In may last year, luxury Italian fashion house Gucci hosted a virtual Gucci Garden on Roblox, an online gaming and metaverse platform. The virtually crafted immersive experience allowed users, or rather their digital avatars, to traverse themed rooms and soak in the fashion powerhouse’s iconic campaigns curated by creative director Alessandro Michele over past six years. The users became neural mannequins. “The mannequin symbolised that we all begin our journey through life as a blank canvas. The mannequins absorbed elements of the exhibition,” Roblox explained in a blog. The virtual Gucci Garden was a digital extension of Gucci Garden Archetypes, an immersive exhibition showcasing 15 key advertising campaigns crafted by Michele that was launched in Florence to mark the brand’s 100th year. It also housed a store where visitors could purchase limited edition avatars, or digital-only items, and it sure fetched some big bucks! A Gucci bag reportedly changed hands for as much as 3,50,000 Robux (Roblox’s in-game currency) or about $4,115, exceeding the price of the bag’s real version by almost $1,000. The purse was not even a non-fungible token (NFT), implying it had no value outside Roblox. For Gucci President & CEO Marco Bizzarri, it was a way to “stay apace” with an evolving world which is enabling seamless interplay of fashion, music, films and technology. NFTs are digital assets with a blockchain based unique identification code; they can be bought and sold like other physical products.
Gucci is not alone. Luxury brands Louis Vuitton, Panerai, BMW, Visionnaire, Burberry, Balenciaga and Dolce & Gabbana are also making a beeline for metaverse—virtual and immersive avatar-inhabited worlds built by leveraging augmented reality and virtual reality. Brands are also adopting other elements that define Web3, particularly NFTs, to interact with consumers. Goldman Sachs pegs the metaverse opportunity at $8 trillion. “Spenders of tomorrow are going to be there,” says Ankur Puri, partner at McKinsey & Company. About 66% of all US early- to mid-teen internet users are on metaverse, where they are spending three times more time than on Instagram. McKinsey pegs the current size of the metaverse economy at $46 billion. It could surpass $500 billion in next five years, he says. CB Insights has pegged the market opportunity for virtual goods at $190 billion.
Why The Rush
Luxury brands were late adopters of internet. Luxury products, after all, are all about ‘touch and feel’. They were also apprehensive about proliferation of counterfeit products on internet. Now, the market has changed. “A significant set of new entrants into the market are millennials and Gen Z,” says Abheek Singhi, senior partner and managing director at BCG.
Also, selling goods on metaverse is less costly than running physical stores. Besides, it brings flexibility. For instance, brands can experiment with new designs and concepts on metaverse and build physical versions on the basis of consumer feedback, says Saloni Nangia, president at Technopak Advisors. “Metaverse also allows personalised customer engagement,” says Anghsuman Bhattacharya, partner and national leader, consumer product and retail sector, EY India.
Metaverse also helps brands manage business headwinds. Luxury brands have been facing stiff competition from Chinese brands. The rise of fast fashion, which is about bringing out as many as 12 collections a year, has also become a challenge. “Luxury brands have had to increase the number of collections to offer more options and freshness,” says Joydeep Bhattacharya, partner at Bain & Company. Now, a bad macro-environment, where inflation continues to remain high, is also haunting the brands. “Fashion players will likely continue to suffer business disruptions through 2022, with some fighting for survival, as pandemic-related and global economy aftershocks are likely to emerge,” analysts at McKinsey said in a report in December 2021. In such a scenario, metaverse, which entails lower investments, can give brands access to new consumer segments, says EY’s Bhattacharya.
Besides, NFTs represent verified ownership and authenticity, elements which are integral to luxury brands, say analysts.
Inside Brand Play
Most brands are testing the potential of Web3. The technology is largely being leveraged for marketing campaigns and engaging with young, digital savvy consumers. Not many have been able to craft tangible business models, while others have monetised NFTs But the fact that the virtual Gucci Garden on Roblox attracted 19 million visitors and success that brands like Burberry have had with NFTs, however, seem to suggest that brands are moving in the right direction.
BMW: BMW has built its own metaverse world called Joytopia that vice president of brand communication and brand experience, Stefan Ponikva, claims will enable the German automaker to take brand communication to a new level. Joytopia has three virtual worlds—Re:THINK, Re:IMAGINE and Re:BIRTH. Each is themed around elements integral to BMW’s strategy—circular economy, electric mobility, urban mobility and sustainability. In Re:THINK, users are familiarised with building blocks of the circular economy. The Re:IMAGINE world represents the stage for important presentations and messages while Re:BIRTH provides insights into opportunities for individual mobility in cities. Joytopia users can navigate the three worlds via their avatars, which have freedom to run, fly and hop. They can choose forms and colours in which they wish to don their avatars. At public events, users can create own spaces, take selfies and post them on social media. The group says on launch day, more than 1,50,000 visits from over 30 countries, with average duration of 13 minutes, were recorded.
Balenciaga: French fashion house Balenciaga launched an exclusive collection of clothes and select accessories last September on gaming metaverse platform Fortnite, which has a global following of 350 million-plus. The campaign involved dressing up four of the game’s most popular characters, Doggo, Banshee, Ramirez and Knight, in Balenciaga outfits or ‘skins’, as they are called in gaming parlance. A virtual Balenciaga store within the gaming arena allowed users to buy the fashion house’s items using V-Bucks, an in-game currency used in Fortnite, and deck up their gaming avatars in Balenciaga. The partnership extended into the physical realm. Balenciaga outfits were made available on the brand’s online and select brick-and-mortar stores. The collaboration seems an astute move given that Fortnite players spend nearly 50% time in creative mode, used to design own universe and play role-playing games.
