What the Metaverse Means for Retail, Part 2

The Time is Now to Prepare for the Coming Immersive Reality

Image courtesy Heidi Fin

In Part 1 of our two-part exploration, Neil laid out his vision of what the Metaverse will be from an experiential standpoint and what that will mean for retail. Neil’s Metaverse is a place to be, and to be with others. Like the mall of our teen years — but also not the mall. Shopping happens, yes, but as an organic outcome of our getting together, expressing ourselves, and sharing.

My view lines up well with Neil’s, though I would put it in different words: the Metaverse is the future of community, communication, and commerce. The digital tools that have insinuated themselves into every aspect of our lives are getting a major upgrade, becoming fully real-time, spatial, and collaborative — a network of persistent virtual worlds and immersive experiences that reflect and subsequently shape our physical reality and perception thereof.

In Part 2, we look at trends in computing infrastructure and what brands and retailers should be doing today to get ready. Every big tech buzzword we’ve been hearing for the last decade — virtual and augmented reality, machine learning, computer vision, 5G networking, internet of things, blockchain, and Web3 — is converging to power the next iteration of that grand experiment in global connection we know as the Internet. And like the two generations before it, this new Internet will give rise to new ways of living and entirely new industries, and in due course render certain aspects of existing daily routine obsolete. While some of what follows describes a future that will likely manifest more toward the end of this decade, much of it is already happening, and the time to make plans is now.

Virtually Everything: Digital Twins for Retail and E-Commerce

Deckers

Over the last several years, brands and retailers have realized the benefits of using 3D to save costs, reduce time to market, and sell more products. Early experiments are now giving way to full scale digital transformation efforts, and real-time 3D for retail is here to stay.

• Digital twins of stores are virtualizing the merchandising planning process, helping retailers save time and money and increase sales by creating more effective store layouts more cost-effectively. The “dark store” — a physical but non-operational replica of a real store used to test out merchandising ideas — is being replaced by a virtual version, saving millions on materials and travel for the larger retailers.
• Digital twins of products are saving time, money and materials for manufacturers. My employer Unity recently piloted such an innovation with Deckers, where 3D versions of products helped accelerate the design process and streamline buying interactions for store buyers, while at the same time minimizing physical materials and travel in the process — which has additional significance, given how much of a polluter the apparel industry has been historically.
• 3D/AR advertising and e-commerce based on digital twins of physical products increases brand engagement and sales through more “tangible” virtual experiences. We have already covered this topic extensively in these pages. From upper-funnel engagement via 3D and augmented reality ads to product exploration, try-ons, and try-outs of products on our bodies and in our physical spaces, 3D and AR are changing the consideration-to-conversion journey. Companies like VNTANA continue to lead the way on providing tools to convert apparel and other 3D data to be web-ready for selling products online in 3D.
• Digital twins of retail spaces and showrooms are changing how customers interact with brands across a line of products. Brands and manufacturers are experimenting with recreating the in-store experience on the phone and in virtual reality, providing a more engaging way to shop in 3D and leveraging the different interaction models and production value offered by immersive technology. Companies like Obsess AR take it a step further, representing the brand itself in web and mobile 3D spaces by creating store layouts based on a brand’s unique assets and identity (colors, fonts, logos etc) — though the product pages are at the moment mostly repurposed 2D images taken from the brands’ existing catalog detail pages.
• Digital twins of humans will increasingly become brand ambassadors and salespeople. As holographic capture of people becomes easier and more cost-effective through the efforts of companies like Scatter, Arcturus and Metastage, expect to see more digitized humans in e-commerce settings, from advertising to selling in virtual showrooms.

While it is arguably early, and experimentation and proofs of concept are still the norm, big players are getting into this space every day. From platform providers like Unity, to marketplaces like Shopify, Wayfair, and Houzz, to huge retailers like Walmart and Amazon, it’s game on. Someday soon, digital twins of products will not be a nice to have, but de rigueur for marketing and selling products online.

Everything Virtual: Fake Stuff, Real Brands

Ralph Lauren Dropped a Digital Winter-Themed Collection Exclusively on Roblox

As if the developments in Digital Twin weren’t exciting enough, there are equally thrilling breakthroughs happening in the purely virtual sphere. Brands are leaning in hard with large-scale game worlds such as Fortnite and Roblox — arguably the most complete functional prototypes we have to date of the emerging Metaverse.

• Branded virtual goods are showing up in more and more Metaverse worlds. Ralph Lauren made a splash in the game world Roblox over the holiday season, offering branded avatar clothing and accessories inspired by vintage Polo designs. Notably, these are clothing items that do not exist in the real world; they are only for use within Roblox. Also notably, the items cost money: one has to purchase them using Robux, the in-game currency that converts to dollars. So this is not only about extending the brand into the wild world of the Metaverse — it’s also about monetizing it right there. Apparently, Nike is all-in on this trend, acquiring the virtual goods apparel designer RTFKT to “to deliver next generation collectibles that merge culture and gaming.” One can only imagine Nike has big plans here.
• Branded luxury items are making their mark in profile pictures (PFPs), with apparel and accessories from brands like Adidas adorning game avatars and NFT phenoms such as Bored Apes. These forward-looking companies are generating incremental revenue by providing tools for their fans to mint uniquely tricked-out PFPs, expressing themselves in this new world of the Metaverse to stand out from the pack.
• Brands are staking out virtual turf in online worlds. Metaverse worlds that sell virtual real estate as part of their core business model are now being populated by brands. Samsung recently plunked down to create a virtual store in Decentraland, a virtual analog to its physical flagship store in the Meatpacking district in New York City. While virtual land is highly speculative right now (I would urge extreme caution to anyone thinking about investing heavily in it), the idea seems sound enough: brands will want their own places in the Metaverse. Assuming these worlds are highly trafficked and that engagement will eventually lead to some kind of conversion outcome, it seems like something worth experimenting with.
• Virtual humans will be the next big brand ambassadors. Avatars will range from holographically captured digital twins (see above) to pure-CG creations. These will not only be real-world popular entertainers like Travis Scott who have already appeared as twenty foot tall CG avatars in Fortnite, but completely synthetic beings such as the wildly popular Instagram influencer Lil Miquela, rendered with extreme realism to appear like a real person.

