By Julia Pueschel, Director of MSc Luxury Marketing at NEOMA Business School and her colleague, Dr. Maria-Carolina Zanette, assistant Professor of Marketing and Director of the MSc Digital Expertise for Marketing at NEOMA Business School
Consumption of online multiplayer videogames sky-rocketed during the coronavirus pandemic and, in December 2021, Meta Platforms unveiled Horizon Worlds. The popularity of virtual worlds – or ‘metaverses’ – makes them a valuable new market for luxury goods.
A quick Google search will bring up seemingly endless tips for luxury brand managers looking to navigate these new spaces. Within this tsunami of advice, special attention is given to the sale of virtual garments and accessories, called ‘digital luxury assets’. These assets can be used in metaverses and videogames to customise a player’s avatar.
Advancements in blockchain technologies and Non-Fungible Tokens (NFTs) have made it easier for companies to sell these assets on various platforms. Hopes are high in the luxury retail sector that metaverse technology will open up lucrative new revenue streams, with some going so far as to call it a potential ‘goldmine’.
However, this relies partially on luxury brands’ ability to recreate similar conditions in virtual markets to real-life ones. Luxury goods receive social value and prestige because of their exclusivity – they are rare because only a few people can afford them. This must be carried across into the sale of digital luxury assets.
Opportunities for monetising digital assets are likely to be reliant on the psychology of scarcity, advises The Business of Fashion, a report from leading consultancy company McKinsey. Fortunately, through NFTs this will be possible.
Almost all online videogames include ‘skins’, digital costumes that players can acquire through monetary or non-monetary means, with which they can customise their avatars. Such a staple feature of metaverse games has the potential to provide luxury clothing brands with an easy way to sell their digital assets.
Most gamers obtain, wear, trade, and sell their skins reflexively. It is just another part of the gaming experience. Yet the system is more complicated than some might assume. Skins can be won in a number of ways – through completing missions, participating in events, or earning in-game currency – and not necessarily purchased with ‘real’ money.
Although the practice of purchasing items is becoming more accepted in gaming communities, there are some who feel resistant to the idea as it takes away from the assumption that an avatar’s virtual attire signifies the player’s level of competency at the game. In this way, appearance informs gameplay, as gamers can make decisions based on quick assessments of others’ levels of skill.
Again, this suggests that a limited supply of digital luxury assets will be crucial to their success, not only in giving purchasers a feeling of exclusivity, but also so that they do not impose on players’ gaming experience. If this is to be the case, then their price must be suitably high. Yet this raises further complications. Simplest, but not least, of all is how much should luxury brands charge for their digital assets?
Keep in mind, virtual clothing and accessories lack certain qualities possessed by their physical counterparts that contribute to people wanting to possess them, such as the quality of materials used. Therefore, it seems reasonable to suggest that their price should be significantly cheaper than real-life luxury goods. On the other hand, this risks that the owners of physical luxury items perceive that the digital luxury assets are less authentic and that the owners of such items do not belong to the ‘community’ of those who can be considered true luxury wearers.
One way that luxury brands might be able to overcome some of these challenges is by treating their digital luxury assets as an extension of existing products. The purchase of physical items could be accompanied by their NFT versions for instance as gifts.
Adopting this as a measure might also allay concerns that purchasable luxury skins could blur players’ ability to tell each other’s skill levels from their virtual attire. By ensuring that digital luxury assets have limited access, these skins should not be commonplace enough for them to be encountered regularly by other players, minimising the issue.
The perceived threat to players’ immersion is all that remains. Some gamers have described digital luxury assets as ‘invaders’, especially when their aesthetic looks odd in the context of the virtual world. Here too, brands can reassure concerns from gaming communities and achieve greater success by developing skins that do not clash with the virtual environment.
It is important to emphasise that there are plenty of positive aspects to luxury brands developing digital luxury assets. Remember, the accumulation of items and costumes that only exist inside the game is one of the core principles of online gaming, not something that is only now being introduced.
In all, metaverse technology does indeed have the potential to be a goldmine for luxury brands and a sometimes also eco-friendly method of generating revenue. Yet if these ventures are to meet with success, they must listen to and cooperate with the gaming communities that will form the bedrock of their new consumer base.
Dr. Julia Pueschel is an Assistant Professor of Marketing and Director of the MSc in Luxury Marketing at NEOMA Business School.
Dr. Maria-Carolina Zanette is an assistant Professor of Marketing and Director of the MSc Digital Expertise for Marketing at NEOMA Business School