The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
American venture capitalist Chris Dixon once said, “The next big thing will start out looking like a toy,” an observation, he believes, sits at the heart of why we frequently discount innovations that, only in hindsight, prove to be instruments of momentous technical and societal change.
Much of our initial dismissal is tied to the fact that, in their infancy, many innovative technologies far “undershoot,” as author and academic Clay Christensen put it, the needs and expectations of users. The first telephones were limited and unreliable. The first Skype calls, 127 years later, were prone to freezing and dropping connection. It would have been easy to dismiss both technologies, as many did, as fanciful toys without long-term value.
But, as Christensen also observed, these same technologies often tend to improve on a trajectory that far outpaces consumer needs. In 1973, the first mobile phones weighed more than four pounds and were single-purpose devices. Today, the iPhone weighs eight ounces, has 100,000 times more computing power than the Apollo 11 spacecraft, and performs hundreds of functions in our day-to-day lives. For many of us, it’s nearly impossible to imagine life without one.
All of this matters today because we are surrounded by an array of technologies — virtual reality headsets, augmented reality technology, gaming platforms, crypto currencies, blockchain, non-fungible tokens (NFTs), virtual goods and more — that, although currently toy-like, are, together, leading us to a place called the “Metaverse” that will literally change the very nature of life on Earth: how we work, play and shop and more.
What is the Metaverse?
The term Metaverse can be traced back to Neal Stephenson’s 1992 science fiction novel “Snow Crash,” which is said to have radically altered the perspective of people like LinkedIn founder Reid Hoffman, completely altering his views on the future of technology. Put as simply as possible, the Metaverse is the collective, persistent, parallel reality created by the stitching together of all virtual worlds to form a universe that we can seamlessly traverse.
The key word here is “persistent.” Just as the physical world doesn’t cease to operate when you go to sleep, the virtual world of the Metaverse will similarly continue to evolve and change, even when users are logged off. To think about this even more simply, consider that unlike the internet of today, where each of us is essentially pushing and pulling static information from a server in a largely asynchronous way, the concept of a Metaverse will give us the capacity to enter a “persistent” (always on) alternate reality where we can interact in a completely “synchronous” (real-time) way, with people, places and things. A world where, for example, thousands of students learning about the American Civil War can be transported directly into the battle at Fort Sumter and observe it first hand. Similarly, we will be able to pull data and experiences out of the Metaverse into the real world, overlaying them virtually onto our physical surroundings.
In essence, the Metaverse is a parallel reality, where we can work, play and commune. But to be clear, this is not simply a virtual version of the internet we use today. The Metaverse is what supersedes the present-day internet entirely.
While the concept of such a parallel world has been talked about for more than two decades, our collective experience through the pandemic — cycling through lockdowns, social distancing and the intense feelings of disconnection and isolation that they produced — has only accelerated our collective imagination around the creation of an alternate reality where one can indeed interact in real-time, at any time with others (potentially thousands or millions of others) and have shared experiences. A world where one can travel — without restriction — whenever and wherever they wish. A world where any experience becomes possible and accessible.
Who will build the Metaverse?
As we speak, there are already companies that are building the nascent foundations of such a new world. For example, Fortnite, developed by Epic Games in 2017, allows players to engage in three different play modes, including a “battle royale” mode where up to 100 players go head-to-head in a last-person-standing free for all. When asked in 2019 if Fortnite was a game or a platform, Epic Games founder Tim Sweeney replied, “Fortnite is a game. But please ask that question again in 12 months.” In the ensuing 12 months, Epic began to answer that question, by evolving Fortnite to become a world of its own, blurring the lines between real-world and virtual experiences. For example, rapper Travis Scott delivered a five-concert series in Fortnite, drawing close to 50 million attendees. And Epic is hardly the only company that sees gaming as a gateway to the Metaverse.
Amazon’s livestream gaming platform Twitch boasts more than 140 million unique monthly users who, as a group, watched almost 2.2 billion hours of livestreamed content in April of this year alone. And brands have taken notice. In the fall of 2020, for example, Burberry became the first fashion brand to livestream the debut of its latest collection on Twitch, attracting an audience of more than 40,000 viewers. To think that Amazon doesn’t have designs on being the primary retail presence in the Metaverse would be naïve.
