A virtual world where we live, work, shop, and interact with others may have sounded like science fiction a few short years ago, but it’s fast becoming a tangible reality. This virtual world is called the Metaverse: a digital ecosystem made up of decentralized, user-generated platforms that provide a live, synchronous experience for users. Today, the Metaverse is still finding its legs in the digital economy, but numerous industry thought leaders already see the overwhelming potential it holds for brands. McKinsey & Company estimates the Metaverse will generate up to \$5 trillion in profits by 2030, with up to $2.6 trillion in profit for the e-commerce industry in particular. Likewise, Gartner predicts that by 2026, 25% of people will spend at least one hour per day working, shopping, studying, or using social media in the Metaverse. It’s time to buckle up because a profitable future in the Metaverse is headed our way fast.
What does this mean for retailers and brands? Major retail brands, including Nike, Adidas, Samsung, and even banks like JP Morgan and HSBC, have already staked their claim in the Metaverse. Forward-thinking retailers that want to follow suit but aren’t quite sure how to branch out into this digital terra incognita are experimenting with existing technologies driving digital commerce, like augmented reality (AR), as they develop a full-fledged Metaverse go-to-market strategy.
The extent to which the Metaverse will transform digital commercial experiences is infinite. And that’s part of what makes it so exciting – the possibilities for brands to innovate and engage through augmented shopping experiences and virtual storytelling are plentiful.
Leveraging the technology of the Metaverse, retailers are able to extend their brand presence from brick-and-mortar stores and traditional digital commerce channels to three-dimensional virtual spaces that enable immersive, deeply personalized brand experiences. This extra layer to the conventional omnichannel approach opens up unique opportunities for brands to create and customize virtual retail spaces, shape and strengthen their brand narrative, and forge a community of loyal customers in an environment free from physical boundaries.
There’s also something to be said about the investment value of the Metaverse regarding advertising gains. Digital marketing success has traditionally been defined by the number of “likes,” shares, link conversions, and so on. As the digital foot traffic of the Metaverse grows, forward-thinking brands need to consider how marketing campaigns in the Metaverse can complement existing ones in the real world or on the Internet. The Metaverse is an extension of the digital commerce experience, and embracing its immersive potential allows for much more personalized customer engagement. Moreover, a brand’s existence in the Metaverse can be seen as a form of effective self-advertisement. For example, the American fast food chain Chipotle recently offered the first 30,000 visitors to its Metaverse restaurant on the Roblox platform the opportunity to exchange a digital voucher for a burrito at a physical store location
These virtual storefronts can be seamlessly integrated into a retailer’s existing e-commerce platforms through APIs, facilitating direct checkout and online inventory management. Fully embracing the power of blockchain technology can prove to enrich customers’ retail experience in the Metaverse, especially in regards to non-fungible tokens, or NFTs. The cryptographically unique tokens exist on the blockchain and cannot be replicated; they are used for both tangible and intangible items. Goldman Sachs predicted earlier this year that NFTs have an earning potential of $8 trillion. Many luxury and high-end clothing brands have already released digital versions of their items as NFTs in the Metaverse that can be replicated in the real world. NFTs can also be used in customer loyalty programs, and give customers early access to promotional events.
What's more, brands can enrich their existing customer 360 views with Metaverse behavioral data, enabling marketers to optimize product strategies, customer experience personalization and message targeting for an increase in conversion and retention rates.
Retailers need to take a long view when identifying key opportunities in the Metaverse. Given that the metaverse is in its earliest stages, industry thought leaders are still debating what retail might look like in the future. Will it be an augmented version of our current online shopping habits with the more ubiquitous use of AR? Or will the metaverse be fully-immersive, with every aspect of their daily lives - not only retail - transitioning online? The outcome may be somewhere in between. Regardless, retailers need to understand the extent to which the Metaverse can impact every aspect of their business.
Leveraging existing e-commerce technologies like AR can help retailers gain a footing in the Metaverse. Since the COVID-19 pandemic disrupted the lives and livelihoods of consumers and businesses across the globe, some 92% of US consumers have abandoned their traditional shopping habits to become online shopping converts, citing convenience and value as the primary reasons for doing so. However, looking at a pair of earrings or a couch on your computer screen or mobile phone is not quite the same as seeing the physical product directly. Shoppers can’t always tell if the color, size, or design of something is to their liking until they see it in person. That’s where AR comes into play. AR is a technology that provides users with a view of the physical world overlapped by computer-generated sensory, video, or graphic input. As the Metaverse continues to develop and grow, AR will continue to be a dynamic driving tool for retailers.