Dolce & Gabbana: Italian brand Dolce & Gabbana unveiled a bespoke collection of 20 looks of metaverse wearables at the first Metaverse Fashion Week hosted on virtual world Decentraland earlier this year. Last year, it had partnered with luxury NFT platform UNXD to launch a bouquet of nine NFTs called ‘Collezione Genesi.’ The NFT collection, featuring hand-made, museum-grade items personally designed by Domenico Dolce and Stefano Gabbana for UNXD, was sold for close to $6 million. According to details on the CoinDesk website, The Doge Crown NFT garnered the highest 423.5 ETH (Ether, the cryptocurrency of the ethereum network) or about $1.3 million. Reportedly, five pieces were physical creations (winners of these NFTs were given physical products too). The company recently released the DGFamily NFT, which allows holders to avail benefits such as access to exclusive drops, events and collaborations.
Louis Vuitton: The brand launched a mobile app game with 30 embedded NFTs, some created by famed American digital artist Michael Joseph Winkelmann, as part of celebrations initiated last year to commemorate its founder’s 200th birth anniversary. The game takes players through an adventurous trail spanning virtual worlds to help protagonist Vivienne collect 200 candles that will unlock postcards detailing Vuitton’s life journey. The postcards have been fashioned as NFTs. The game has seen more than two million downloads since launch in August 2021.
Gucci: The brand was one of the first in the luxury industry to delve into NFTs when, in May 2021, it auctioned a unique artwork drawn from the Gucci Aria campaign film on Christie’s and donated the proceeds to UNICEF USA. The auction reportedly closed with a final sale price of $25,000. The House has also collaborated with Superplastic (which crafts animated celebs, vinyl toys and digital collectibles) to create a series of rare, limited-edition NFTs.
Burberry: UK-based Burberry has married fashion and Web3 by dropping NFTs in Mythical Games-published popular multi-player game Blankos Block Party. The game features digital vinyl toys known as Blankos that live on a blockchain. The fashion house curated a limited-edition NFT Vinyl toy called Sharky B that could be purchased, upgraded and sold on Blankos Block Party marketplace. According to website dappradar.com, the cheapest Burberry NFT was the jet pack worth $100 each, while a single unit of Sharky B was originally priced at $300.
Panerai: Italian luxury watch marker Panerai is creating a collection of exclusive NFTs with introduction of Radiomir Eilean Experience Edition, a limited-edition watch with only 50 pieces. Each buyer will receive one of the 50 Panerai Genesis NFTs associated with Radiomir Eilean watch in a unique cryptographic wallet allowing them to own this NFT. The NFT owners will get priority access to all future Web3 initiatives from Panerai and invited to enjoy exclusive services, events and offerings from the brand.
Visionnaire: Italian meta luxury brand Visionnaire launched Apollo del Belvedere NFT earlier this year at Miart, Milan’s modern and contemporary art fair. The brand roped in renowned visual artist Jonathan Monaghan to realise the NFT version of the famous Apollo Belvedere marble sculptures housed in Vatican museums. The NFT intends to ‘create a bridge between reality and digital universe,’ says art-director and co-founder Eleonore Cavalli. The buyers of the NFT will also get the physical art piece.
Amrapali Jewels: Jaipur-based Amrapali Jewels is tapping into NFTs to showcase Indian heritage and craftsmanship to a global audience. “Indian craftsmanship is unique. So, to use craftsmanship that has taken centuries to hone and give it a digital avatar can be an exciting opportunity,” says CEO & creative director Tarang Arora. Although Arora believes that a large part of jewellery ownership will remain physical for the next decade or so, metaverse can become a huge part of the luxury retail landscape.
Is metaverse only about opulence of digital or can it create viable business models? Analysts say ‘touch and feel’ is integral to consumer association with luxury but metaverse can open avenues for interesting business models. For instance, there can be a slice-based model wherein if a user, say, buys 50 digital skins of a brand, he/she will be eligible to get a physical product crafted by the brand, says BCG’s Singhi. Another can be a loyalty-based model wherein if a consumer makes a digital purchase, he/she can get loyalty points which can be redeemed in the real world. “Metaverse will not replace existing business models but create many parallel business models,” says Singhi.
“As various models such as quick commerce and express delivery gain prevalence, it’s a great opportunity for companies to break out of marketplaces and develop personalised offerings,” says EY’s Bhattacharya. McKinsey’s Puri says luxury brands have started creating partnerships, something which never happened before. Last year, Prada Group, together with LVMH and Cartier, announced creation of Aura Blockchain Consortium that will allow consumers to track origin of their purchases and authenticate goods. It will promote a single blockchain solution open to all luxury brands worldwide.
The concept of metaverse and NFTs is catching on in the West but it may be still some time before India joins the bandwagon, say experts. For instance, though India has a strong gaming culture, the number of Indians on these platforms who would buy luxury labels is limited. “Our gaming market is quite big but if you take out Rummy and cricket players, the user base is small,” says Puri. Only a small share of the population has adequate income to pursue such indulgences, says Bhattacharya of Bain & Company. Besides, the ecosystem is yet to develop. He says metaverse will be a joint play of technology, gaming, creators and brands. “The creator economy is taking off far more in U.S. and elsewhere than in India,” says Bhattacharya.
India will have to play catch-up really fast.