Entering the Metaverse – A new path for the luxury industry?

In the past couple of years, the world has changed a lot. While most of us have been negatively impacted by the COVID-19 crisis, it has also led to some positive developments. One of those being the accelerated development of the digital world, ranging from new technologies to adapting old business models to fit a more digitized demand, our world as we knew it before the pandemic has been impacted in the long run.

Today’s topic is at the center of heated discussions and arguments: Is the Metaverse here to stay? Should people invest in it? Is it the future or consumption or is it just a trend that will make a few rich people even richer?

First of all, let us define what the Metaverse actually is. The Metaverse, short for Meta (with the idea of transcending reality) and Universe, is a virtual universe where digital and reality meet. How is that different from those VR video games that have already existed for a few years now? Well, the Metaverse is indeed incorporated in a limited form in some of those games but in reality, it is much more than that. This new universe is not only about entertainment, but it can also be used for services, fashion, art or even real-estate. It’s a world in itself. One of the big questions now is, will our society slowly switch completely from physical to digital? Will it be more interesting for an art collector to buy a unique NFT painting, or will the canvas remain the gold standard?

Luxury houses stepping into the Metaverse

Dolce & Gabbana has been one of the first to make the move and launched their Collezione Genesi, their first collection that included NFTs, virtual tokens that can be traded online.
A lot of digital marketplaces focus on gaming but here, the UNXD platform is the first one to work with a major luxury fashion brand.
One thing that must be highlighted is that D&G being one of the first movers could impact the entrance of other luxury houses. We all know the stories and backlashes D&G had to face with their campaign in Asia, showing a model eating pizza with chopsticks. It has greatly impacted the brand image of the house, adding up to their politically-incorrect reputation. Will the blockchain help D&G restore their reputation in a highly digital country ?

Another example of a luxury brand that made the buzz was Balenciaga presenting their fall 2021 collection in a virtual environment that can be described as a Metaverse, it has been created with Unreal Engine, a tool most virtual designers use to create games and digital worlds.“Afterworld: The Age of Tomorrow”, the virtual project is a very strange experience that we encourage you to check on YouTube to discover a very innovative way of presenting a new collection. Something that could have lit the bulb and given the idea to the fashion designers to hop in the virtual world is when people started creating and reproducing fashion designs on the video game Animal Crossing during the pandemic. When they saw the interest in having your virtual avatar well dressed in luxury clothes, some fashion houses started recreating their designs in the game to stay relevant during the pandemic and attract new customers. Some of them are still present in the game now that the shops have reopened. Finally, the last move Balenciaga made was their drop on the video game Fortnite. Rather than focusing on NFT’s, the luxury house decided to do a collaboration with the game and in the same way some houses did in Animal Crossing, the brand created limited edition clothes for avatars in the game. Will these new trends lead to people willing to have their own avatar online and start to buy virtual clothes instead of physical ones? The question is the same than for the virtual art and canvas, it remains blur and only time will tell.

Although Metaverse has presented great advantages for marketing purposes, it seems that Luxury brands have also found another way to utilize metaverse in their blockchain. For instance, for the first time rival groups in the luxury industry (LVMH, Richemont, Prada Group) have created together the platform AURA to fight against counterfeit goods. Thanks to it, you will be able to trace all the product journey before your purchase and all the production history. Going to the very root of the purchase will help in the second market to know the authenticity of the product. It is similar to what StockX does for the authenticity certification selling process, except for the fact that you will be able to trace all the previous purchases of your item.

For the moment, there don’t seem to be clear disadvantages since we are at the beginning of this new era. More than the luxury sector, people see it only for gaming use with VR. That is why luxury brands which stand for innovation in every domain should embrace this new technology to lead us and show us all the other possibilities that the blockchain could bring.

By Diego Sotillo Horcajo, Dejan Prole, Catia Pires Vieira, Noémie Burckhardt, Alex Magliano, and Evangelia Kiki @HEC Lausanne

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