Demand for digital fashion and luxury products in the Metaverse is expected to grow strongly, bringing additional revenue to the industry. They are reportedly projected to bring in $50 billion by 2030. Also, the Metaverse’s market share in the fashion industry is expected to grow to $6.61 billion over the next five years.
“Digital media revenue streams are negligible for luxury brands… We believe this is about to change,” predicted Morgan Stanley strategists in an industry outlook released in late 2021. This change is already in full swing. Brands from Burberry to Nike, from Forever21 to Tiffany’s are exploring different revenue streams to future-proof their digital businesses.
According to Technavio’s latest outlook, the growth momentum of the Metaverse fashion market will accelerate at a CAGR of 36.47 percent, reaching a value of US$6.61 billion by 2026. This market will see a growth rate of 30.5 percent year-on-year by the end of this year. The report points to the increasing number of fashion brands joining Metaverse platforms as the key growth factor in the foreseeable future.
“Metaverse platforms have the potential to transform the online shopping experience. Fashion brands, especially apparel brands, are highly dependent on attractive labels and branding to drive sales. Clothing brands use Metaverse platforms to increase their brand awareness,” emphasizes Techvio’s analysis team, referring among other things to the acquisition of Rtfkt Inc. (a company that makes digital sneakers) by Nike Inc. in late 2021. “Nike and Rtfkt have a virtual sneaker called Rtfkt x Nike Dunk Genesis Cryptokicks collection launched. These virtual product launches will help increase brand awareness and engagement with consumers.”
Must-have fashion NFTs
Morgan Stanley’s analysis concludes that “the development of the Metaverse is likely to take many more years; However, NFTs and social gaming (like online games and concerts attended by people’s avatars) present two near-term opportunities for luxury brands. According to the investment bank’s own study, non-fungible tokens (NFTs) and social gaming could expand the total addressable market of luxury conglomerates by more than 10 percent over the next eight years and increase the industry’s earnings before interest and taxes by around 25 percent.
A good example of this potential is the 25 million virtual items created on the virtual gaming platform Roblox in 2021 alone. Nearly six billion of these have been purchased, grossing their creators $538 million, according to Winnie Burke, head of fashion and beauty partnerships at Roblox, in an interview with Drapers. Burke added that Gucci, Tommy Hilfiger, Nike, Vans and PacSun are among the companies that have set up worlds in Roblox where fans can explore the latest collections or try on virtual clothes. “As we address a fully digital generation, we know that Gen Z values community and accessibility more than any other generation, and we have joined Roblox to further expand that connection with our customers. Given that they use Roblox as a place to socialize, it’s clear that to foster our strong emotional resonance as a brand, we need to continue to be by their side in the gaming world,” said Brie Olson, PacSun President, of the decision to invest in the virtual universe.
Venture capitalist Nic Carter believes that redeem-and-keep business models can help accelerate the spread of NFTs and provide consumers with a more compelling entry point into Web3. Carter spoke of the attraction of the “digital twins”.
Digital twin NFTs are virtual copies of physical products that share their data with the original physical version (each digital twin includes the values representing systems, products or services, processes of companies and all other physical things created using virtual reality or 3D modeling technology). “This digital twin idea has been embraced by some brands, although the model itself has not yet stabilized. Burberry was one of the first brands to bring their products into the Metaverse, launching their own character in Mythical Games’ NFT-focused Blanks Metaverse RPG in 2021, although the vinyl characters remained digital-only,” Carter wrote in one Post.
Fashion label Hogan has released physical products as redeemable NFTs through its Decentraland-based retail section. “We wanted to expand our presence in the Metaverse and partnered with Boson Protocol to launch a one-brand pop-up store on Decentraland. Through this marketplace, the virtual quarter of boutiques of big fashion brands, we have offered our physical products for sale as redeemable NFTs – a wide range of products with which we want to appeal to old and new generations and create the world of the future together with Web.03 “, so the Italian brand in a company statement.
Dolce & Gabbana’s auction of nine NFTs for $5.7 million last spring was cited by Morgan Stanley analysts as another sign of the potential this space holds for the fashion industry. “We expect the whole sector to benefit from the emergence of the Metaverse, but see soft luxury brands (ready-to-wear, leather goods, shoes…) as particularly well positioned versus hard luxury (jewellery and watches),” reads it in the private bank’s December 2021 report.
The Rise of Phygital
“The greater opportunity that phygital fashion offers is that NFTs can be sold before physical garments, allowing brands to gauge demand for physical goods before they are actually manufactured and distributed,” said Jessie Fu, co-founder by digital fashion house Altr_, opposite Chinese newspaper ‘Jing Daily’. Fu concluded that “this should reduce overall consumption, production and associated shipping costs.”
Another example of the rise of Phygitalem are places where physical retail is merging with digital fashion. FashionUnited spoke to AR fashion platform Zero10 about their recent collaboration with Crosby Studios to launch a physical retail pop-up store featuring digital-only clothing. This pop-up store opened for 10 days in September and offered a virtual shopping experience with a traditional physical store in what the pair called a ‘physical’ gateway to the Metaverse. Customers used Zero10’s proprietary apparel AR technology to try on onsite garments that were only available digitally. Designed by Crosby Studios, the collection comprised five digital-only pieces that evoked the studio’s signature aesthetic, which is inspired by ’90s video games and is also reflected in the store’s interiors.
“The pop-up exceeded all of our expectations. People loved the idea of trying on virtual items in a pop-up store and being able to experience the digital world in a physical setting. Over the course of two weeks we had over 2,000 guests – despite the limited space. On average, visitors spent more than half an hour in the shop. Some stayed for several hours, took great photos and videos, and many of them came more than once,” a spokesman for AR fashion platform Zero10 told FashionUnited. The pop-up store coincided with New York Fashion Week and proved that “people wanted to experience AR more as part of the physical experience. Zero10 digital items have been tried on approximately 25,000 times in the app.”
This article was similarly published on FashionUnited.uk. Translation and editing: Barbara Russ