Leveraging Tech to Improve Financial Inclusion
Financial inclusion is a favorite cause in the financial services industry.
The last decade has been a rough one for retailers. The decline of shopping malls has robbed many of their primary sales channel. The move to online sales does offer a bigger market, but one where the competition is extraordinarily fierce, as any retailer trying to compete with Amazon for sales will concede. For certain classes of retailers — supermarkets, to name one — the most to online has been blocked by the arrival of powerful intermediaries who enforce “coopetition” that dilutes focus and competes for customer and market awareness. In fact, many retailers confide to me that, could they turn back time, they might have behaved differently to compete with the likes of Amazon and adjust to the modern world of retail.
The good news is, the Metaverse is coming, and it provides the opportunity for a giant reset for retailers who want to reshape the game in their favor and create unique experiences for their customers.
The cool kids are all over the metaverse and savvy retailers are rushing in to capitalize on a fast-growing multi-billion dollar market. Snazzy virtual sneakers and other non-fungible digital collectibles could be a $25 billion dollar market by 2030, according to Morgan Stanley. Fast-moving brands like Swedish fast fashion giant H&M are opening storefronts in the Metaverse, selling both virtual clothing and creating 3D VR experiences that rival top online games. At the 2022 Consumer Electronics show in Las Vegas, German sportswear giant Adidas announced a project to build wearable lenses that can display real time performance data and more, bringing wearers into an AR flavor of the Metaverse (Adidas has also launched a full line of limited edition online clothes). On the other side of the Pond, the venerable and beloved U.S.brand of Crockpot slow-cookers crashed its way into the early Metaverse by minting NFTs and selling them in an online NFT marketplace.
Clearly every retailer suddenly needs a Metaverse strategy, right?
If it were only so simple. The Metaverse is actually a bit more pre-Alpha than most care to admit. Yes, Facebook and Microsoft will have Metaverse-like applications that work great for corporate meetings. But that’s not really representative of the retail experience. Right now, no one really knows how the Metaverse will look and feel and function and there could be some missteps. The earliest version of the Internet were walled gardens of content and activities by AOL. (Ironically, this model came back to win in China with superapps WeChat). That said, it's not too early to think about how savvy retailers can leverage the Metaverse to create stronger relationships with customers, build and feed communities, and construct entirely new revenue lines out of virtual goods and services.
The term was coined by science fiction writer Neal Stephenson in his 1992 novel “Snowcrash.” Mark Zuckerberg, CEO and founder of Meta, described the Metaverse as “...an embodied internet, where instead of just viewing content — you are in it. And you feel present with other people as if you were in other places, having different experiences that you couldn’t necessarily do on a 2D app or webpage.” Cathy Hackl, one of the leading authorities on the Metaverse, defines the Metaverse as “...the internet breaking free from the rectangles in our hands, desks and walls and being all around us”.
The Metaverse will be a fluid space that both encompasses and floats through all the other spaces — physica, 2Dweb, and virtual worlds. It will weave together multiple levels of immersion including both partially immersive Augmented Reality (AR) and fully immersive Virtual Reality (VR), depending on the requirements of the experience. But the Metaverse will not exclude the physical world. It will enable the lighter immersion which happens when you consume and interact in two-dimensions in your smartphone or your laptop. For example, when a person Zooms into a meeting in the Metaverse without wearing immersive gear, they might appear as a talking face on a screen in the room.
The Metaverse will, in theory, diverge from the Internet in a few key aspects. Participants will be represented physically somehow, as avatars or some other visual representation. People will be able to travel through the Metaverse and maintain their identity and their virtual possessions, just like walking through a shopping mall in the physical world you bring your purchases from one store to another. The Metaverse will not stop or start — it will always be happening. There will be an unlimited number of participants, and all can inhabit the same Metaverse simultaneously.
Today none of this is possible in the online world doe. The closest thing to the Metaverse right now is fully immersive online worlds and game environments like Fortnite and Roblox. And you cannot yet move between multiple worlds with the same identity, possessions and currency. So yes, you can buy your Nike AirJordan virtual kicks with a limited edition NFT but you can’t wear them to Fortnite, Minecraft or to go out to a virtual happy hour.
