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The Metaverse Scorecard: What It Takes for Retail and CPG to Play in the Virtual World
2022 is shaping up to be the year the word “metaverse” was on virtually everyone’s lips. Consumers are poised for something new, and for retailers and consumer packaged goods (CPG) brands this moment is “a unique opportunity to experiment with format, not simply to join the dots between a single consumer across multiple channel touchpoints,” as it says in the latest installment of our Consumers Unmasked research, but pointing to a key factor going forward: “As we emerge from COVID-necessitated experiences to a more settled strategic reality, consumers are ready to take a chance on new experiences.” Below, EPAM’s Whitney Browne, Director of Experience Consulting, Ward De Kruiff, Managing Principal of Business Consulting, and Alexander van Gestel, Vice President of Consumer Products of EMEA, offer up some non-virtual insight. Scroll down to learn about the metaverse of today and tomorrow, which brands are innovating here and first steps curious brands can take on their metaverse adventures.
What’s your understanding of the current state of the metaverse?
Whitney BrowneWe need to distinguish between the metaverse as it is now and the future vision, which will involve interoperability between unique virtual worlds. Right now, our virtual worlds are basically city states. If I create an avatar in Second Life, I can't bring it into Decentraland. In the future, we’ll see a more open-source environment where people can create an avatar and move it back and forth between worlds.
Ward De KruiffMy definition for the metaverse: It’s a mirror world. It mirrors everything that we experience in real life without the physical boundaries.
Alexander van Gestel
From a brand perspective, it's really about points of interaction and points of engagement and experience and transaction. The brands that I put high up on the list are those that partner with you and furnish you with virtual clothing or virtual points to enrich the metaverse experience. Then there's the transactional piece and the currency piece, in terms of NTF [non-fungible tokens] and crypto and such. Brands are thinking about what customers spend virtually and what comes back into the so-called real world.
What are some examples of retail and CPG brands that are doing innovative things that might serve as inspiration for other brands?
Ward De Kruiff
I will give two answers. First, the Super Bowl™ was filled with innovative ways to create new touchpoints, leveraging new technologies. Miller Lite™ had a virtual bar during the game, and Coinbase, although not a retail or CPG brand, had an advertisement which just showed a QR code to a big audience, generating lots of traffic. Second, if you talk about innovation, let’s look at the GitHub community. That community is in an open-source environment with a new protocol allowing brands, in real time, to mint NFTs in real-time. That, for me, is innovation.
I love the tone of the Miller Lite spot because it really spotlights the hype around the metaverse. One of the ad’s last lines is: “It's just like reality, but with worse graphics.” That's brilliant. And then one of the characters says, “And in a not-so-subtle attempt to get press, we’ll launch this ad exclusively in the metaverse.”
This moment really is about finding the PR value of getting in there early. For brands, that's one of the rationales for the metaverse moves they are making. The other one is to use the building blocks of the metaverse to do some R&D, to get in quickly to start playing and learning.
Alexander van Gestel
There are two threads here.
One thread involves this question: “As a business, are we getting left behind?” Brands want to get some credit here. They want to be seen as being part of the future, not laggards. They want to do something, even if it's just a token (and I’m not referencing actual tokens).
The other thread asks: “Are we leaving money on the table?” There's a sense that if you're working in certain categories, the gold rush has already happened, particularly around NFTs. Some of our clients are beginning to quantify how much revenue they might have missed out on last year. They’re wondering about the quantifiable business case and revenue potential.
Potentially, a lot of people are thinking: “We've missed the boat here. There are a lot of things being claimed by our competitors and real, tangible dollars we’ve missed because we hesitated or haven’t understood the metaverse fully.”
It’s easier for some brands, based on their audience and the kind of products and services they put out into the market. For instance, Nike®: That brand can play in the space because their user base includes people who are actively playing in these virtual worlds—and because everybody has a pair of Nikes, right? But some brands that are a little bit more niche, or not targeted to the young male gamer demographic, might have a harder time here.
Do you have any sense of what the future will look like for retail and CPG in the metaverse?
Whitney BrowneTo cite Nike again: They're interesting because they bridge the gap between IRL [in real life] commerce and virtual commerce. You can go to nike.com and buy a pair of Air Jordans®, but you might also buy that pair of Jordans virtually, for your avatar—so you can wear the same shoes in both worlds.
There are two kinds of commerce. First, there's virtual commerce, or we can call it vCommerce, where you're buying goods and services in the metaverse. This is opposed to replicating an eCommerce experience in a virtual world, where you're buying a pair of shoes that will be sent to you, but you're doing that in a virtual space instead of on a flat, 2D eCommerce site.
I want brands to be smart about leveraging the technology. If they want to create a shopping experience, they should ask: “What are the form-factor elements of a virtual experience that will make it fun to explore?” Remember, in the metaverse, we’re not constrained by the physics of the real world or the need for a retail floor plan or inventory space. I don't want to see a shopping mall digitally replicated. We shouldn’t be constrained by that in the metaverse. Let's have some fun with it.
