Soft luxury brands that sell ready-to-wear, leather goods and footwear have a better outlook in the metaverse than hard luxury brands that sell jewelry and watches.
At a time when some people are still wondering whether the "metacosm" really exists, the concept has been out of the loop, and in addition to the influx of technology companies, luxury companies are also planning their own metaverse future.
Morgan Stanley's team of analysts recently released a report saying: "Metaverses may take years to build, but for luxury companies, social games in metaverses (such as online games and concerts that people attend through virtual identities) and NFTs present two closer opportunities." ”
According to a report released by Bain & Company, while the global luxury market as a whole shows a V-shaped recovery in 2021, it is still below the level of 2019. Metacosm has brought new opportunities to the luxury industry, but the biggest challenge is still the recovery of China's luxury industry.
1
Open a store in a social game and open the door to a $10 billion market
Millennials and Gen Z, who spend a lot of time navigating the virtual world, see their Avatar as an extension of their own image. On the gaming platform Roblox, one in five players change their virtual identities every day and buy virtual goods and clothing in order to show their personality. It can be said that in the virtual experience, the image is everything.
This brings an entry point to the luxury industry. Morgan Stanley's team of analysts says luxury goods companies have ushered in an opportunity to sell virtual goods in the metacosm, a market size of up to 50 billion euros (about $57 billion) by 2030, which is expected to help luxury companies increase their revenues by more than 10 percent and increase their EBIT profit by 25 percent.
Balenciaga, a unit of Ker, began selling "skins" for its characters in the hit game Fortnite for around $8 in September.
Gucci, also part of the Kering Group, opened a Gucci pop-up shop, Gucci Garden Experience, on Roblox. This has become a barometer of virtual fashion shopping interest. The luxury industry leader has created a virtual venue with a swimming pool, balloon arches and a shopping space. A digital version of the Dionysus bag was launched in the shopping space, and the price was speculated to more than $4,000, which was more expensive than the $3,400 sold in the physical package.
Blockchain industry media Cointelegraph believes that metacosmity can also help luxury companies expand users. For example, Roblox's current players are mainly teenagers, and 70% of sales in the fashion industry are contributed by women. Metacosm will give luxury companies an opportunity to appeal to a whole new age group of consumers who didn't belong to their target customers in the past.
It is estimated that social games could add $10 billion to $20 billion in sales to the luxury market.
2
Attract new demand and solve the problem of counterfeit goods through NFTs
Luxury companies are also tapping into the NFT market, which provides application scenarios for the metacosm. In September, world-renowned designer Karl Lagerfeld unveiled 777 NFTs on the digital fashion marketplace THE DEMATERIALIZED, each priced at 77 euros (about $87). Eagerly awaited by players, Lagerfeld's work sold out in seconds, sparking interest in the new path opened up in the luxury market.
In early October, Dolce & Gabbana's first NFT collection was auctioned off at unXD, the luxury market, and nine NFTs fetched $5.7 million. Analysts at Morgan Stanley say consumer enthusiasm for NFT collectibles will create huge demand for luxury goods companies in the medium term, with such NFTs likely to reach $25 billion in the $300 billion NFT market by 2030.
In addition to attracting demand, luxury companies adopt NFTs for two other reasons. First of all, when luxury goods are resold, luxury companies can't make money, which is also a problem that has plagued the luxury industry for many years, and through smart contracts, luxury companies that create NFTs can get a certain percentage of sales every time the goods are resold. In addition, due to the unique characteristics of NFTs, the problem of fake goods in luxury goods can also be solved.
Analysts are most concerned about how much of the new revenue will be converted into profits. For example, the NFT platform OpenSea has a commission rate of only about 2.5%, compared with between 15% and 40% for platforms such as Alibaba and Tmall or e-commerce Farfetch. They believe that they are more optimistic about the NFT business of soft luxury brands that sell ready-to-wear, leather products and footwear than hard luxury brands that sell products such as jewelry and watches.
Due to Gucci's prospects in the metacosm, HSBC has upgraded Kering's rating from "hold" to "buy".
3
Broader challenges: the recovery of China's luxury industry
Since China's stance on cryptocurrencies is tougher, one could argue that China takes the same position on the metacosm. But in reality, China's big tech giants have designed online shopping malls similar to metacosms, such as platforms and apps like Taobao, Tmall, JD.com, and WeChat.
Kerstin Brolsma, an analyst at China Market Research Group, said: "Some Chinese companies are helping to raise consumer awareness and understanding of the metacosm through a lot of investment, mainly driven by Tencent, a leader in the game sector. ”
Brolsma noted that millennials and Gen Z grew up with games, and that they have a high level of acceptance of things like virtual fashion or character attire, and are clearly potential fans of the metaverse.
Brolsmar also said: "This part of the population wants experiential shopping, and combining physical and digital is very attractive to them, there is a demand, as long as luxury companies are willing to do this, they will be welcomed." In fact, Chinese mainland singer Ardor released his first NFT music work "WATER KNOW" on May 25, with a transaction price of 304,271 yuan.
However, she also pointed out that the surge in demand for digital experiences in Western countries is due to the long-term closure or quarantine caused by the epidemic, and China, which controlled the epidemic earlier, now has different priorities.
Brolsmar said: "Where luxury companies are headquartered will affect how they are constructed in the next 5, 10 or 15 years, and China's needs now are different from those in the West, which also reflects a broader challenge facing the luxury industry, which is how the Recovery of China's luxury market is." ”
Wen | Contributor to the Chinese edition of Barron's Magazine Guo Liqun
Edit | Kang Juan
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(This article is for your informational purposes only and does not constitute the provision or reliance of investment, accounting, legal or tax advice.) ）
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