Don't be a digital fashion victim in the metaverse!

Following the 28 October 2021 announcement by Mark Zuckerberg that Facebook will be renamed ‘Meta’, the term ‘metaverse’ has truly come out from the back room, where the gamer is consumed by games such as Roblox or Fortnite, into everyone’s consciousness. The metaverse is expected to be the next big thing on the internet, an intersection of the physical and digital worlds, where augmented reality and virtual reality enable people to develop and live in new worlds or environments. 

When Mark Zuckerberg released a video announcing the renaming, his avatar went through a wardrobe of fashion possibilities, and it seems that the fashion industry is equally obsessed with the metaverse. Big fashion brands are already making millions of dollars selling clothing and accessories that exist only in the metaverse. In the future, if your work and play take place in the metaverse, you will want to have some clothes! 

Conducting commerce in the metaverse has raised an important question at Edgar, Dunn & Company, the leading strategic payments and fintech consultancy. Is there a better set of payment rails which are designed for the metaverse rather than using a set of payment rails that we have in the real world? Another essential question we want to explore in this article is what will fashion retailers need to do to remain relevant in the metaverse? 

The metaverse needs a new currency that is designed for the new world and not one that came from the old world. Blockchain technologies, cryptocurrencies, and non-fungible tokens (NFTs) have been poised to be the recognised foundation for all commerce in the metaverse. Grayscale, the Bitcoin Trust, recently suggested that the metaverse has the potential to become a USD 1 trillion annual revenue opportunity for new virtual worlds. The Grayscale report, published in November 2021, refers to Decentraland, which is a 3D virtual reality world powered by the Ethereum blockchain. Another example, Enjin Coin (ENJ), also an Ethereum-based token, aims to make it easy for users, businesses, and brands to use non-fungible tokens (NFTs). Enjin Coin is used to directly back the value of NFTs minted within the Enjin ecosystem. This would be a good fit for the metaverse and leverages the proven Ethereum token. Be it government-backed Central Bank Digital Currencies (CBDCs) or other cryptocurrencies, it is expected that the future of money in the metaverse will be based on a new digital currency. As Ethereum and NFT are closely integrated by providing security and integrity, it is highly likely that Ethereum will be an integral part of digital commerce in the metaverse. 

Most of the fashion industry’s investments in the metaverse have been through video game skins, which make up an estimated USD 40 billion a year market. Skins represent a relatively low-cost way to engage the fashion-savvy gaming community. Balenciaga, a luxury fashion house founded way before the internet in 1919 by the Spanish designer Cristóbal Balenciaga, has partnered with Fortnite and worked with Fortnite’s parent company Epic Games to create a video game for its Fall 2021 fashion show. Other brands are now announcing similar collaborations – for example, the British designer Stefan Cooke announced his designs would be a part of The Sims. Burberry and Louis Vuitton are minting NFTs to be metaverse-ready. 

Adidas, Nike, and H&M are also turning their attention to claim their presence in the metaverse. Adidas Originals, the fashion and lifestyle subdivision of the German sportswear giant, is launching an NFT collection of both physical and digital products. Gucci’s Roblox bags, now famously, were resold for more than their real-world physical bags. Burberry’s NFT characters for Blankos Block Party have been sold at eight times their original value. The metaverse represents an attractive space for future growth for fashion brands, with NFTs forecast to constitute 10% of the luxury goods market by 2030 – a EUR 56 billion revenue opportunity, according to Morgan Stanley. 

Digital only products, such as fashion skins, NFTs, music, games, will be sold in the metaverse. Equally, there will be events, such as music gigs and business conferences, that will be held in the metaverse. All these will need to be sold and purchased in the metaverse, and blockchain technologies will be the preferred payment method. Defining the metaverse economy will be pioneering, revolutionary, and unlikely to be based on the old world or real-world payment ecosystems. For the retailers and the fashion brands, the metaverse will be all about positioning their brands by grabbing as much virtual land or real-estate as possible. 

Don’t be a digital fashion victim in the metaverse. Edgar, Dunn & Company will keep a watchful eye on how commerce and payments intend to be interoperable and be trusted by consumers and businesses as we witness the metaverse unfold over the next few years. 

About Mark Beresford 

Mark Beresford is a Director at Edgar, Dunn & Company (EDC) and has over 25 years of strategic consulting experience in the payments sector. He is responsible for the company’s Retailer/Merchant payments practice, working with omnichannel merchants and payment service providers across the globe. 

About Edgar, Dunn & Company 

Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC expertise includes M&A due diligence, legal and regulatory support across the payments ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.