Ward De KruiffWe’re currently building on Web 2.0. For me, the metaverse today, for brands and retailers, it's about adding an additional new channel into the omnichannel mix.
We're moving away from the familiar app economy. We will see decentralized apps and, to Whitney’s point, a new virtual economy. It will be a creators’ economy. Digital assets and content creation will be far more important than ever—and the metaverse will have its own economy. For brands, it's important to have an innovative, early adopter mindset. I consider the metaverse the new operating system for Web 3.0.
How long do you think it'll be before the metaverse economy really becomes mature?
Ward De KruiffThat’s interlinked to how quickly the technologies will mature. With truly fast-paced tech, we’ll see a parallel development of the metaverse itself. Look at Meta and Mark Zuckerberg: The expectation is that it will mature in five-to-10 years, and I think it might actually be sooner than that because nobody anticipated what’s going on with NFTs today.
Alexander van GestelPicking up on what Ward said about frontiering, I lived in New York [City] for 10 years. You could just follow where the artists set up their studios and then, five years later, watch the realtors and estate agents move in. Then, slowly but surely, everyone moved to Bushwick. There’s a similarity. For a while now, lots of great artists and designers have done some pioneering things in the virtual space, and particularly around NFTs. And suddenly, lo and behold, months later the money moves in and starts following the trail.
But things need to open up. Right now there are a lot of gated communities. The metaverse needs to become a metropolis where everyone can move freely. We don't want to end up with a kind of a Johannesburg or Rio de Janeiro, where you have these big walls and extreme and unequal situations on either side. Ultimately, the metaverse should be an infinite world, should it not? It shouldn't be something that, to Ward’s earlier point, just replicates or mirrors the existing world, because the possibilities are tremendous.
Whitney BrowneWhen I see brands buying virtual real estate, I just feel like saying, “I've got a bridge to sell them too.” It's crazy to me, but if they want to pay for it, great.
To avoid walled gardens or the city states of the metaverse, you need an open-source environment where people can come in and develop and experiment. What Epic Games is doing is really interesting. As the creators of Fortnight, they have a great game engine and now they are laying the groundwork for what this might be in the future. They spun off a couple of interesting products that are relevant here.
One’s called Twinmotion. Architects use it to render buildings in 3D space. It’s an engine that allows you to build buildings, build neighborhoods. Car companies are employing Twinmotion to recreate Manhattan and test self-driving cars, because nobody wants an experimental autonomous vehicle on the streets. It’s a great application, and it's sort of open source. And once this digital New York City is built, anyone can use it because it's there.
Epic Games has another product called Unreal Engine, which allows you to create what they're calling “synthetic humans,” which are fully photorealistic avatars. There’s an infinite number of faces that you can pull from in this engine to experiment with. It saves designers the trouble of having to recruit and find actual people to test on.
You wouldn't imagine that the creator of a game like Fortnite would get into the enterprise space, but it is and it’s allowing brands to start playing with some of these pieces—whether it's avatars or 3D environments—and get ready for creating the metaverse.
What should companies and brands that are stepping into the metaverse for the first time do now?
Alexander van GestelIt maybe sounds glib, but it has to be about community, not corporation. We often talk about people-first or consumer-first strategy, but ultimately, we have to view the metaverse through the lens of community.
We’re already walking this path in terms of social media, which is really about social communities and shared interest in the virtual world. The next phase will not be about sharing videos or photos but sharing experiences, in real time, together. Look at the esports, egaming area, which is virtual and real-world activity, where people play virtual games together in real life. The space where genuine, real-world friendships extend into the virtual world—that's where opportunity resides.
We should also note that virtual experiences really accelerated during the pandemic and consider the effect this may have for future sporting- and music events. Will Coldplay ever tour again? They might not need to.
Ward De KruiffFor brands, it's important to keep investing in a strong digital presence. It's about blending the real world and the digital world with this new virtual world. But it's an adoption play. To Alex's point, it's now really about building new communities, and that's the adoption play.
Why the gaming industry is so important right now is because more than 2.7 billion people play games. That’s where new communication channels like Discord, Twitch and Medium have seen an increase in popularity because the community is in control. It's really about community engagement.
On the other hand, brands should be looking at content creation. Ralph Lauren on Roblox is a good example: They’re leveraging historical catalogues, digitizing past collections, and making money from this. An actual digital wearable or a skin goes for three, four, five dollars. The money is important to note, but we should also focus attention on the content creation.
One of the things that I keep getting hung up on is the friction of VR experiences. If there's an expectation or desire that we should take all our online activity and run it through a cumbersome headset—that will be a big barrier.
Maybe the metaverse is best experienced in small doses. Alex talked about going to see a Coldplay concert. For that, I’d say, “Great, happy to put on the goggles!” But for the more mundane aspects of current internet usage, I think that puts a lot of strain on human physiology. Where we are now with the tech, I'm not sold on living life in the metaverse quite yet.
EPAM Continuum will periodically publish more content about the metaverse. In the meantime, read our Consumers Unmasked: Stage 2 report to get a real-time understanding of changing consumer expectations.