they scroll through a feed. Brands need to create a true connection with these audiences.”

The labels seem to have bought into the idea. In March, Dolce & Gabbana and Tommy Hilfiger were among several big names to take part in the first Metaverse Fashion Week, creating elaborate experiential boutiques in the Decentraland metaverse. (Although the event was marred by technical difficulties and faulty graphicsdemonstrated the willingness of brands to take risks in a reputation-based industry). Brands are also increasingly making clothes that can be integrated into people’s online lives, rather than just replicating real-life clothes like NFTs that are put into digital wallets to sell. at a later date.

As a result, users choose what to buy based on taste, rather than resale value, Hambro said. Take Burberry’s recent Roblox throw, which reimagined its iconic Lola bag in “extraordinary materials including clouds, water, and wild foliage.” Like a conventional NFT sale, the label made an unlimited number of bags available at 800 Robux (equivalent to $9.99) over a 24-hour period, and buyers can use them wherever they go within the platform’s universe.

What intrigued the co-founder of Geeiq, whose signature later analyzed sales data, was that the prices were not linked to the rarity of the items. Quite the opposite, in fact: the bags that had proven most popular during Burberry’s one-day sales period (in other words: the most common styles) remained the most expensive on the secondary market.

“That really goes against what we’re seeing with NFTs, where it’s very much tied to the rarity of the NFT itself,” said Hambro, who believes the value of the items stems from the “aesthetics of the product itself.” .

“These people were buying these products, really to express themselves, not just to own and sell.”

digital identities

Often called the “first stylist of the metaverse,” British stylist Gemma Sheppard says that just like real-life fashion, self-expression and creativity are at the heart of dressing digitally.

“Two years ago, my goddaughter asked me for some shoes for her avatar,” recalled Shepperd, a former head of luxury jewelry brand Boucheron, who has since been named global fashion director of the metaverse at Dubit, a fashion development studio. games. “At the time, they were the equivalent of £60 ($70), and her mother said, ‘Absolutely not, that’s more expensive than the shoes on your feet.’ But I started talking to her and it made me realize that it was really important to her that her avatar had these sparkly, sparkly shoes.”

“I had this massive understanding,” he added. “This is how Generation Z is behaving. This is where they are. That’s what your communication is about. Your identity in the metaverse really matters.”

About 70% of US consumers, from generations X to Z, already consider their digital identity “important”, according to a 2021 to study for The Fashion Business. And Sheppard’s advice for brands (and the spirit of her own playful designs) is to harness the creative potential of the medium.

“All of my concepts come from how I work in the real world, using traditional idea boards, but then I let my imagination run wild,” he said, referring to a new collection he is working on. “Let’s take accessories: I have some jeweled cups, but they have superpowers: they have auras and can shed glitter (representing) confidence, for example… A bag doesn’t need to work on Roblox like it does in the real world.”

By contrast, virtual worlds can offer brands the opportunity to test physical designs before putting them into production, Sheppard said. But it would be a mistake, she added, to assume that people will dress virtually the same as they do in real life.

“That’s the beauty of the metaverse,” he added. “I live in Ibiza, and they say you can never be naked: you can show up in your Swarovski dress and I can come straight from the beach in a bikini, and that’s absolutely fine. And I think, to a degree, that applies to the metaverse.”

future questions

The future of immersive digital worlds remains, like any new technological change, a matter of speculation.

Some observers have even questioned whether the metaverse, or at least the version pedaled by Meta boss Mark Zuckerberg, will ever happen. Amid dwindling interest in NFTs and falling crypto prices, new job listings with the word “metaverse” in their title dropped 81% between April and June of this year, according to the research firm. Revelio Labs workforce analysis. (Although treating this as a death sentence for the industry may be like writing off the Internet according to the “dotcom bubble” of the 1990s.)

However, investment bank Morgan Stanley has forecast that the digital craze could boost industry sales by $50 billion by 2030, according to Reuters. Traditional brands will face stiff competition from web-firsts like self-described “digital fashion house” The Fabricant for their share of that market. It also remains to be seen whether selling virtual goods for a few dollars ultimately hurts the real-life desirability of luxury brands in an industry built on aspiration and exclusivity.

A more immediate question is whether we will one day access our digital wardrobes in different virtual worlds (for now, an item purchased in Fortnite or Decentraland, for example, can only be used on those specific platforms). Dubit’s chief commercial officer, Andrew Douthwaite, says this poses significant technological challenges, despite the obvious interest of users in having a cohesive, cross-platform metalocker.

“’Interoperability’ has been the buzzword in the metaverse for the last year or so. In practice, it’s difficult, because the different platforms are closed at the moment,” he said, explaining that this could change with a move to a more decentralized version of the Internet, often referred to as Web3 or Web 3.0. “I absolutely think it’s something to strive for,” she added, “but it’s not as easy as saying that because I buy something in one world, it should work in another world.”

Other potential opportunities exist where the digital and real worlds collide, whether through augmented reality (AR) or virtual reality (VR). Recent years have seen great advances in virtual “try-on” technology, for example, allowing shoppers to see what clothes look like without visiting stores or returning unwanted garments by mail. Future applications will also depend on the development of devices such as “mixed reality” smart glasses, Hambro said.

“Where this gets really exciting, and now I’m getting into speculation and conjecture as to when the hardware is good enough, is where, through the glasses you’re wearing now, you’ll see me wearing a different outfit based on the NFTs. own,” she said.

It is, perhaps, this future that the fashion industry is betting its millions on.

The CNN Wire
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