Opportunities for Luxury Fashion Brands in the Metaverse
Read Time: 5 Minutes
In the digital world of the Metaverse, luxury brands such as Louis Vuitton and Balenciaga are starting to recognise the revenue opportunity as analysts anticipate the market for virtual luxury goods could reach $50 billion by 2030.
Nathan Foley recently hosted a teleconference with Isabelle Aguerre, GLG Network Member and former co-founder and CEO at Oneblink, former Global Director of Client Strategy at Chanel, and former Global Director of Strategic Marketing and E-commerce at Balenciaga, to discuss the evolution of luxury brands in the Metaverse. They spoke about opportunities in this fast-moving space, the challenges that exist, and what some luxury brands are doing to test the waters. Below is a condensed and edited version of their conversation.
How have luxury brands evolved to meet their customers in the Metaverse?
Interest in the Metaverse started for luxury brands in the gaming environment. One of the strategy questions for luxury brands is how can brands reach digital audiences and a new generation of customers?
The Metaverse is still in the build-up phase and evolving fast. A few groups in the Metaverse are viewed as having potential for consumer engagement across multiple Metaverses. One is Generations Z and Alpha, in the gaming area. Then you have non-fungible tokens (NFTs). Third is a wealthy group of celebrities and influencers that congregate around the art world and NFTs.
Art is the initial field that’s developed in the NFT Metaverse, and arts and luxury are interconnected. The luxury brands are looking at the types of consumers in each group. Brands are in test-and-learn mode. Luxury brands are careful about managing brand equity and risk, and they’re trying to understand whether it’s a business opportunity or a communication opportunity.
Luxury brands have tested gaming for visibility and communication by creating partnerships with games to develop so-called skins, such as dressing and accessorizing an avatar. Louis Vuitton and Balenciaga both did initial trials.
Can you walk us through the mechanics for a consumer making a purchase of a luxury NFT in the Metaverse?
The Metaverse has different parts. One is a digital immersive experience that doesn’t require blockchain, using technologies like augmented and virtual reality. The other part is a place to transact, and that’s where the blockchain comes into play.
There are elements of blockchain functionality that keep it secure. Encryption using an unbreakable code is validated and connected, creating a fortress. If you want to attack one of the transactions — essentially, a contract — you cannot break in. The entire chain will see that you tried to break in because it’s all connected.
How do we pay for luxury goods in the Metaverse? Can we only use crypto?
The blockchain is the enabler to guarantee you are the owner of something that’s been transacted. The NFT represents proof of ownership for a unique digital asset. The blockchain is the underlying technology.
If you think about the direction the Metaverse could take, you could have a Metaverse piece that is an evolution of e-commerce in the same way social platforms are enabling transactions.
In some Metaverses, you have to transact with cryptocurrency — though, from a technical perspective, I don’t see why you can’t have a 3D environment with a payment system that is not cryptocurrency.
What is involved in purchasing NFTs and virtual products? What is the appeal, and can you give us an example?
It’s important to differentiate NFTs and virtual products. You can buy a virtual product that doesn’t have an NFT attached. NFTs denote rarity and unique ownership. It’s like buying a piece of art or a limited series. That idea of a limited series is what is generating buzz and demand for something that can gain value over time. The NFT, because of the unique ownership component, brings value. There’s also value in its resale potential.
Louis Vuitton (LV) essentially developed a Metaverse experience by creating a game that is not part of the general Metaverse but that connects you to the brand’s overall marketing strategy. Its theme is travel, a core value of LV’s brand. The game depicts Vivienne, the new brand mascot, travelling through an immersive digital world, a journey inspired by the history of Louis Vuitton — the founder of LV. As a teenager in Anchay, Franche-Comté, Vuitton left home and travelled nearly 300 miles on foot to Paris, where he eventually launched his eponymous brand.
As you progress through the game, you gain rewards in the form of NFTs, which give you access to an in-person exclusive event. Brands try to create a scenario where you can win or buy an NFT in the Metaverse and bring the customer into the real world, where they can have an experience and make a real-world purchase.
You’ve probably heard about the Bored Ape Yacht Club (BAYC) and its NFT collections that are selling for big dollars, sometimes in the millions. It’s been one of the most successful brands in the NFT experimentations. BAYC created its own cryptocurrency, and it has held real-world meetups. It has also collaborated with luxury brands. Gucci is accepting BAYC ApeCoin payments for purchases in U.S. Gucci boutiques, the first major brand to do so. And Rolling Stone and BAYC partnered for the second time on an NFT collaboration. The new release includes two physical art prints, available on the BAYC website, as well as two digital NFTs that will be auctioned on OpenSea.
Much of what you’ve said about the opportunity for luxury brands is in brand equity and driving traffic. What about revenue opportunity? How long will it take for the Metaverse to become a revenue driver?
It will take a long time. I’m not sure people are ready to spend significant money for something virtual. The younger generation may feel differently. They can collect things in the digital world that they can show everyone vs. collecting things in the real world to show a few people. Maybe people will spend more in virtual worlds than in real life. That’s the revenue part. But it’s currently a brand equity experience.
Can you address concerns about sustainability and the Metaverse?
Brands increasingly need to address sustainability in their practices. Fashion shows in the Metaverse could mean that you don’t have to fly around the world to stage or attend a real-world fashion show, but the current Metaverse will require an immense amount of energy to maintain.
Some luxury companies envision a future where we will spend part of our lives in the Metaverse. When everyone has an avatar and is spending time in the Metaverse, companies will need to move to cryptocurrencies and NFTs because that’s where a lot of value might be created. But cryptocurrencies built on blockchain require mining, and that requires tons of computing power and energy. So there’s definitely a sustainability question there.
There’s a contradiction at the core of this. The Metaverse and its associated technologies can help a company connect to a new generation, but in doing so, they don’t necessarily address the planet and sustainability concerns. And these are two major strategic stakes for luxury brands. At some point, these two topics need to be connected because there are some opposing forces there. The younger generation is also the audience most concerned about sustainability. And this is also their contradiction.
Luxury brands want to be perceived as innovative, but the way they’re reaching their target may clash with their CSR commitment. Of course, this depends on the energy sources of the future, but we’re not in the future quite yet.
About Isabelle Aguerre
Isabelle Aguerre is the founder of Lux in Vivo, a consulting firm where she works with luxury brands on a variety of topics including digital transformation. Before Lux in Vivo, Isabelle was co-founder and CEO at OneBlink, a technical development and consulting business focusing on blockchain technology for the luxury industry. Before this, she was International Director of Client Strategy at Chanel. Previously, Isabelle was Global Director of Strategic Marketing and E-commerce at Balenciaga.
This retail and technology industry article is adapted from the GLG Teleconference “Luxury Fashion in the Metaverse — Analysing the Revenue Opportunity.” If you would like access to the transcript for this event or would like to speak with retail and technology industry experts like Isabelle Aguerre or any of our approximately 1 million Network Members, contact us.
Other Questions Asked during the Teleconference:
- How have you observed the evolution of consumer shopping activity in the Metaverse?
- What are the key mechanics involved for consumers purchasing luxury goods in the Metaverse?
- How do we pay for luxury goods in the Metaverse? Can we only use crypto?
- Overview of the customer journey in buying a luxury good in the Metaverse — what does the customer then do with this purchase?
- What capabilities/partnerships do luxury brands need to expand into the Metaverse?
- What will fashion shows/events in the Metaverse look like?
- Sustainability concerns associated with operating in the Metaverse
- When will the Metaverse be a real revenue driver for luxury fashion brands?
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