Is building your retail network in the metaverse a good idea?

There is a lot going on in the virtual universes space and there are some indications that it is here that brands and companies are going to be reinventing their retail network and sales model.

A few months ago, in this post, we were talking to you about the infatuation with the metaverse, especially on the part of the highest profile brands that are banking on the potential of virtual universes to give their communication a makeover, on the one hand, and to diversify their revenue sources on the other. If the immersive promise of the “grand metaverse” is still very far from reality, the idea that virtual universes are on their way to becoming indispensable retail platforms is gaining traction. As in real life, creating a retail network in the metaverse begins by seeking out the best locations! This is attested to by the emergence of a virtual retail property market that would not exist if there were no demand by retailers nor anything at stake for them.

Pixels as expensive as m²?

Agencies specialized in selling virtual sites and real estate, both private and commercial, are on the increase.

>> If you doubt this and have no idea what their business consists of, take the time to watch this video shot at the Metaverse Summit held in Paris in July 2022.

Let us take the example of Everyrealm (ex-Republic Realm). This agency is developing land and real estate investment products on the main platforms deemed to be metaverses. It also paid more than 4.3 million dollars in November 2021 to purchase a site on The Sandbox, the biggest virtual land purchase transaction so far recorded. The acquisition of virtual land now enables it to offer exclusive villas for sale on a private The Sandbox island or, on Decentraland, commercial premises at the heart of a virtual replica of an old Tokyo neighborhood already occupied by the bank JP Morgan and “100% virtual fashion” brands such as DressX and Tribute Brand.

Buying a parcel of land in the metaverse of your choice confers the ability subsequently to build a property on it, a showroom, a shopping mall, or anything else. This is what the Carrefour Group has done, which has owned an 82,000 m² site on The Sandbox since December 2021, while remaining very discreet both about what it intends to do with it and about the transaction amount (300,000 euros, according to Le Figaro).

>> It will be noted with amusement that when it comes to virtual real estate and land the talk is of m² and hectares, whereas these properties are only after all pixels… The persistence of the metric unit in virtual universes doubtless enables purchasers and owners to latch onto something familiar.

Be that as it may, the leading platforms’ land pixels are very coveted and are seeing their prices skyrocketing as the retail brands/companies attempt to gain a foothold there. At the beginning of 2022, it cost a minimum of 5 ETHER, namely around 15 000 euros, to purchase 96 m² on The Sandbox and 5 000 MANA (ca. 11 950 dollars) for 16 m² on Decentraland.

A few things you need to know about this market

If you are considering becoming an owner to create your retail network in the metaverse or just to experience it, there are a few things you need to know before taking the plunge:

  • Your plot has more chance of appreciating in value on The Sandbox with a predetermined area, whereas the Decentraland map is extensible and therefore less subject to the scarcity phenomenon that drives price increases.
  • As in the physical world, the value of a plot depends on its size, its location, and its environment. A plot in a neighborhood already occupied by major brands or celebrities is far more expensive. Metaverses also have their “golden triangle”! If you want visibility and footfall, that is where you have to be!
  • There has been no in-depth survey, but once you are an owner, it would appear that you cannot build just anything you like on your plot. Each platform has its own town planning regulations and architectural agencies have specialised in the design of virtual turnkey buildings (3D models) compatible with such and such a platform. Take a look at the upscale creations of The Row, that can be built in the leading metaverses.
  • Converting the price of your plot into euros or dollars is only valid at a time “t” because you are necessarily buying and selling in the crypto currency used on each platform. The exchange rate of these currencies fluctuates far more than that of “conventional” currencies and there is nothing to suggest that they will stabilize.
  • The land/real estate NFT market is very speculative. Assets are changing hands ever more rapidly, occasionally with spectacular gains into the bargain, but also falls in value, as evidenced by the examples below for 2 plots on Decentraland (source Opensea).
Token: 187155 …1st sale2nd sale3nd sale
Date20 June 202107 April 202210 April 2022
Transaction amounts (US$)4,684.469,687.8411,272.12
+/- value + 106.9 % (in 291 days)+ 16.3 %
(in 3 days)
Token: 51042 …1st sale2nd sale3nd sale4nd sale
Date12 April 201910 January 202204 April 202209 April 2022
Transaction amounts (US$)832.4614,184.9312,320.5312,669.77
+/- value + 1,603.9 % (in 32 months)– 13.14 % (in 84 days)+2.8 % (in 5 days)

The real good questions you need to ask yourself

The fact that the virtual land and real estate market is becoming organized and growing in scale is evidence of an acceleration in the development of commercial activities in the metaverses. In the copious literature to be found online on this subject, the most commonly encountered statement is: “The question is no longer whether you need to be there or not, but when to go”. This fails to address a far more important question for a brand/company that has hitherto been retailing non-virtual products in the physical world: “why go there?”. Otherwise expressed, what is your strategy for the metaverse and how does it fit with your overall business strategy? Specifically, that means: “What is your budget?

If your ambition is to create a true retail network in the metaverse and sell there, this will not happen overnight. As virtual universes are not interconnected, a first difficulty is to choose the platforms on which you wish to be present. Metaverses are multiplying, each of their audiences is specific. The most relevant to your brand are not necessarily those which people are talking about the most. In short, a serious market and location study is a must, as in real life…

A second matter to be determined is whether you are interested in becoming an owner in these metaverses, bearing in mind that there are other options, for example:

  • Looking to the rental market. It is barely in its infancy but will ramp up and be far less risky. Renting commercial premises in a good location, in an existing building or complex will be less expensive than purchasing land, and self-building. This option also saves you the headache of the status of the land/real estate NFTs on your balance sheet.
  • Relying on already well-established influencers.  Instead of investing in your own right, you are creating a sort of network of franchisees/affiliates who will showcase and sell your products. Here too you need to be able to identify the right partners, those whose audience is sufficiently extensive, and, above all, which fit with your targets.

A third point that merits serious research: what exactly are you going to be selling? Virtual products/objects? Physical products? The constraints are obviously not the same. It would be a pity not to explore the avenue of 100% virtual products. Even if you currently find it surreal that customers are prepared to pay for clothes, accessories, furniture, and “objects” that have no material reality, this market really exists…

 If you prefer to concentrate on a physical offering, how are you going to integrate this new channel with your logistical set-up? Leaving this issue unresolved it is out of the question if you want customers from around the world, who will be making purchases in your sales outlets in the various metaverses, to be delivered as quickly and with the same reliability as those purchasing on your current website.

Does all this strike you as too new, too complicated, too risky? That is completely understandable. But this is our advice: you need above all to move beyond this impression. Take an interest in what is happening in this universe, familiarize yourself with the thinking of the actors who are in the process of shaping it and taking dominant positions within it. Yes, this is a gamble, but as with all gambles, only those who hazard a wager have any chance of winning!

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