STORY INLINE POST
The advent of Metaverse could be the technological breakthrough driving the next e-commerce revolution. Although high volatility in NFT or cryptocurrency markets and clumsy interfaces of some platforms make many people question current versions of the metaverse, we believe that the metaverse has the potential to become the next iteration of the internet, which could transform e-commerce as much as the smartphone mass adoption did over the past decade.
Just 15 years ago, in the early stages of e-commerce, the majority of websites for consumer brands were little more than brochure-ware. But quickly, challenges from digital natives and faster-moving rivals raised the bar — and a seamless e-commerce experience featuring intelligent search, detailed product information, customer reviews, easy payment, and fast delivery became table stakes.
But soon, that was not enough. Consumers’ move from desktops to handsets drove a “mobile-first” revolution in e-commerce. As a result, today’s mobile apps often offer features unavailable on the desktop experience: easier navigation, enhanced product visualization, and simpler social sharing — as well as hyper-personalized experiences powered by better customer journey tracking and advanced analytics.
Already, metaverse platforms – like Roblox, Decentraland or the Sandbox – capture a significant share of attention from a large swath of younger consumers. Roblox has 202 million active monthly users with an average session of 2.6 hours per day when logging in. And users are spending real money in those virtual worlds: Nike has generated US$185 million-plus with NFT drops, and a virtual Gucci bag was sold for US$4,115 in Roblox, more than its physical world retail price. Overall, we see four main revolutions that the metaverse could bring to e-commerce in the future:
Create upper funnel leads through brand awareness
Enhance e-commerce experience through extended reality (XR)
Explore new business models to sell virtual or augmented products
Create a new distribution channel for physical products or services
Create Upper Funnel Leads Through Brand Awareness
Metaverse-platforms (m-platforms) are virtual and connected worlds focusing on gaming like Roblox or Fortnite, experiences like Horizon, or decentralization like Decentraland or The Sandbox. M-platforms are expected to capture a significant share of users’ attention at the expense of other media in the upcoming years, driven by increased traction among younger generations: Roblox claims that more than half of Americans under the age of 16 have used the platform. This shift from traditional social media to m-platforms, is turning those virtual worlds into major entry-points in the e-commerce funnel, just comparable to what Facebook or Instagram have become over the past decade.
Building brand awareness in those virtual worlds will take various forms: in-game ads as the old-fashioned way to make advertising, digital collectibles or wearables fostering the sense of belonging to specific communities or virtual universes designed by brands to create emotional bonding or convey brands’ values. Pilots already exist: Samsung opened a virtual showroom in Decentraland in 2022 with no items sold, Ferrari hid its new 296 GTB on Fortnite Island and Louis Vuitton launched an immersive game called “Louis: The Game” to discover the brand’s universe and collect Non-Fungible Tokens (NFTs). Companies will most likely leverage those pilots as a gateway toward brand.com websites and mobile apps, by targeting customers where they spend most of their time.
Enhance E-Commerce Experience Through Extended Reality
As massive investments flow into XR technologies, forward-thinking e-commerce players will offer enhanced experience to bridge the gap with physical retail on its strongholds, such as visualization, immersive atmosphere or touch and feel.
Augmented reality (AR) is already on the verge of becoming mainstream as AR-powered apps are supported by every new iPhone since 2018. E-commerce brands and retailers could leverage this largely untapped opportunity to improve online visualization drastically, both on m-platforms or on existing e-commerce channels. Some online vendors are already launching pilots to increase conversion – like Ikea for home furnishing or Warby Parker for prescription glasses – and decrease return like Walmart acquiring Zeekit, claiming that its virtual fitting rooms could slash return rates by 36 percent.
Although we cannot predict future adoption of VR and haptic technologies, it could represent an unprecedented opportunity for e-commerce to reinvent online experience beyond what AR enables. VR and haptics could reproduce a physical store experience with an immersive setting or realistic touch and feel.
Explore New Business Models to Sell Virtual or Augmented Products
M-platforms are not just games anymore: major developers, such as Fortnite or Roblox, clearly show their ambition to become comprehensive social spaces. Thus, selling digital wearables or collectibles could become a viable revenue stream for companies with high brand awareness.
As online communities become larger and stronger, building digital identities will highlight users’ belonging to specific groups or their social status. Emerging technologies like NFTs enable the creation of unique virtual goods – that used to be replicable infinitely – allowing companies to create even more lucrative business models based on scarcity or exclusivity. Luxury brands are already experimenting with new business models like Dolce & Gabbana selling a nine-piece NFT collection called Genesi for around US$$5.6 million.
To unleash the full potential value for customers, e-commerce players must connect the dots between physical and digital worlds. Nike has already paired real-life sneakers with exclusive NFT versions, but companies could imagine the experience the opposite way: as soon as a customer buys a product online, they receive a digital twin or unlock an exclusive experience, making delivery time more tolerable. This could be a powerful tool for brands to accelerate direct-to-consumer online transactions by making digital twins available only to purchases made on their brand.com.
Create a New Distribution Channel for Physical Products and Services
If we go even further, e-commerce players could leverage m-platforms to market and sell physical products to metaverse users. Some brands are already preparing or starting to sell physical products in virtual worlds: Dominos launched a pilot to order real pizzas from Decentraland in 2021, while McDonald’s filed trademarks in 2022 to “operate a virtual restaurant featuring home delivery.” Although these kinds of virtual shops in the metaverse are still designed for early adopters, they could become a common distribution channel as m-platforms reach mass adoption.
While the future level of disruption and adoption of the metaverse remain unclear, massive investments are trying to solve hardware limitations, improve user interfaces, increase utility for customers and build trust undermined by recent crypto scandals. Business leaders need to approach the evolution of the metaverse as a potentially disruptive event for e-commerce, favoring a test-and-learn approach to prepare for possible revolution. While current revenues from the metaverse are marginal, the learning dividends of experimentation could be critical in the future.