Learnings from retail: How can retailers prepare for the metaverse?
October 21, 2022 6 Minute Read
The retail industry has undergone significant structural change with the long-term growth of e-commerce, compounded recently during the Covid-19 pandemic. While it is now commonplace for retailers to provide a fully integrated omnichannel experience, its potential value was initially doubted by some, where the market disruption has been quite severe. Not least, the changing space requirements led to retailers’ over-committal of floorspace of 16%. Still, having already adapted once to a changing operating environment, the retail industry is well placed to take advantage of the next opportunity – the metaverse.
Simply, the metaverse is just another route to market for brands. However, the opportunity could be far more wide reaching. To date, most of the metaverse retail activity has been concentrated on digital products and largely through leisure-based uses. Luxury brands like Burberry, Gucci and Louis Vuitton that have agile multi-channel strategies, have actively engaged customers in the metaverse, with gamers buying branded clothes for their avatars. 79% of consumers active on the metaverse have made such a purchase. TheMall is pitted to be the largest shopping mall in the metaverse, with more than 100 million virtual square metres available, offering vast space across 100 business floors. That makes the project almost eight times the size of the world’s largest mall in Dubai. But as the technology evolves, it provides a new opportunity and access point for customers to 'try and buy' physical goods, virtually.
Retailers can learn lessons from the e-commerce experience to examine why and how to engage with the metaverse, including:
Why would you use this new channel? And how does it fit in with your existing model?
E-commerce has enabled retailers to access consumers in a more convenient format. Those looking to enter the metaverse need to explore what this new channel can offer their brand and how it complements existing channels. It also presents a new opportunity for pure bricks and mortar retailers such as Primark, smaller brands, or those with limited channels to market, to explore something different.
Retailers will need to serve a virtual transaction and assess the potential implications for additional warehouse space requirements. An assessment of technology requirements to deliver the experience in-store and the impacts on floorspace, will also need to be made. Only then can retailers establish their optimal store and storage strategy.
In early 2022, Selfridges opened its first metaverse department along with 70 of its brands participating in the metaverse’s Fashion Week – a ripe opportunity for a mass of retail businesses to test and trial this channel.
Who are you targeting? And what is the best way to engage them?
E-commerce is now actively engaged with by both younger and senior consumers, with the former cohort the early adopter. It’s likely a similar pattern will be observed with metaverse retail, as we are already seeing a multi-generational approach across other metaverse uses such as gaming, esports, and a consumer base that is pretty tech savvy.
Digital marketing and social media evolved hand in hand with omnichannel retailing, providing consumers with a route to market. Metaverse technology provides a similar opportunity for brands to enhance communication through immersive advertising campaigns, virtual in-store exhibitions, or avatar chatrooms.
One leading sports brand is having significant success, with almost seven million people visiting the metaverse from across the world, evidencing the platform can be inclusive in bringing many corners of the globe together.
Customers will still expect a seamless service and standard of excellence regardless of a new engagement channel, that brands will need to deliver.
What is the ‘value add’ of this channel? And how can this best be measured?
Following the adoption of e-commerce, retailers now have the technologies and systems in place to establish the value of different sales channels. Similarly, if entering the metaverse, retailers will need to adapt the appropriate infrastructure to track sales and returns from this route, and the apportionment to store space, if any.
This new footfall channel means new data sources. Retailers will need to review and enhance their data collection processes, and storage policy.
Moreover, with metaverse regulation largely absent, brands will need to stay updated on technology policy developments on online safety, privacy, etc. A further point is how brands protect themselves against the potential volatility of cryptocurrency.
It’s estimated the metaverse could unlock opportunities for retailers, culminating in annual revenues in excess of $1 trillion by 2030; a sizeable opportunity that cannot be ignored. Metaverse retail presents an exciting opportunity for retailers to challenge their approach to value creation and how they reach out to consumers in a growingly tech savvy world. Embracing this channel will therefore allow retailers to proactively develop an approach, assess implications for store and storage space, and tackle any obstacles with confidence.
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