For the Metaverse, this foundational layer will likely build on existing elements of AR and VR and will involve the programming languages created for this purpose, but it still remains a work in progress. Until we can actually wander around the One Big Metaverse easily, or at least move from one to the other with our personas and online possessions and histories in tow, the Metaverse will remain a disjointed experience.
Let’s assume, however, that the Metaverse foundation is created. This foundation will ideally include a set of payment rails and mechanisms for exchange. Right now, the world of online currencies is the Wild West. Each virtual world has their own, and the currencies cannot be exchanged or moved. The same is true for possessions. This has created a black market for rare and valuable online items. If the Metaverse is to become truly mainstream, some regulation of online property rights for users will likely be introduced. Until then, however, the lack of rights and the lack of modern mechanisms of exchange actually introduces opportunities for savvy retailers.
In the internet world, retailers have struggled to defend their business and their margins from the e-commerce giants, such as Amazon and Walmart. Notably, Nike pulled out selling its products on Amazon. The innovative retailer instead has focused on building a direct channel and regaining direct relationships with customers through its own mobile apps by building communities for limited shoe releases or running training. In 2020, Nike began rolling out 150+ “Nike Live” stores with interactive experiences that guide shoppers to product choices and help them explore training options. Nike followed through on its “Just Do It” mantra, to great effect.
Retailers can follow the Nike spirit and engage with the Metaverse with a different mindset, absorbing lessons learned from their eCommerce experiences and from successful retailers that merged online and offline to create more powerful bonds with buyers. Some interesting experiments are already emerging, mainly in online gaming platforms.
As the Metaverse develops, retailers will have a blank canvas for innovation — and new opportunities to build brand and sales. They can also work together for collective benefit. Here are some ways we think retailers can take advantage of the Metaverse in unique and sticky ways:
Fortunately, retailers looking to create in the Metaverse can do so at their own pace. Creation of relatively simple Metaverse totems, like NFTs, is already a well-honed process complete with creative shops, marketing agencies, design firms, and marketplaces where brands can sell their tokens.
For brands looking to take a deeper dive in the Metaverse and build virtual worlds or store experiences, the easiest step would be to put up a storefront in one of the existing virtual world platforms, like Roblox or Fortnite, or newer platforms like Facebook’s coming platform. The creators of these worlds can do the turnkey creative work or point brands towards experienced game development shops to craft compelling experiences. That said, this virtual real estate is likely to be more pricey and the retailer will not own the platform.
This is likely to be an ongoing tradeoff as retailers face the same dilemma they once faced in thinking about channel opportunities in department stores, malls, and online retail aggregators like Instacart or Amazon. History rhymes, even in the Metaverse.
On the far end of the spectrum is creating their own mini Metaverse destinations. This will live in cyberspace as standalones. Because we remain in the relative infancy of the Metaverse, building out standalone experiences remains costly and will likely be spendy for the next few years at least, whilst tech firms and startups develop the necessary tools and infrastructure to simplify Metaverse construction. Again, this mirrors the early days of the Internet prior to all the amazing interactive capabilities that now come free as open source software today.
With adoption slowly ramping in the Metaverse, the cost of the virtual foot traffic may seem extreme for retailers not prepared for technology sticker shock. In addition, going all in on a bespoke Metaverse platform could create significant technology debt that might make it harder to adopt and build on newer Metaverse infrastructure platforms when they come in subsequent years.
That said, experimentation with the Metaverse is not only warranted but essential for retailers that don’t want to get “Amazoned” in this new world. Whereas the web was easy to dismiss in its early days, the Metaverse already feels far more inevitable, in some shape or format. Virtual goods have, after all, been among the fastest growing sectors in retail for years now (even though most of these sales were inside of games like Fortnite).
These are only a handful of potential considerations for retailers exploring the Metaverse. In all likelihood, the Metaverse will evolve in ways none of us envisioned. As such, retailers should recognize that this is a paradigm shift that offers a rare chance to reinvent the way retail works. Staying on the sidelines means someone bolder and willing to experiment — either competitors or challenger brands — will reap the rewards of the brave new world.
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