Why Ralph Lauren Wants To Sell Your Digital Clothing

IIn December, Ralph Lauren opened its newest store, passing through sprawling metropolises like Milan, Tokyo and New York for an exciting new location: the online world of Roblox, with 47 million daily active users. It features its virtual store, open 24/7 and accessible to anyone in the world with just a few clicks, with virtual puffer jackets, plaid beanies, and other retro ski wear for the winter, for under $5.

This is just the latest example of how the fashion industry is starting to delve into the so-called metaverse, with Ralph Lauren, Gucci, Balenciaga and others charging real money for digitally-only clothing and accessories. As ridiculous as it sounds, it’s being heralded as a potential new gold mine, with Morgan Stanley estimating that the metaverse could present more than $50 billion of opportunity for the luxury industry in the next decade.

Here‘a quick guide to what the metaverse is, and why fashion brands are racing to set up shop within it:

Wait. Remind me what the metaverse is, again?

Frankly, it’s still being thought about. But the idea is that it could be the next version of the internet, offering a more immersive three-dimensional experience. In the metaverse, you have digital personas called avatars who can seek experiences similar to what you might do in the real world — you can shop, eat at restaurants, and attend concerts. Although it has started to take shape on various online gaming platforms, such as Roblox, most of it is still theoretical.

Is this really a new idea?

Incorrect. People have spent years immersed in online video games, and brands are getting involved there too. Adidas, Armani and Calvin Klein experiment with digital mode in Second Life, an online virtual world that had about one million members at its peak in 2007. In 2012, Diesel started selling clothing and furniture on The Sims. In 2019, Louis Vuitton develop ‘skin’ — in-game purchases that change player appearance— for players in League of Legends.

Then why are people talking about it again?

The pandemic has something to do with it. As public safety restrictions forced millions of people around the world to quarantine and maintain social distancing, people started spending significantly more time online. According to eMarketer, adults in the US spent 7 hours and 50 minutes a day interacting with digital devices last year, up 15% from 2019.

Facebook also attracted a lot of attention when announcing it changed its name to “Meta” in October, with ambitions of becoming a major player in the metaverse. It will cost $10 billion this year and more in the years to come to make it happen. Bill Gates recently predicted that we’re going to be attending work meetings on the metaverse in the next three years.

Brands, which moved fashion shows online during the pandemic and have been thinking a lot about how to connect with customers in the digital realm, are now racing to figure out their metaverse strategy. Balenciaga is creating a metaverse division. Gucci, Burberry, and Dolce & Gabbana sell virtual fashion. Nike acquires a virtual shoe designer.

What’s in this for the brand?

Several things. For one thing, it’s a way to attract the next generation of customers, namely Gen Z, who are digital natives and are used to spending a lot of time online. “Their physical and digital lives have the same advantages,” says Michaela Larosse, who leads creative strategy at The Fabricant, an Amsterdam-based digital fashion house.

It also looks like a very lucrative new revenue stream. According to Morgan Stanley, the metaverse could help luxury brands expand their total addressable market by more than 10% by 2030, good enough for an additional $50 billion in revenue. Even more interesting, the bank said, is the profit margin, with the potential for 75% of that revenue to reach a measure of profit called EBIT, or earnings before interest and taxes.

Think about it: With digital goods, there’s no need to buy raw materials, spend money on labor, bother with manufacturing or ship things around the world. Brands already have a vast collection archive to retrieve and reuse for the digital realm. Plus, they don’t just profit from the first sale. They can collect royalties every time an item is resold. This is made possible by embedding terms in “smart contracts” on blockchain technology, which will drive the metaverse.

Digital fashion is also inherently sustainable, with the production of a single digital garment requiring 97% less carbon and 872 gallons of water less than physical clothing, according to DressX, a digital fashion startup. Plus, there are no end-of-season leftovers to discount, donate, or destroy.

Okay, but why would someone spend real money on clothes that don’t exist?

Good question. The answer sounds like this: If you spend a lot of time online, you probably care about how your avatar looks. Consider that one in five Roblox users update their avatar every day, according to the company.

“As people spend more and more time in the digital world, they are increasingly becoming more aware of how they describe themselves in the digital world,” said Dylan Gott, global technology innovation manager at Estee Lauder, who may soon be offering makeup for avatars. for use in the digital world. metaverse.

There is also the achievement factor. While some 16 year olds can walk up to Balenciaga on Rodeo Drive and take a look at the latest runway, they can spend a few bucks buying a digital version to show off online to their friends. “This generation is used to spending money on their avatars,” said Simon Windsor, co-founder of Dimension Studio, which is helping Balenciaga host virtual fashion shows during the pandemic.

For others, it is an investment opportunity. If someone buys an NFT — a non-exchangeable token, which is a type of digital asset stored on a blockchain — and its value grows, it can be resold for a profit. For example in 2019, Fabricant sells a shiny silver dress called “Iridescence” for 54 Ether, or about $9,500; Today it’s worth more than $200,000. “This is a very good investment for buyers,” said Larosse.

How much does it cost?

Some virtual modes are inexpensive. For example, in September 2021, Balenciaga launched a Fortnite “skin” for 1,000 V-Bucks (the currency used in Fortnite), the equivalent of about $8. Ralph Lauren sells his winter clothes on Roblox for $3 to $5.

Other items sell for thousands or even millions of dollars, more than the value of any physical product. In August 2021, Gucci sold the Dionysus wallet for 350,000 Robux (the currency used in Roblox), the equivalent of about $4,100 — more than the original bag cost. In October 2021, Dolce & Gabbana goes up for auction collection of nine pieces NFT, including a digital tiara made with “gems that can’t be found on Earth”, for $5.7 million.

Where can you buy virtual mode?

There is not a single metaverse where you can shop for your favorite brands. Instead, companies have sprung up on existing online gaming platforms like Roblox, The Sims, and Fortnite. They also started selling their wares on a new wave of metaverse platforms, such as Zepeto, a Powered by Softbank popular company in Asia.

Usually, an item can only be worn on the platform where it was purchased. The overwhelmingly big question is whether shoppers will eventually be able to wear their virtual wardrobe across multiple platforms.

How can this change the fashion industry?

Designers will have more freedom to push the envelope. In the metaverse, jackets can catch fire, be made of water or change color throughout the day or according to the mood of the owner. “You can forget the laws of physics in the metaverse,” says Windsor. “Anything you can imagine can be delivered.”

This might give brands a new way to test products too, launch them first in the digital world, gather feedback, and assess demand before selling them in the physical world. Shoppers who like the digital version may be able to click a button to order the physical version.

“We believe there should be a strong connection between digital and physical,” said Franck Le Moal, chief information officer at LVMH, a luxury powerhouse that owns brands such as Louis Vuitton, Dior and Givenchy.

It could also open up the industry to more designers from different backgrounds. For example, Zepeto lets anyone create their own digital clothes and sell them on the platform. Fabricant launched a new initiative in September, where anyone can design digital clothes, sell them, and share royalties.

To be sure, there’s still a lot to discover in the metaverse, and critics argue that it will never go mainstream. Regardless, meanwhile, the world’s biggest fashion brand is taking it seriously and moving fast. “This is a great opportunity,” said Le Moal. “It’s become a common topic of conversation.”