Deloitte recently dubbed AR the “quiet revolution” in retail because of how the technology is slowly but surely transforming the industry. They cite the CEO of Levi’s as an example, who declared in 2019 that sizing would soon become a thing of the past, replaced by body-scanning and made-to-order clothes. This immersive and hyper-personalized shopping experience will have a profound impact on the customer experience and how manufacturers run their supply chains. By fully embracing AR, the customer shopping experience is completely transformed: color, style, and other dimensions are based on customer preferences rather than customers searching for something close to their tastes. Today, more than half of US retailers already employ AR to some extent in their online shopping platforms, and that number will only continue to rise.
There are already several existing AR use cases that might point the way forward for retailers hoping to expand into the metaverse. With the use of AR in interior and property design, customers can better judge how wallpaper, curtains, furniture and other household items look before making an online purchase. One such example is the IKEA Place app, which lets you view true-to-scale 3D models of furniture in your living space. Likewise, AR-based indoor navigation gives users more accurate and valuable directions to locations or objects than GPS and similar technologies. Employees in an office can find out which meeting rooms are available or where essential items such as working printers or test equipment are located.
Some fashion retailers even offer AI-powered body measurement apps to customers, making clothing size selection and virtual try-ons much more convenient and accurate.
When it comes to items like makeup or jewelry, customers can rely on technology like the Magic Mirror, which is essentially a camera, a mirror, and a computer rolled into one. Magic mirrors enable customers to try on clothes, makeup or jewelry virtually. There is a lot of potential to harness such technology for retailers in the metaverse when it comes to navigating customers through product launches, popular items, and more.
Several major retail brands have already staked their claim in the metaverse. Nike launched Nikeland on the Roblox platform, giving customers a new level of engagement with the legendary sports brand. Customers can play games, meet and socialize with Nike’s celebrity brand ambassadors, or participate in brand promotions in Nikeland. They also have their own personal space in Nikeland to show off their merchandise. According to Nike, more than 7 million people have visited Nikeland since it launched in November 2021. Luxury brands such as Gucci have also seized the Metaverse’s potential. Nasdaq reported that the company started selling digital sneakers, handbags, and other items back in 2021. A NFT inspired by Gucci’s Fall/Winter 2021 Collection was also auctioned off at Christie’s online.
The fast fashion retailer Forever 21’s venture into the Metaverse, Shop City, allows customers to own and manage their own stores. Each user can customize their store interior and the items offered there. What’s more, there are other sections to Shop City, including an obstacle course and a food court. Given that it is built on the Roblox gaming platform, it comes as no surprise that role play, interactivity, and community building are major selling points.
Retailers that offer a unique and exclusive customer experience have a chance at getting ahead in the Metaverse. The Flyfish Club is the first member’s only dining club where membership is purchased on the blockchain as an NFT. Membership gives people access to the Flyfish Club’s restaurants in addition to some exclusive social and cultural events.
Microsoft, Meta, Roblox, and many other companies are actively building their own platforms in the metaverse. As virtualization tools, cloud computing, and other technologies used to build the metaverse continue to advance, there’s no doubt that many others will soon follow.
In its 2023 TMT Predictions survey, Deloitte pointed out that the race to engage younger audiences online has become even more competitive. The choices are seemingly endless regarding on-demand streaming services, social media platforms, and gaming worlds. As such, businesses need to rely on three major selling points for their online services: Is it personalized? Immersive? Interactive? The Metaverse promises to check off all three boxes and more; forward-thinking businesses can harness its potential to engage with an entirely new generation of younger clientele.
That’s exactly what Walmart did when it launched two virtual interactive spaces on Roblox. In Walmart’s Universe of Play, users can play mini-games and add digital items to their holiday wishlist. Walmart Land is a floating island where each shopping aisle offers different immersive experiences. For example, House of Style includes a virtual dressing room, a strike-a-pose challenge, and an obstacle course. More aisles will open up to Walmart Land users over time to maintain long-term user engagement. Major retailers like Walmart are upping their game by blending gaming with digital commerce.
The pressure to respond to growing e-commerce demands and rapidly changing consumer behaviors has meant that many leading retailers are dedicating resources to build new, future-proof innovation strategies that include cloud, AR/VR and the Metaverse as priorities. To achieve these overarching e-commerce and customer experience goals, Chief Innovation and Customer Experience Officers are aligning their digital strategies to create an innovation pipeline with a roadmap that ultimately drives customer satisfaction and growth in the digital realm. The biggest challenge has been the accelerated pace at which they are required to do so, with many having to compress 5-year digital strategies into 5-month strategies.
