By:
Tommy Huthansel, Director, Gaming & Global Partnerships
Kevin Villatoro, Director, Global Partnerships
Experiments in virtual commerce
According to our recent Creative Experience survey, 35% of CMOs have already adopted virtual product experiences, while 31% are considering adopting them.1 Luxury brands are particularly active in this space: in 2020, Rolls Royce collaborated with Tencent to feature a virtual car in the QQ Speed Mobile game and in March 2021 Gucci released its first virtual sneakers that can only be worn using Augmented Reality (AR). The Italian fashion house also made the headlines later this year by auctioning its first Non-Fungible Token (NFT) in May.2
Brands are reflecting on how to deepen their involvement with virtual experiences, move beyond ‘PR-able’ launches and actually build sustained ways to monetize the creator economy – perhaps selling branded NFTs in the Decentraland marketplace – and the younger consumer reach that integrations into gaming can provide. Open world games are proving to be the ideal testing ground for brands to ensure they are at the epicenter of a culture that is rapidly evolving: for instance, Nike built a digital space, ‘NIKELAND’, in Roblox to enable gamers to outfit their avatars with special products.3
Other brands like Balenciaga and Chipotle are exploring how creating correlations between virtual and physical products, as well as between virtual and physical experiences can boost engagement and accelerate revenue streams across both planes of reality: three months ago, Balenciaga launched a Fortnite partnership that featured both virtual skins available for purchase within the game and physical fashionwear inspired by the game and available for sale on the fashion house’s online commerce store;4 the restaurant chained open a virtual location in Roblox where players could get access to an offer code that entitled them to a free burrito in a physical U.S. location on Halloween.5 Ultimately, brands are recognizing that the currencies used in these open world games are almost becoming the default pocket money for younger consumers and that enabling purchases in this context is the best way to get access to the market share this cohort represents.
The rise of the Metaverse and the explosion of the interoperable customer journey
This type of experimentation in creating connections between commerce experiences that take place on different planes of reality is also a step that marketers are taking (or should be taking) to prepare for the imminent emergence of the Metaverse. While there is a lot of buzz surrounding this word, especially after Facebook’s recent rebranding into Meta,6 technically we are still somewhat away from the Metaverse being a reality, with only a few open world games offering experiences that partially resemble what we expect it to become.
When fully realized, the Metaverse will be the extension of the internet into an open ecosystem made of hybrid, shared spaces that blend physical, digital and virtual realities. It will enable participants (users, artifacts, organizations) to maintain a sense of presence that persists across these spaces and to take part in immersive experiences that have the potential to scale, expand and interoperate with one another. Its emergence has the potential to create a new paradigm that will define not only the next ten years, but the next century.
What does this mean for commerce? With the emergence of digital experiences across multiple channels the buyer’s journey has already expanded into a myriad of customer touchpoints that are often hard for brands to influence and monitor. The rise of the Metaverse will open up a whole new set of engagement opportunities that can lead to transactions, but also add complexity for brands that are less successful in mapping how various experiences contribute to influencing sales. Most importantly, brands that are unprepared for this paradigm shift and fail to figure out early what their footprint in the Metaverse should be, will be left in the dark and have an incomplete view of consumers’ behaviors.
Enable customization and collaboration to create a new dimension of exclusivity
One of the major drivers for interest and purchase in the creator economy that is emerging is exclusivity. Creating an NFT may not be the solution for all brands - for instance, it is questionable whether it would be worthwhile for manufacturers of utilitarian products like fast moving consumer goods to invest in this direction – but exclusivity can manifest in various ways: for instance, tying access to an exclusive sponsored event in an open world platform to a purchase in the physical world and vice versa. Ultimately, if your brands’ value proposition is not already tied to exclusivity, ownership in the virtual plane of reality will need to produce some type of value or practical application in the physical world.
Another area in which brands will be able to monetize exclusivity through the emergence of the Metaverse is customization. In the future, interoperable platforms that allow consumers to modify and personalize a virtual product down to the finest level of detail could not only provide to the customer the ability to purchase the unique branded virtual artefact that resulted out of the experience, but contextually also purchase the right for the physical equivalent of that design. This could be applicable not only for apparel brands, but for all product categories in which distinctive design is valued by a passionate fanbase: automotive, interior design and any collectible category.
