What Gucci and others learnt from the metaverse
In December last year, with Christmas approaching, the teen-focused fashion brand Forever 21 was trialling a range of new products. “Y2K-style” items were in, as were flared trousers, strappy crop tops and fluffy accessories. But its most popular design by far was a bubblegum-pink beanie hat emblazoned with the word FOREVER. It cost just 75p.
In fact, the beanie did not exist in the sense that most of us understand. It was a virtual item available to buy on Roblox, an online gaming platform launched in 2006 which now has nearly 60mn users and is regarded as one of the most successful early iterations of the metaverse.
The beanie was a remarkable success: having cost approximately $500 to design and launch, it sold more than one million units, making it one of F21’s most popular items ever. Its presence was also felt offline when, in November, the brand launched a real-life Metaverse Collection, featuring a version of said limited-edition pink beanie ($14.99), so that consumers could match their avatars.
The beanie’s journey from metaverse to reality is a trick the company is keen to repeat. As Jacob Hawkins, F21’s chief marketing and digital officer, explains, Roblox and its ilk can act as R&D testing labs where consumers are the guinea pigs. “[We can] spot trends that our customers are loving and find entirely new ways to design and retail our products,” he says. A word has already been coined to describe this blending of the physical and digital in fashion and in other industries: “phygital”.
Goldman Sachs estimates the metaverse’s economy could hit $8tn in 20 years, and fashion brands have been busy experimenting. Eager to hunt down younger consumers, even revered luxury houses have been trying to find a foothold in this curious new world, wary of being caught napping, as in the first years of ecommerce.
In early 2022, Gucci became the first luxury house to announce that it had purchased digital real estate in the Sandbox metaverse for a store-cum-event space where it created a virtual gallery displaying NFT artworks and vintage fashion pieces. It also released a pair of $12.99 virtual sneakers, which can be “worn” using augmented reality on a phone.
In November, the British heritage brand Burberry also made a pitch for a Gen Z audience by partnering with the hugely popular online game Minecraft. The brand’s signature tartan “check” seemed a good fit with a product famous for its chunky square visuals. The collaboration was in two parts. Digital “skins”, or outfits, were free for players to download and wear in the game, and Burberry also released a real-life collection inspired by Minecraft, including a £390 scarf with pixelated Burberry lettering. Phillip Hennche, the brand’s director of channel innovation, says the partnership generated “huge” interest. Launchmetrics, a data platform that analyses luxury brands on social media, estimated the project generated a $5.2mn return on investment in advertising.
Such experiments are key to understanding how the concept of luxury might evolve in the metaverse. “If you can’t buy a Gucci handbag in the real world, you can spend $5 to buy one in the metaverse,” says Alison Bringé, Launchmetrics’ chief marketing officer. Brands hope that, once consumers own the virtual product, they’ll be more likely to buy the real version when they have more cash. “This is a gateway to building that relationship with the consumer,” she adds. Balenciaga, Prada and Thom Browne are among other designers offering outfits for metaverse avatars for under $10 a go.
Metaverse gaming and NFTs (non-fungible tokens) could constitute 10 per cent of the luxury goods market by 2030, according to a 2021 report by JPMorgan. This would represent a €50bn revenue opportunity and a 25 per cent increase in the market’s overall profits. And while many image-conscious companies remain cautious about the opportunities of web3, some are taking the plunge.
Around half of French luxury brands are experimenting with the metaverse or NFTs, or plan to soon, according to a 2022 report by French luxury industry group 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, according to Gaetan Cordier, a lawyer specialising in the luxury sector at Eversheds Sutherland in Paris. Connecting with this group on multiple platforms is therefore likely to become more important.
The appeal for brands 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, beautiful interiors and gorgeous but terrifying staff, where the products are for looking at but not touching unless you can actually afford to purchase them; even stepping inside a Chanel or Hermès boutique is more than many people have the nerve to do. Compared with exclusive environments like these, the metaverse is a less intimidating setting, particularly for younger consumers used to interacting and spending money virtually.
Another popular trend is augmented reality collaborations, where consumers can try on 3D versions of clothing or accessories from their bedrooms before ordering the product.
Via apps, users can wield their smartphone cameras to overlay 3D digital versions of the products on to their face or bodies — similar to popular Snapchat filters. Snap said that 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, for example, were viewed 2.3 million times, and resulted in a sixfold return on advertising spending.
It’s not all upside for luxury brands, however. Many have concerns about intellectual property and compliance issues on these new platforms and worry about tarnishing their carefully preserved images. Unlike a website, for example, companies cannot design separate spaces to comply with country standards on data, consent and privacy. “If you have a well-dressed avatar in Sandbox, great, but if Gucci or Balenciaga fashions are appearing in ‘adult’ content, that would pose an image problem,” Cordier says. As yet, it’s unclear how or even if such issues could be resolved.
Another concern is brand reputation. At the beginning of this month, Hermès won a landmark lawsuit against a digital artist who had sold a collection of “MetaBirkins”, fluffy virtual bags marketed as NFT art and 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. It was awarded $133,000 in damages.
“Ten years ago, we had concerns about brand safety on social media, but we worked with industry and the major players,” says Asmita Dubey, chief digital officer at L’Oréal. “Web3 is unregulated, but it is coming.”
Some of these dangers have already been illustrated by another hyped digital space: NFTs. Last summer, Tiffany & Co gave owners of a CryptoPunk NFT access to a sale of custom necklaces. These “NFTiffs” were sold for 30 ether each — about $50,000 at the time — and owners also received a physical pendant, encrusted with diamonds and made in the image of the corresponding pixelated CryptoPunk characters. 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 now around 9 ether, around $13,000, according to crypto market analysts CoinGecko. It’s likely that the value of the diamond-studded pendant has held up considerably better.
Yet Ian Rogers, chief experience officer at the crypto firm Ledger and the former chief digital officer at LVMH, is clear that there’s no going back. “Luxury people should understand NFTs and digital ownership better than anyone”. After all, he says, “nobody buys a luxury watch to tell the time.
“You buy it because you appreciate the aesthetics, the craft, you think it might have some resale value and it gives you status and makes you part of a small group of people that appreciate the same things.”
Cristina Criddle is an FT technology reporter. Adrienne Klasa is the FT’s Paris correspondent
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