Before taking bold new strides in the Metaverse it's important for the digital leaders of retail brands to establish clear processes for their Metaverse innovation pipeline, from generation of ideas to cultivation. This means creating a to-do checklist before progressing with any major project, including:
Most importantly, solving actual issues that consumers have must always be at the forefront. BrandsAnd finally, brands need to be prepared to leverage the foundational technologies underpinning the metaverse while nimbly adapting to its rapid rate of change.
It’s also essential to organize the right team that compliments the development, design, and business aspects of managing your Metaverse platform. The digital team should include, but not be limited to:
Below we discuss the technology needed to make a Metaverse go-to-market strategy a reality.
Given that the Metaverse is not a single platform, but rather many Metaverses, each with their own technical specifications, your technology stack needs to be dynamic and scalable.
Hosting a 3D environment like the Metaverse necessitates a large amount of computing scalability and flexibility. Cloud-native infrastructure, the likes of Google Cloud, Amazon Web Services and Microsoft Azure, not only ensure a 10x greater speed-to-market, but also provide readily available services for data processing, automation, AI, ML, and security, as well as a range of other tools for industry-specific use cases.
Along with cloud computing, chips and processors (think Nvidea, Intel) that use advanced process nodes will be essential to keep the Metaverse running smoothly. Further, 5G technology and latency networks are a must to ensure that the interconnectivity of metaverse platforms isn’t spoiled by lagging bandwidth issues.
The immersive nature of the Metaverse comes with unparalleled access to customer data. This means that retailers will have opportunities to gain added value from customer intelligence analytics, but also an even greater responsibility to ensure data quality and governance. AI and ML models process customer data and provide insight on billions of micro-decisions relating to customer experience, personalization, and message targeting, while ensuring data quality and protecting customers’ right to privacy at the same time.
As we’ve already established, blockchain technology is central to the function of the Metaverse: several of the biggest existing platforms were built using blockchain technology. NFTs are unique cryptographic tokens built with blockchain technology that can be used for tangible and intangible items. In the Metaverse, NFTs serve as smart contracts to control the transfer of digital assets - anything from a virtual house, store, retail item, or work of art.
The Metaverse is often hyped as being “immersive”, and that is due in large part to virtualization tools like virtual reality (VR) and augmented reality (AR). VR is a computer-generated simulation of an environment that users can interact with, whereas AR is a view of the physical world which is overlapped by computer-generated sensory, video, or graphic input. Devices like the Oculus VR headset or Google Glass plunge users into this virtual world. With the development of such technology, holographics are likely to become commonplace as well.
There are already several different Metaverse platforms in existence. Each possesses unique strengths, and retailers should carefully consider which platform has the most significant potential to enrich their brand. For example, Roblox is primed for companies closely related to any form of entertainment, as it is most widely known as a gaming platform and online concert venue.
Another popular Metaverse platform is The Sandbox, which Samsung, Adidas, Gucci, Atari, and Warner Music have invested in. Like many others, there is a commercial aspect to the platform, but The Sandbox also prioritizes the creative experience of its users. Meanwhile, Binance’s HighStreet platform offers its users the opportunity to purchase items both digitally and physically.
However, it is possible for retailers to build their own Metaverse platform if it seems like none of the aforementioned ones suit their retail strategy. Skilled engineers can rely on the technology foundation we established in the previous section, along with programming languages like Java and HTML, to bring your virtual world into existence. Regardless, it’s wise to test and gather data on existing platforms before ultimately deciding to invest heavily in one’s own Metaverse.
It’s important to understand which existing Metaverse platforms seamlessly integrate with all major cryptocurrencies and exchanges, given the fluctuating nature of the crypto market.The platform should also correspond to your predefined business strategy and audience, whether that relates to real estate, NFTs, gaming, digital commerce, or something else.
An efficient Metaverse platform is both personalized and decentralized, meaning that businesses are free to develop their own immersive environment while still maintaining authority over that digital space. The ability to integrate chatbots, data management, and e-commerce tools also helps to refine the most immerse and user-friendly experience.
Retail has always been highly competitive, but forward-thinking businesses know how to stay on top by embracing the latest technology trends. Our day-to-day lives are increasingly moving online and industry leaders need to be in possession of the right tools to accommodate the massive amount of data that comes along with that shift. The Metaverse has the potential to transform online consumerism by creating a multifaceted and more accommodating virtual space in which people can interact with one another. It promises to be a real-time experience with a fully-functioning economy and a wide range of contributors.
Grid Dynamics is investing much time and effort into exploring and leveraging the latest AR technology trends. Considering the role it will play in the Metaverse, we’re looking forward to its potential and engaging with clients that want to harness technology to usher their business and clients into the future.