Is the metaverse the future of retail?

The highest profile brands are bagging themselves metaverses. Is the current rush to these virtual universes a fad, a new speculative bubble, or the beginning of a profound revolution in retail and consumption habits?

At the end of October 2021, by announcing the renaming of the Facebook group to Meta, Mark Zuckerberg propelled the term “metaverse” to the forefront of public awareness, which hitherto had only been familiar to gamers, geeks, and science fiction fans. A contraction of meta and universe, the word metaverse was coined by the author Neal Stephenson, in his novel Snow Crash published in 1992, to refer to a simultaneously immersive and interactive virtual universe of which the gaming platforms Minecraft, Fortnite, Roblox or The Sandbox are but pale portents.

The ambition Zuckerberg is pursuing is to push the concept much further by ushering in a total virtual world in which everyone will be able, via his or her avatar and a virtual reality headset, to do “everything he can do in his real life and much else besides”. That is the promise. And many people are betting on Meta’s ability to accelerate the technological developments and fusion required to turn it into reality on the back of colossal investments (a 100-billion-dollar budget has been announced) and of the gigantic potential user base of the future metaverse represented by Facebook, Instagram, Messenger and WhatsApp.

A colossal bet 

Beyond Meta’s ambitions there is already a “metaverse ecosystem” comprising numerous actors: infrastructure creators (gaming platforms, marketplaces), providers of immersive material (virtual reality headsets, haptic devices) decentralized payment systems (cryptocurrencies/blockchain), content publishers, virtual object creators, and merchants in the form of NFT (non-fungible token, a digital certificate attesting to the ownership and authenticity of a virtual asset).

All this is attracting numerous investors, because the barely nascent metaverse market bears  every resemblance to a new Eldorado: according to the consultancy Grand View Research (GVR), this market, valued at $38.8 billion in 2021, could reach 678 billion dollars in 2030, namely an annual growth rate of almost 40% over the decade 2020-2030.

As for Citybank, it considers that subject to enormous investment in technological infrastructure (processing power, 5G, AI, etc.), “the metaverse economy” could account for between 8 and 13 trillion dollars by 2030 and number 5 billion users…these astronomical projections are based on the conviction that the metaverse will take over from the web as we know it. When you realize that the GDP of the United States of America was 22.9 trillion dollars in 2021, it is hard to comprehend how something that does not yet exist could, in less than 10 years, attain such levels… Be that as it may, there is no shortage of metaverse evangelists, and the prospect of quick riches is enticing investors big and small, and numerous speculators. 

What exists today

Specifically, today, it is the gaming platforms that are generating the biggest revenues from the metaverse concept thanks to two complementary basic trends:

  • The monetization of virtual objects or privileges within the game itself. Increasingly, players will be able to buy and sell objects that have no material existence, but which have a value within their community because of their scarcity or the prestige they confer on their owners. For example, thanks to your perseverance as a player you have won a particularly coveted sword. This sword confers powers on your avatar that enable you to progress more quickly within the game, but it also possesses a potential market value: there is nothing stopping you from selling it to the highest bidder, in the cryptocurrency in use on the platform or, if it is an NTF, in a wider marketplace.
  • Openness to third-party brands and companies. The phenomenon is not new. In 2007, the nec plus ultra for companies was to be present on Second Life, to set up a virtual head office there, or recruit there. By setting up in one or more metaverses today, trademarks and brands can be sure they will be talked about. But beyond the “marketing and media coup” associated with the relative novelty of their initiative, they are banking on the development of a market for virtual objects, exclusive collections and NFTs. It is in this light that you need to look at what Gucci is doing, one of the first luxury goods companies to have offered virtual “wearables”, namely exclusive virtual accessories intended to be worn not by flesh and blood people, but by their avatar. Yet another “exploit” given prominence by the media: in May 2021, on the Roblox platform, Gucci sold a virtual handbag that was more expensive than the material version of this same handbag (4115 dollars for the first compared with 3400 for the second). The troubling thing for the average person is that this virtual handbag only has this value in the Roblox universe. Not being an NTF, it cannot be sold on another platform.

A new consumption universe

In the long video in which Mark Zuckerberg sets out his vision for the metaverse and for Meta, the focus is on the way in which the future universe will transform social relationships and various areas such as entertainment, health, education and work. Consumption and retail are not addressed as such, but the message is very much there: offering innovative possible interactions between brands, their customers, and products, the metaverse will inevitably be a new consumer marketplace. Consumer brands have very much understood this, even if for the time being the platforms that can stake a claim to the description “metaverse” are for them first and foremost a new marketing channel: this is where, in 2022, they need to launch their new collections and new products, like Coca-Cola (on Fortnite), in the guise of a limited period game conferring entitlement to real-world rewards.

But the movement doesn’t stop there: trademarks and brands are starting to lend substance to “a genuine parallel world” by buying plots of land and building properties on the gaming platforms. For example, the hotel chain CitizenM recently gained prominence by proposing to build a virtual hotel on The Sandbox where avatars frequenting the platform can then stay. The operation is financed by the publishing of 2000 NFT creations conferring on those who acquire them real-world privileges (discounts, free drinks…). In a second stage, the profits from these NFT sales will be used to finance a CitizenM real estate project in the real world.

One can appreciate that the average person will be skeptical about this type of scheme, but these investments really do occur and are helping to forge ever closer ties between virtual world and real world, the first paradoxically seeming to play the role of opening doors to the second.

The big unknowns of the metaverse equation

In his novel Snow Crash, Neal Stephenson articulates the 4 principles determining the advent of the “grand metaverse”:

  • The metaverses’ content must be enduring, which is already the case with buildings and properties that can be purchased on certain platforms.
  • The metaverse must be in immersive 3D. This is the experience already offered by virtual reality headsets, until such times as there are lighter devices (spectacles) and, above all, the creation of rather more convincing and realistic 3D content than most games and virtual universes currently created by the brands.
  • The metaverse must be superimposed on the physical world. The game PokemonGo has demonstrated that this was physically possible.
  • The metaverse worlds must be interconnected and interoperable. On this point, we still have a very long way to go:You cannot import your Fortnite avatar into the Microsoft Teams environment; your rights and privileges on one platform are not valid on all the others; each platform uses its own unit of account, currency, or cryptocurrency, etc.

No one knows when interconnection and interoperability between platforms will be possible, nor even if they will be possible one day. That is the first great unknown. The second concerns the availability of the resources – materials and energy – needed to build and operate the millions of all too physical servers and data centers that these sophisticated virtual universes combining 3D, real-time and block chain require. To hear the proponents and evangelists of the “grand metaverse”, that constraint simply does not exist – nor the urgent necessity of reducing greenhouse gas emissions so that the planet remains habitable for living things. It is true that the same people think that technology will solve all problems, even at the price of humans giving way to artificial intelligences that they consider to be infinitely superior to mere mortals.

The last unknown is all about whether some 7 billion mere mortals aspire to live, via an avatar proxy, in “enchanted” virtual universes rather than in the real world, for all its imperfections. Nothing could be less certain, all the more so as the enchanted worlds in question, where everything is by definition traceable, bears all the hallmarks of a dystopia…

In the meantime, the brands will continue to invest in metaverses because, in the short term, it is here that they can find new revenue streams, by monetizing experiences containing an element of fun, and virtual products – which consumers will want, or not… Time will tell…

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