The metaverse, a highly popular virtual realm of our time, presents a challenge in terms of its precise definition. While numerous individuals might express it as “a virtual reality headsets-accessible, immersive, and three-dimensional computer-simulated environment, allowing shared exploration,” its accurate characterization remains somewhat less acknowledged.
An alternative perspective might simplify the concept by describing the metaverse as “a virtual realm where individuals engage with people, products, and locations firsthand through personalized avatars, creating an immersive experience.”
What justifies our concern for an entity that poses such challenges in its very definition?
The evidence is compelling: the statistics paint a clear picture. Presently, a staggering 2.5 billion individuals actively engage in the virtual realm, as reported by L’Atelier. Moreover, the trading volume of non-fungible tokens (NFTs) witnessed an astronomical surge of 21,000%, amounting to over USD 17.7 billion in 2021, according to Nonfungible. Analysts even project that the market for virtual luxury goods has the potential to reach a remarkable USD 50 billion by the year 2030.
For luxury brands, the metaverse corresponds with a rising consumer trend referred to as “experiential luxury,” wherein the focus lies on captivating the senses through various dimensions. This trend entices individuals towards immersive encounters, utilizing technology, color, pattern, and material as fundamental elements.
Luxury’s response to metaverse
Luxury brands are exploring just how, having invested in ways to combine service, the circular economy, storytelling and personalization.
According to Jana Arden, Head of the Luxury Sector at KPMG, her observation reveals that luxury brands are adopting innovative strategies through three key avenues: directing their efforts towards consumers, prioritizing employee-centric approaches, and implementing measures to enhance operational efficiency.
One can also understand brands’ approach to the metaverse by looking at how they are trying to create value (what they do), for which customers (the who), and how they execute it all.
In their pursuit to increase revenues, brands are employing various tactics. One approach involves introducing new offerings, including physical products or services that leverage the capabilities of Web 3.0. These initiatives aim to enhance the functionality and appeal of existing physical products, aligning them with the evolving digital landscape.
The primary avenue to monetize the digital experience lies in the utilization of non-fungible tokens (NFTs). It is widely acknowledged that individuals are willing to invest in these digital collectibles, recognizing their potential value within the metaverse. Moreover, the concept of NFTs aligns seamlessly with the essence of luxury. While “fungible” denotes interchangeability, non-fungible signifies exclusivity—a distinctive digital identifier that exists as a one-of-a-kind entity.
Beyond the realm of Bitcoin watches and NFTs, even more transformative changes are emerging in the form of new business models. While still in the nascent stages, luxury brands are positioning themselves in the space between adapting existing business models for the metaverse and developing entirely new business models exclusively tailored for this virtual realm. This shift reflects the industry’s recognition of the metaverse’s potential and the willingness to explore novel approaches to meet the evolving demands and opportunities it presents.
In the context of the metaverse, luxury brands face the crucial task of strategically selecting the appropriate customer segment. Engaging with customers in this new channel requires forging connections with the right communities and tailoring offerings specifically to their needs. It entails a shift in interaction channels and emphasizes the importance of identifying and catering to the ideal customer base.
The importance of effective execution cannot be underestimated, as visionary ideas can falter without proper implementation. Consequently, it comes as no surprise that brands are actively optimizing their internal organizational choices and focusing on developing capabilities in this regard. Some brands are even establishing dedicated business units or enhancing existing ones to specifically cater to the metaverse and its associated possibilities. This strategic approach underscores the commitment to capitalize on the potential of the metaverse by aligning internal structures and resources accordingly.
Simultaneously, brands must exercise patience while executing the crucial tasks of incubating and scouting their next moves and business models. Acting prematurely carries the risk of damaging brand reputation, while delaying too long could result in difficulties catching up with competitors. Therefore, striking the right balance and timing is imperative to ensure successful implementation without compromising brand integrity and market positioning.
The metaverse can be likened to a marathon. To outline a luxury brand’s strategy for navigating this journey, it entails three fundamental steps: defining a clear vision, understanding customer needs, and allocating resources strategically to effectively execute these goals. By establishing a visionary direction, aligning with customer expectations, and dedicating focused resources, luxury brands can pave the way for a successful journey through the metaverse.