Brands in the metaverse: Should I stay, or should I go?

May 2022

May 2022
Authors: Benjamin Gietzendanner, Théotime Lodier & Marine Wellauer

Metaverse may be the trendiest buzzword, but it is not a new concept. Thanks to non-fungible tokens (NFTs), virtual reality, “phygital” stores and digital avatars, leading brands, especially in the luxury goods industry, have been engaged with the metaverse for quite some time. There are opportunities in the metaverse for companies in all industries. However, as the case of the counterfeit digital Hermès bags show - Hermès sued creator of digital Birkin bags, one of which sold for $42,000 – there are also threats for brands in the metaverse.

A brand should not ask whether it should be in the metaverse or not. Instead, it should assess its maturity and understand the business model it wants to pursue in the virtual world.

Why your business needs to prepare for the metaverse

The metaverse is a digital parallel universe where we can interact as we do in real life. We can socialize, play games or even work. Even though “metaverse” is a trendy buzzword, it’s not a new concept. In the early 2000s, Second Life offered an online multimedia platform that allowed people to create an avatar for themselves and live a second life in an online virtual world. The experience, however, was limited, and only a few profitable business models were developed and sustained. Today, leading brands are engaged with the metaverse – NFTs, virtual reality, phygital stores and digital avatars – and testing new business models. The most progressive move is Balenciaga’s announcement of a business unit dedicated to the metaverse and digital exploration.

Although the metaverse promises success for consumer products, engagement by industry players is still low. From Louis Vuitton’s latest birthday party held via a video game to Fendi’s NYC flagship store available physically and virtually, many luxury brands have not hesitated to jump into this virtual adventure, mainly with a test and learn approach. But other industries are also investing in the hype. McDonald’s has released NFTs, Hyundai has enabled a virtual showroom for its customers to familiarize themselves with future mobility solutions, and Panini is producing NFT collectibles cards.

One current problem is that existing digital parallel universes are not connected yet and do not use the same standards, and that applies to devices as well, which hinders user adoption. Today’s consumer can buy NFTs, visit virtual showroom or interact digitaly with people. However, this requires multiple accounts, avatars and digital wallets, which "complicates" the customer experience.However they need to use several accounts, avatars and digital wallet, which decreases the customer experience. The ultimate goal, in for the future, will be to provide create a fully integrated parallel universe which is callcalled the metaverse.

Although several pioneering brands are testing value propositions for the market, other brands have yet to consider the metaverse and could find themselves at a significant disadvantage. One way or another, eventually, they will have to consider the metaverse.

Hence, the real question is not “Should I stay?” but “How should I go?”. Current metaverse key business insights allow the brand to understand key customers' expectations and drive a relevant value proposition and revenue stream.

Image: Metaverse Key Business Insights

How to leverage the benefits of the metaverse?

Companies from all industries can leverage the benefits of the metaverse:

Position the brand as an innovative, disruptive player in the industry and define industry standards in the early stages of this revolution.
Dive into brand DNA and be transparent, explaining the brand’s identity through immersive experiences covering historical roots, technological progress, products and manufacturing.
Reinvent the customer journey (from pre-sales to sales) by pushing digitalization further, allowing customers to shop for products in the metaverse.
Enter the direct avatar market by offering avatars and digital items. Allow customers to buy, customize and share avatars and items on social media.
Reduce time-to-market by digitalizing key upstream processes (e.g., Product R&D, Logistics, etc.), allowing companies to virtually train employees and optimize process flows.

The Metaverse is a broad and recent topic, which we are exploring more and more every day. Risks do come along with incertitude, but by carefully working on the understanding of what comes behind we will be able to prevent risks, while benefiting from the advantages at an early stage.

As the case of the counterfeit digital Hermès bags show - the French luxury brand is suing a digital artist for selling unauthorized Birkin bag NFTs – brands who choose to sit out of the metaverse will also not be immune to risks.

How to mitigate risks associated with the metaverse?

Protect your products from counterfeiters: Anyone can create and offer NFTs on the internet. Brands should be aware of counterfeits to protect their image.
Communicate your presence or absence: Anyone can easily use and harm a brands’ image in the metaverse. Brands need to communicate their absence (if that is the case) to avoid fraud.
Be present in the right place: There are numerous metaverse platforms today. Brands should consider engaging on the platforms where their current and future customers are active.

Entering the metaverse will only provide tangible and sustainable benefits if the business model has been thoroughly designed. The metaverse business model canva allows the brand to understand the metaverse business value and its stakeholders.

Image: Metaverse Business Model Canva

Key takeaway according to the brand maturity

The metaverse presents new opportunities for brands, but it can also be a threat. Therefore, a brand should not ask itself whether it should enter or not. Instead, it should assess the company’s maturity and understand at what level to invest in the metaverse.

Image: Metaverse Brand Maturity Scale