The early returns from all this virtual innovation are quite exciting. The consumers driving adoption skew heavily Gen Z and younger, and it’s not clear yet whether these kids are the edge of an adoption curve, or they will age out, or the industry will grow and evolve with them to accommodate their needs. Regardless, the industry’s bias toward action is high and many brands are taking the plunge.

Everything in Between

But wait; there’s more. In addition to our physical things going virtual, and the virtual world seeming as real as the physical, there is the convergence of and eliding of the two.

• Augmented reality adds layers of meaning and provides a physical canvas for brands to paint the real with the virtual. In addition to offering simple product try-ons and try-outs, brands can deliver unique content based on location, and/or activated by images and QR codes. The QR code in particular has made a raging comeback, first facilitated by Snap and WeChat for social use, but kicked into high gear with the pandemic. It could well provide the most frictionless and universal onramp to the Metaverse. Or as Neil might say: I see, I want, I scan, I mint.
• The Metaverse is leaking into the physical world. We all knew that it was only a matter of time before Bored Apes became such a phenomenon that it would launch its own media empire. Having recently closed a massive venture round, Apes creator Yuga Labs has been given the keys to a new kingdom in the Metaverse, despite never having built significant technology before, purely on the strength of its brand IP. We’ve seen this movie before in traditional media, and even with purely virtual properties like Gorillaz — but not at this pace. Of course, we are already seeing physical merch based on Bored Apes, and we can expect to see more of this kind of thing over time. As Web3 brings brands and the virtual together meaningfully and commercially, the Metaverse will increasingly cross over to the physical plane.
• IoT + Web3 are at the bleeding edge of digital-physical convergence. Earlier this year, pioneering music artist Verité did a really innovative NFT drop, auctioning an NFT-enabled jacket — a jacket that she wore in one of her music videos. The jacket contains an NFC chip that unlocks that music video as an NFT. The winner of the auction owns not only the jacket but the NFT for the video. If the jacket is ever resold, the new owners will also be in possession of the video NFT. The possibilities for this kind of physical-digital convergence are staggering.

Digital-physical convergence is perhaps the most exciting of these ongoing Metaversal developments. Rather than sucking the real world into the virtual, or creating completely digital realms in which to escape… why not both? After all, computers are here to make our world a better place (or at least, they should be). What better way to make the world a better place than to… make it better?

Virtually Here

Depending on your point of view, we are currently in one of two situations, Metaverse-wise. Some would argue that none of the above is actually what we will come to recognize as “the Metaverse,” i.e. until everything is 3D, in a virtual world, and all connected to each other. Others would argue (I am among them) that we’re already in the Metaverse — it just still mostly has a 2D skin, with the occasional peephole into our spatial computing near future.

Regardless of which camp you’re in, it would be hard to argue that the Metaverse is imminent. The developments described above are all well underway. Even the more bleeding edge innovations have been put into practice, albeit as one-offs or at small scale. Maybe the tipping point isn’t quite here yet, but I find it hard to imagine that it won’t come in this decade.

So, where to start? Assuming you’re not already in the action, I think there are a few things that any brand should be doing right now:

1. Create the first digital twins of your products. There is a wide range of 3D capture, conversion and creation tools on the market, for many use cases and every budget. One can start small and learn; the cost of creating your first 3D product display page or deploying your first AR ad unit does not have to be very high. But the learning curve with these tools can be a bit steep at first, so it will benefit you to start sooner than later.
2. Develop your Metaverse Muscle Memory*. Spatial computing requires new and unique skill sets. Being able to tell your brand’s story, or create interactive experiences that best represent your company and products, is an art. And getting good at art takes time and patience.
3. Don’t wait. The cost of getting into this space will only get higher as time goes on. As with other waves of technology disruption, seemingly unassailable, entrenched players often get left behind because they don’t get ahead (think: Blockbuster Video). There’s a lot to learn already, and the Metaverse is moving fast — faster than any previous set of innovations in computing. Don’t wait until it’s too late.

I know: this is a lot to take in. But that is to be expected. Retail is, after all, one of the most universal, impactful and palpable expressions of the human condition. One shouldn’t expect the collision of retail and the most exciting technological advance of our time to be anything less than terrifying and awe-inspiring.

An amazing transformation is right around the corner. Hard work lies ahead, but once it all comes together, all kinds of magic will happen. That magic is the Metaverse. And it’s virtually here.

* (I should TM — I just coined it!)