Retailers can leverage metaverse technology in areas including omnichannel commerce, personalization, product development, and loyalty.
Chain Store Age recently spoke with Justin Hochberg, CEO and founder of metaverse creation company Virtual Brand Group (VBG), about how the metaverse is quickly evolving from concept to crucial commerce channel. VBG works with retailers like Forever 21 in creating immersive virtual environments.
How can having a Metaverse store help retailers reduce their physical overhead?
The metaverse works for all types of consumer-facing brands. And it delivers three different benefits that are greatly different than what exists in web 2.0. First of all, in terms of reaching a global audience all at once, these platforms are not segmented by country or geography.
When Walmart puts up a store on Roblox, it reaches anybody in the world who wants to go there and experience that same experience. By definition, the metaverse is accessible in a different way globally, which is good because the physical store experience is largely broken.
By that, I mean the general consumer behavior pattern is to want to spend as little time as possible in a store. Think about that experience. You have to drive there, park, go inside, find the product you’re looking for, buy it and reverse the whole process. That's a lot of time just to get an object, so e-commerce is really attractive, right? That instant purchase.
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However, that experience doesn't do anything for the consumer except for one thing, which is get the item that they would like as efficiently as possible. If you think about the world's most successful physical retailer, what it does better than anyone is make things experiential. And the number one physical retailer in the world is Disney World.
Because not only do you go there for longer than a few minutes, you don't ever want to leave. If you've ever had a kid who went to Disney World and you try and get them out of there, it’s not so easy. Beyond that, people not only spend two or three days at the park, they go on a Disney cruise for a week or two and they go on it maybe every year.
Disney is an experiential retail experience. And it's not about riding the ride. It's about the overall experience. So, the second big thing you can do when you're talking about transitioning from an e-commerce site or a brick-and-mortar store to the metaverse is this experience becomes fun, playful and social. Customers can interact with things and so the amount of time being spent is less about the transaction and becomes more like Disney World.
The third thing that is really important is sustainable product development, especially in apparel. Fashion contributes about 10% of the carbon emission footprint in the world. For a long time, fashion companies have been looking for ways on the back end they can reduce that footprint, through steps such as using computer-aided design (CAD), changing their dyes and adopting biodegradable fabrics.
What we're now seeing is the idea that you can develop product and test product in the metaverse first, which means avoiding almost any emissions in the physical world and then building a physical program around that.
Are you seeing that not only is the metaverse good for selling digital goods for an avatar, but it's also a viable means of selling physical goods?
That’s one of the other pieces which is layered on there. There are other benefits. VBG is the metaverse creation company for Forever 21 and are building their business on Roblox. One of the things that is hard about Roblox is that it’s a closed ecosystem, much like Facebook. Those are walled gardens, as we call them.
If you buy an item in Roblox, it doesn't allow you to connect that item to the blockchain or anything else. Nonetheless, what we ended up doing was issuing codes via social media to anybody who bought a virtual item in Roblox that pushed them to an e-commerce site.
If you went to the Forever 21 website, when we launched the company on Roblox, you would actually see the physical item of say, this sweatshirt I'm wearing with the virtual avatar wearing the exact same item. This was the first time a retailer tied physical and virtual goods together.
This meant that if you came to Forever 21 through Roblox, you got a 20% coupon to buy the physical item. If you came through e-commerce and bought the physical item, you got a coupon to go get the Roblox item and you could directly link from the e-commerce site back into Roblox to buy the item.
This was about nine months ago. The evolution of connecting virtual and physical commerce has moved drastically ahead. But we believe in this very simple principle. There is no difference for a consumer to be virtual or physical, or both at the same time.
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Where retailers make a mistake is, they start thinking that consumers will decide they're in the physical world, then they’ll decide to be in the virtual world. But we spend hours and hours staring at our phones, right? Just because it's not a virtual reality headset doesn't mean that we are not spending most of our day staring at some screen. The next time you do this, you might be an avatar. Connecting the physical to the virtual so that what you buy in one place connects to the other, or vice versa, is fundamental to the new retail experience.
How can retailers use NFT's to help connect customers with physical assets in the metaverse?
NFT's have gotten a bad rap simply because for the last year and a half they've been associated with highly speculative things. Because of that, a lot of people don't like to use the word NFT.
[Read more: Retailers discover ‘real world’ uses for NFTs]
But the word ‘NFT’ is really just a piece of technology that has been associated with something. The underlying technology relies upon what we call a ‘smart contract,’ which is basically like a set of terms and conditions that are programmed into it - like a cookie that you're used to from the web, but much more sophisticated.
If a customer buys an item, it associates their email address with a digital wallet that is only for that product. As soon as a customer buys a physical good, the NFT registers whatever that brand wants in their wallet. One example might be a mirror copy of the virtual version of an item. For example, I could have a virtual copy of all my ticket stubs from all of the games I’ve gone to, so I can earn points toward a reward.
The use of NFTs allows retailers to connect directly one-on-one with a consumer in a way they have never really been able to do before, and it's dynamic. Instead of just gathering their credit card information, and maybe having an email address, they actually have a way to communicate with them individually, send them information, give them goods, give them rewards, give them loyalty points.
You're also saying that NFTs can be a good mechanism for an omnichannel loyalty program?
Probably the best use of NFTs is connecting. Typically, a loyalty program is some version of buy nine products and get the 10th for free. That is relatively effective, but it doesn't account for how often I bought the product. Am I buying that all in one day or over five years? to It doesn't account for the quantity or spend - did I buy one stick of butter? Did I buy 100 bucks worth of stuff?
And it doesn't ever get updated. It's not dynamic. It's nine and 10. Nothing changes weekly. With NFTs, instead of there being one static award program for everybody nationwide, there can be separate tiers that are customized for how often you go to the store or website, how much do you spend on an individual purchase, is it off-hours, is it a new offering. NFTs enable retailers to create a loyalty program to increase customization and communication, and react in real time to drive more purchases and loyalty.
During 2023, what do you think the most important metaverse trends will be in retail?
In 2020, we saw the introduction of the word ‘metaverse,’ largely driven by Facebook. 2021 was a combination of the introduction of cryptocurrency and speculative NFTs, combined with brands and sampling. 2023 will finally start to see the execution of using this technology for more than just a headline, for driving new revenue, acquiring new consumers and integrating both physical and virtual interactions in a way that the consumer doesn't know the difference.
It’s just like you don't really say, ‘I’m going to the Internet’; we passed that 25 years ago. Now you say, “I’ll be online today.’
Also, the big retail metaverse theme for 2023 is redefining the consumer journey and how it changes the relationship between a brand to a consumer, and adds rewards for the consumer. That's the biggest thing that we see happening.