Roblox is another online gaming platform, which, according to the company, “over half of all US teens under the age of 16” played in 2020. A key difference, however, between Roblox and other online gaming platforms is that all the games in the Roblox marketplace are built by its user community, using a simple developer toolkit provided through the platform. The result of this user-generated approach is that in a very short period, Roblox has amassed millions of different games and experiences. Indeed, Roblox has become its own small economy, where content creators can monetise their game creations by building in virtual goods and game upgrades which can be purchased by players, with the proceeds being split between Roblox and the game’s creator. In some cases, top creators are already earning upwards of $1 million per year — in real-world cash.
Facebook too has clearly bought into the potential of the Metaverse, as evidenced by its 2014 acquisition of VR headset developer Oculus and, more recently, by its creation of Facebook Horizon, a virtual reality platform currently in closed beta. In its current iteration, Horizon allows individuals and small groups to interact and engage in a wide variety of experiences, essentially allowing users to step into a virtual, real-time version of Facebook. Like Roblox, Facebook believes that the experiential content landscape in Horizon will be largely developed not by Facebook, but by users and organisations.
The overarching point here is that the Metaverse will not be developed by any one company or group of individuals but rather collectively, by all of us — individuals, brands, technology companies, government and non-governmental organisations — anyone and everyone.
And while companies like Facebook, Google, Disney and Amazon will all build their unique presence and experiential platforms within the Metaverse, all will have to agree on a set of shared protocols for interoperability across domains and accessibility across all device types. Because the true promise of the Metaverse can only be realised when each of these “worlds” — be it Fortnite, Facebook Horizon and eventually millions of others — are stitched together into a universe where we can seamlessly teleport from one world or experience to another in real-time.
Economic value in the Metaverse
How does one create economic value within a limitless, digital world?
In the physical world, the value of an object is governed by a few key dynamics, among them, its authenticity, scarcity and ownability. Until now the internet has been, by its very design, fundamentally boundless in dimension and limitless in its supply of digital content. But it’s this same limitlessness that has commodified most digital products. After all, the internet was born as a means of file sharing, not of file buying.
For example, how much is a highlight video of LeBron James worth? Well, if I simply rip it from YouTube, not much. After all, there’s nothing inherently limited, authentic or unique about it. Anyone can download the same video but none of us can truly own it. Yet, at least one LeBron James highlight video is for sale for more than $230,000 on NBA Top Shot, a platform that allows fans and investors to buy, sell and trade officially licensed sports video highlights. For all intents and purposes, there is little difference between the worthless LeBron clip from Google and the $230,000 clip on Top Shot, with a few important exceptions. Top Shot authenticates every clip and assigns exclusive ownership of these one-of-a-kind assets using blockchain technology.
Likewise, by virtue of blockchain, any digital asset — be it art, clothing, a LeBron James photo or even experiences themselves — can now be authenticated as genuine, verifiably limited and exclusively ownable. For these reasons, these unique and limited assets, also known as NFTs, can indeed carry a value. Think about the example of Pokémon cards. The cards themselves have almost no inherent value. It’s only the rarity and authenticity of certain cards that drive their value to extraordinary heights. The same key tenants of value can now be applied to digital assets for the first time in history.
In fact, as I write this, almost half a trillion dollars has changed hands through the sale and purchase of NFTs. Today, most of this is represented by the sale of digital art and collectables.
For example, digital artist Mike Winkelmann, who works under the handle Beeple, had until recently never received more than $100 for one of his pieces. In late 2020 however, Winkelman sold an NFT of his work for more than $66,000 dollars. A few months later, the same piece sold for $6.6 million. And if that weren’t enough, in March of 2021, the artist sold a digital collage through Christie’s auction house for $69 million. Why? Because now, using a blockchain ledger, the authenticity, rarity and rights of exclusive ownership can be conveyed and verified.
