How Will The Metaverse Impact Businesses In The Consumer Goods Sector?

As Global Chief Innovation Officer at EY, Jeff Wong helps companies harness disruptive technology and prepare for the future of work. 

In a world full of fascinating technology innovation, the metaverse stands out. The potential for a “real-time 3D internet” to transform how we work, play, entertain and socialize is exciting, and I believe consumer goods will be one of the first sectors to feel the impact — because the process has already started.

A Consumer Entertainment-Led Innovation

The metaverse is a futuristic-sounding concept that mostly exists today in online gaming. Platforms such as Roblox and Epic’s Fortnite offer a “synchronous and live” virtual reality (VR) environment that enables players to meet (as avatars) and play the game or simply watch experiences together in real time. The 2019 Fortnite World Cup, for example, amassed 2.3 million viewers for its finals (as well as selling out Arthur Ashe stadium to watch it in person). In 2018, 200 million people in China reportedly viewed the League of Legend World Championship.

However, the metaverse is more than just gaming. It’s also a growing platform for consumer trade.

From Entertainment To Goods And Brands

The market for in-game purchases of outfits, weapons, hairstyles and accessories is surprisingly large. L’Atelier BNP Paribas expects in-game spending on items like digital clothes and character upgrades to grow to $129 billion by the end of 2021, from $109 billion in 2019.

Luxury brands are getting in on the action. As Vogue Business notes, Gucci was quick off the mark in May when 20 million users visited its virtual Gucci Garden on the Roblox platform. In just two weeks, hundreds of thousands of users bought multiple limited-edition avatar items from the garden’s virtual store. Gucci’s Dionysus bags even sold for more than the usual price of the physical equivalent. Vogue Business found that users who bought these virtual Gucci items “wore” them five hours longer than other accessories.

Fashion house Balenciaga teamed up with Epic Games to debut its autumn/winter 2021 collection in VR, offering a special line of in-game outfits and accessories, as well as physical merchandise sold via the game. Balenciaga also released its spring/summer 2022 collection as a video using only one model and a computer-generated image (CGI) audience.

Meanwhile, Ralph Lauren designed a virtual clothing line for 200-million-user South Korean social network Zepeto, and Stella McCartney sold a collection of virtual items, including a tote bag, heart-shaped sunglasses and a puffer.

New Opportunities, Skills And Risks To Consider

Mass-market consumer goods brands may see the online gaming market as niche. However, with a major company like Facebook rebranding itself as Meta and announcing plans to invest $5 billion in creating a metaverse platform, many brands will start to pay closer attention.

A mass-market platform is an opportunity for consumer brands to develop virtual products, like Balenciaga’s, that cross over between the physical and virtual worlds as well as develop new ways to market their goods.

This platform also requires new skills. Existing graphic design skills will need to be supplemented with new skills in VR and animation. Additionally, new security technologies will need to be mastered as hackers of cyberspace replace the shoplifters of physical space.

The impact on the already beleaguered brick-and-mortar stores could be significant. If metaverse shops sell physical goods — the inevitable extension of today’s online retail — demand for physical shops could fall further. Brands savvy and agile enough to move to the metaverse, while also embracing new models for their physical footprint, are likely to prosper.

When it comes to environmental issues, the metaverse is a double-edged sword. Improving virtual experiences and services may limit the environmental impact of travel or printed paper, but the increased use of computers draws more electricity. There is no doubt that the metaverse will challenge consumer goods companies as they look to balance their environmental impact strategies with future growth. Those same companies will also be keen to understand how they can protect their investment in intellectual property (IP).

Protecting IP In The Metaverse Is A Significant Challenge

How do brands protect themselves against forgery or copying in an interconnected, cross-jurisdictional virtual world? Bits and bytes can be copied with the click of a mouse. Infringers are also hard to detect — or at least hard to locate.

Part of the solution comes from something called a non-fungible token (NFT). Drawing on complex blockchain mathematics, NFTs guarantee that digital creations are one-offs or limited editions. This means that NFTs can be used to give perceived added value to digital goods from trusted brands.

Paradoxically, this same technology that lends itself to protecting the IP of established brands also creates opportunities for market newcomers. RTFKT (pronounced “artifact”), for example, has staked out its claim as a leader in the NFT field. The company sold 600 pairs of digital sneakers for a total of $3.1 million in seven minutes in February 2021. At price points of $3,000, $5,000 and $10,000, these virtual luxuries are for the wealthy, but there’s no doubt that mass-market innovators will follow.

NFTs, however, only offer protection to the extent that customers care about buying genuine branded goods. Brands will also be reliant on platforms taking prompt action to remove infringing content. Given this is already a thorny issue with the internet, we can expect the wrangling to continue.

A Future That’s Ready To Be Embraced

Consumers will always need physical goods. Even if many of our entertainment, travel and work experiences move into the metaverse, our physical need for food, drink, clothing, healthcare products and household goods will remain.

For consumer goods brands facing a weakening physical market, however, the metaverse can provide a much-needed alternative. For others, it will open doors to additional markets, and there will be other exciting new entrants who will leapfrog straight into virtual goods. It’s up to the creators of real and virtual consumer goods to decide where they want to place themselves in this new and burgeoning market.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

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