The digital revolution transformed what once was a brand-centric market to a customer-centric market where limitless access to information and options empowered individual consumers to be met by brands with convenience. Through the popularity of social and interactive ways to shop, play and watch entertainment together in recent years, we are now witnessing a shift towards a more community-centric market where consumers expect to be enabled by brands to interact with each other.7
The emergence of truly interoperable experiences will be a major enabler for this type of behavior: imagine being able to take a picture of a branded physical product in your home and create its virtual rendering through AI and machine learning; publishing this design on social media to form a community of creators who share the same passion and can collaborate on enhancing it in a virtual environment; ultimately, receiving recommendations from the brand on which physical accessories or parts you should purchase to recreate the result of that collaboration as a physical product, or even being able to pay a premium to get the brand to put this unique design in production, so you can gift ‘the real thing’ to members of your community. Collaborative exclusivity and being able to persist a shopping cart that multiple Metaverse experiences can integrate with - this is the ultimate playing field where experiential brands will compete in the future.
Reversing the availability and ‘shoppability’ equation
The emergence of the Metaverse will also empower early adopting brands to overcome some of the challenges that physical and digital commerce present today and put them in a position to get better insights on consumer demand. Today, some brands are still shy of building direct-to-consumer digital experiences because of the operational complexities that are associated with standing up an online storefront that is connected to inventory management and order fulfillment. By doing so, however, they delegate primary aspects of the customer relationship to physical and digital retail partners and remain in a disintermediated position with regards to their target audience. In the future, these brands may be able to virtualize a direct-to-consumer model that allows them to gather crucial market insights and delegate to partners the ‘real world’ actions and executions that emanate out of the transactional behaviors they are observing.
More broadly, correlating - while at the same time decoupling - virtual shopping experiences with the inventory and supply chain processes that govern physical production and distribution will empower brands to make investments that are more accurately based on demand, by virtue of making virtual items ‘shoppable’ before their physical equivalents are available or planned for production and purchase.
In the future, most forms of entertainment will likely be connected to the Metaverse so brands will be able to place their products within existing storytelling constructs and make them available for instant, virtual purchase. Entertainment companies and any brand that owns properties with some type of cache will thus evolve into or partner up to form end to end lifestyle retail ecosystems that monetize the big cultural moments their franchises create, enabling impulse buying for virtual artifacts before the physical merchandise is available, or even use virtual ‘shoppability’ to gauge what items deserve to go into production, or in the case of franchises with a standing legacy, what items should be re-released (if iconic sneaker designs are being reissued, why shouldn’t iconic anything – cars, playsets, action figures, team jerseys, coffee machines, soda bottles, stamps – be, if there are first-hand insights on the demand that exists for them?).
These tactics will enable ‘cultural’ brands to position their licensed products as a preferred option to the DIY alternatives available in independent artist marketplaces like Redbubble while leaving to consumers an outstanding level of choice and customization. They will also empower brands to monetize consumers’ nostalgia, which is currently fuelling the collectors’ second-hand market on platforms like Ebay.
How brands should start preparing for commerce in the Metaverse
The best way for brands to prepare for this paradigm shift is to interrogate themselves on what are the levers that exist within their value proposition to generate or enhance some level of fandom or a sense of exclusivity. Do you take to market products that have cultural cache? What about your legacy products? Have you explored what it would take to create a virtual equivalent for either of them with gaming engine companies like Unity Technologies?
If you are not a ‘cultural’ brand, do your products or services have a utilitarian purpose that can be tied to gaming as an activity? If so, what type of ‘real life’ value or practical application could you let consumers’ unlock by taking part in an in-game buyer’s journey, so you start building relevance with a younger cohort that expects to be engaged in this new territory? Are there levels of customization or personalization of your products that are worthwhile exploring, but are too costly to enable in physical production without certainty of demand?
These types of experimentations could fit within an existing gaming franchise as an integration to test the waters and get valuable learnings on what type of commercial presence in the Metaverse your brand should expect and invest into in the long term.