Already these fundamental economic principles are cascading into other virtual goods including clothing, collectables and even virtual real estate — yes, real estate. Platforms like Upland are making it possible to purchase virtual real estate assets like the New York Stock Exchange, for example, which recently sold for $23,000. Who would spend that kind of money on a digital representation of the NYSE? Someone who assumes that as more people invest, and prime assets become scarcer, the price of such digital holdings may logically rise. Simple supply and demand.
Retailing in the Metaverse
When it comes to retail, there are those that foresee the creation of shopping venues — stores, malls and more — in the Metaverse. This is probably short-sighted. To simply transport industrial age shopping concepts and conventions to the Metaverse would be both unimaginative and ineffective. The creation of the Metaverse will allow us to break free from the current industrial form and function of physical stores and move light years beyond even the best digital shopping experiences of today.
Why would one create a virtual replica of a Canada Goose store when in the Metaverse I could potentially shop for a new Canada Goose coat from inside an Arctic exploration experience led by Iditarod champion and Canada Goose spokesperson Lance Mackey? There I can gain first-hand, contextual knowledge of the garment’s technical quality and performance, order it and have it delivered to my real-world home. I can buy my new car in the Metaverse — not from a static showroom of cars but while taking an adrenaline-pumping test drive on the racetrack of my choosing. I can get beauty advice from a personal advisor that I pull from the Metaverse into my living room. In a world where any experience is possible, why on earth would we use our industrial-era version of retail as a template for the future? Marketers, store designers, merchandisers and more will have to begin thinking very differently about what a “store” is.
In time, almost all of us will spend time socialising, learning, working and entertaining ourselves in the Metaverse. Some may choose to spend almost all their waking time there, seeing the real world as dull, limited and inefficient by comparison. With increasing amounts of time spent in the Metaverse, the ratio between the virtual and physical possessions we own will increase dramatically. I mean, who wants to wear the same virtual outfit to two different virtual parties in the same virtual weekend?
As we spend more time in the Metaverse, status symbols like the virtual home you own, the virtual clothing and jewellery you wear or the virtual cosmetics you use will become every bit as important as those same real-world purchases and possessions are today. Brands will capitalise on this demand by creating an ever-growing assortment of virtual products at real-world prices. Indeed, the sheer amount of time that one can spend in the Metaverse, as opposed to the real world, may in itself be viewed as a status symbol.
No one knows for certain, but what most experts agree upon is that the Metaverse, while years or even decades off, is an inevitable step in the convergence of humanity and technology and an evolutionary melding of reality and virtuality. And while the Metaverse may take decades to develop, there will be increasingly sizeable investments made now and, in the days to come, by organisations building that future.
Scuti, for example, is a start-up that focussed on “bringing to life the world’s first retail marketplace through games and allowing brands to sell and ship direct to game players.” Obsess, is another start-up building CGI environments and experiences for major fashion and beauty brands. Companies like Ikea are already successfully employing augmented reality technology to allow customers to design their spaces using its Studio app. Beauty giant L’Oréal has built an entire line of virtual cosmetics. And Gucci has begun selling virtual clothing, launching its Gucci Virtual 25 sneakers, designed by Gucci creative director Alessandro Michele, for $12.99 per pair.
Each of these things, while limited by the technologies and protocols we use today, is a small step toward the Metaverse. Growth will come slowly and incrementally until, as was the case with the internet, enough infrastructure, developers and users create a tipping point.
Smart brands will indeed buy real virtual estate and hire builders to develop their brand presence and experiences, where they will sell both digital and physical products to consumers who split their time between worlds. Laggard brands and organisations will be stuck in the real world and even worse, in the ghetto that the legacy internet will become.
Editor’s Note: This article was revised on June 8, 2021. A previous version of this article stated that Roblox has amassed tens of thousands of games and experiences. That is incorrect. It has gained millions.
The Opportunity in Digital Fashion and Avatars Report — BoF Insights
BoF Insights’ guide to digital assets in fashion, which examines the rise of the metaverse and underlying technological, social and consumer shifts, plus includes a playbook for how to seize the opportunity. To explore the full report click here.
The Opportunity in Digital Fashion and Avatars is the in-depth report published by BoF Insights, a new data and analysis think tank from The Business of Fashion arming business leaders with proprietary and data-driven research to navigate the fast-changing global fashion industry.