How Luxury Brands Make Money in the Metaverse
Would you pay hundreds of dollars for a purse, coat, or shirt that you never wear in the real world?
Players already have a long history of using clothing and accessories to establish their virtual identity, and there’s every indication that users across the Metaverse will do the same. Luxury brand executives are taking the trend seriously and moving quickly to capitalize on the opportunity to sell virtual versions of their products to people in the metaverse.
In the new frontier of the metaverse – a persistent, shared virtual world that users can access across different devices and platforms – avatars are everything. And this means that some users will pay a lot of money to equip their avatar with luxury goods.
Meta CEO Mark Zuckerberg expects this niche to be big in the metaverse. Zuckerberg says, “Avatar will be as common as profile pictures today, but instead of a static image, they will be living 3D representations of you, your expressions, your gestures that will make interactions much more richer than anything possible. online today. You’ll probably have a photo-realistic avatar for work, a stylized avatar for going out, and maybe even a fantasy avatar for gaming. You are going to have a wardrobe of virtual clothes for different occasions, designed by different designers and from different apps and experiences.
Morgan Stanley analysts say the market for virtual luxury goods could reach $50 billion by 2030.
How it works?
Most virtual luxuries are released in limited quantities, and users who purchase them receive an NFT (non-fungible token) as a virtual certificate of ownership.
In the Metaverse, users will be able to transport items such as clothing, accessories, and home decor from one platform to another (for example, from the Fortnite game world to the Meta universe).
The Benefits of Virtual Goods for Luxury Brands
Eliminate overstock. Gonçalo Cruz, co-founder and CEO of PlatformE, a technology provider that helps conventional brands create and launch 3D renderings of things like clothing, says virtual goods can solve the oversupply problem for consumers. luxury brands.
“Every brand has overproduction, overstocking and, of course, end-of-season stock,” he says of the fashion industry as a whole. “So you start doing discounts, and it’s a never-ending story. You’re now seeing 90% off at the outlets. It depreciates the value of the brand.
With virtual goods, brands won’t have to hold deep discount sales to offload excess inventory.
Big margins. The creation of luxury products does not require any raw materials and the labor is minimal. This means that the sale of virtual clothing and accessories equals almost all profits. Designers also have enormous creative leeway in the creation of virtual goods, as the limitations normally imposed by the practicalities of the market do not apply.
Companies can bring back old designs. Most luxury brands have decades of archival designs that they can convert into virtual assets, providing a new revenue stream with minimal investment.
Cathy Hackl, Metaverse Consultant, says, “Not everything they create in the Metaverse has to be new. They can draw on their many years of history and heritage and present their legacy to new generations. Nostalgia is a powerful feeling, and ultimately creativity is creativity.
Ongoing resale revenue. Many smart certificates or NFTs for virtual items include royalties or revenue shares on future transactions when the item changes hands. This means continued revenue for the original designer and fewer problems with counterfeits.
Examples of brands that already claim a claim in the metaverse
The Gucci Garden — a pop-up on Roblox that sells the brand’s designs — sold a single bag for over $4,000 in real money.
tommy by Hilfiger The venture capital arm has announced a partnership with viral marketing agency EWG Virtual to focus on “v-commerce”.
Burberry created a series of unique playable NFT creations called Sharky B who live in Mythical Games’ Blankos Block Party. Figures include accessories like armbands, jetpacks and pool shoes. The collection of designs sold quickly for almost $400,000.
Balenciaga has launched its clothing collection in Fortnite. These “skins” (outfits for in-game characters) are purchased with V-Bucks, Fortnite’s global currency. V-bucks are purchased with real money.
Dolce & Gabbana has sold its nine-piece “Collezione Genesi” collection on the UNXD luxury digital marketplace for $5.7 million.
To learn more about the business and technology trends that are transforming businesses today, check out my book Extended Reality in Practice: 100+ Incredible Ways Virtual, Augmented, and Mixed Reality are Changing Business and Society.