How Brands Can Thrive In The Direct To Avatar Economy

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How Brands Can Thrive In The Direct To Avatar Economy
February 1, 2021
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The world's next Coco Chanel is probably a 10-year-old girl who is currently designing avatar skins in Roblox. This idea stems from the changing world of fashion and digital identity. Since the invention of the Internet and video games, it was only a matter of time until people wanted to play as their favorite characters. To be someone else in digital form or expand on who they are as digital avatars.

 

For years the fashion cycle has been stuck in a cycle of overproduction and waste. The industry was at a tipping point, pushed over the edge by the global pandemic. But it's given fashion houses and designers a chance to step back, slow down, re-evaluate, and create for the future.

 

Designers are shifting their focus back to creativity with technology at the heart of it. "Let's sell creativity, not more clothes. We need to change the system. Be brave and reimagine it," said Leanne Elliott Young, founder of CommuneEAST in Verdict. The creativity spawned from designers is more than the technology to make clothes. It's turning clothes into technology.

 

Designers, brands, and celebrities alike realize that future consumers are online. They have digital identities in games and virtual hangouts. In order to market to future customers, they need to meet them where they are at - in the metaverse (or Fortnite or Roblox).

 

Enter the Direct-to-Avatar economy.

 

The World Will Embrace The Metaverse As A Fashion Capital

"Direct-to-Avatar (D2A) refers to an emerging business model selling products directly to avatars (D2A) - or digital identities - bypassing any supply chain management like dropshipping, logistics of how to get a physical product to a consumer's door," said Ryan Gill, co-founder and CEO of Crucible. "D2A brands are being sold in social or competitive virtual environments like games or open worlds where consumers project themselves as an avatar." This means reimagining the world of atoms into a world of bits and pixels.

 

Kerry Murphy, founder of The Fabricant, a digital-only fashion house, describes the D2A economy as made up by "Digi-sapiens." He said in Mission Mag, "they comprise around 3.5 billion individuals globally, with more than 55% of the total spending power. They are made up of Gen Zs and young millennials, who have grown up blurring reality and fantasy, with the virtual world becoming their second home." Digi-sapiens are "are trendsetters, trend chasers, and early adopters of any technology that upgrades and frees up their existence."

 

They also care about the environment, scarcity, authenticity, and exclusivity. Digital fashion houses and clothing brands solve this problem. Kerry Murphy explains in Vogue Business, "the real value of 3D is that it enables us to be way more creative and to create situations that we haven't previously seen, which allows for this new aesthetic language; a new way of expressing our creativity that really speaks to young, digitally savvy audiences". Other fashion design collectives like New Industrial Order (N.I.O) use technology to design unique looks within a circular fashion system. N.I.O uses 3D knitting to make seamless garments. New Industrial Order doesn't start orders until they are placed. They're able to do this because of 3D knitting, which results in reducing stock overages.

 

Yes, digital clothing is sustainable, unique, and a new frontier. But this new frontier is one ripe for exploration and creativity for designers and avatars. As people's lives blend more into the metaverse, they will have a better understanding of what the metaverse can do for them. That understanding will lead to demand for fashion that keeps up with digital identities and even digital people.

 

"Wearable technology really groomed people to think beyond our wildest dreams to envision what the future of fashion can be, but many early examples of wearables failed to meet the hype or expectation,” says Amanda Cosco, Fashion Futurist, and Founder of Electric Runway. “The Metaverse doesn’t have the same constraints as our physical world, and neither does what we wear in it."

 

Thomas Webb, a digital artist, was tasked with creating an art installation for luxury car brand Mercedes-Benz. He wanted to show people with no programming knowledge what the artificial intelligence in the car meant. The Mercedes EQC understands empathetically what its driver is doing and why. This sort of AI can be programmed into fashion as well. Why simply wear a garment when it can understand how you feel as you play Pokemon Go or roam the world of Roblox? The clothing can change shape, color, and even dimension, based on the emotion and possibly even the intention of its wearer.

 

This idea of virtual goods as virtual items are another emerging area in augmented retail. One to the benefit of brands hoping to be noticed by the younger generations. A McKinsey study noticed Gen Z view "consumption as access rather than possession." Consumption is "an expression of individual identity" and a matter of ethical concern. The shift in consumption mentality is what leads brands to virtual goods as commodities in the emerging area of augmented retail. Brands tuned into young and upcoming generations can start thinking now about their product strategy. Fashion is one example of how an outdated industry is reinventing itself.

 

"Gen Z considers their digital avatars an extension of themselves," says Samantha G. Wolfe, founder of PitchFWD and Adjunct Professor at NYU. "This generation loves individuality and challenges social constructs. So it makes sense that as they spend more time in virtual worlds, they want to represent themselves uniquely. This might start as buying branded goods and clothing, especially ones that connect to them authentically. However, it offers a huge opportunity for a new kind of fashionable expression and a new kind of designer that's only possible in the metaverse."

 

Streetwear in 2025

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Norwegian retailer, Carlings, launched a digital collection of futuristic streetwear. Customers bought the streetwear online and then it was e-fitted to their photos. The goal is to counter the "wear once and throw it away" mentality of online influencers. And as influencers become more digital, they won't need the latest fashions in person to show off new and creative designs.

 

Streetwear in 2025 will be hyper-personalized products, designed by consumers empowered with technology. Consumers will 3D print shoes at home. Hence, 3D knitting shoes can be deconstructed and rebuilt, so consumers always have a pair of shoes that's unique and individualized to their own personal style.

 

Nike's auto-lacing technology will be part of all shoes. Possibly shoes won't have laces in 2025 as the fashion industry continues to cut down on waste. Shoes will be made out of alternate material like "biocouture, cellulosic fiber, cork sheeting, or mycelium." Shoes will be made out of material that can sense changes in the environment. They will become waterproof when it rains or vented if it reaches a certain temperature outside.

 

Mano ten Napel, founder of digital magazine FashNerd, said in BBC, "In the future, with the roll-out of 5G, clothes will function as a new interface, impacting on the way we communicate with the connected world and with each other." Smart shoes track their wearer's workout, analyze foot position to improve stride, and even detect falls. Sensors in clothing communicate with the environment around it, tugging its wearer back from the crosswalk if a car drives by unexpectedly or magnetically connects a parent and their child in a crowded shopping center.

 

Amber Jae Slooten, digital fashion designer at The Fabricant, said of their first collection: "We didn't have to ship any collection, we didn't have to hire any photographers, we didn't need any models," Slooten said. "We didn't even need to fly to the desert to photograph it." In 2025, virtual fashion, arriving at someone's door as if physical, real-world apparel will be the norm. It's the frictionless approach to e-commerce that companies have been striving towards for decades.

 

Startups like Aglet have raised $4.5 million for their augmented reality location-based sneaker game and app that records steps traveled by sneaker collectors, earning virtual currency to buy virtual sneakers, including one virtual pair that sold for $850.

 

Gaming As the New Social Network

CATHY HACKL

 

A switch has happened in online gaming where it went from being a game with others to being with others in a game. Online games like Fortnite, Roblox, and Grand Theft Auto are examples of games where players go to hang out, not just play.

 

Fortnite has Party Royale mode and hosts concerts. Travis Scott made $20 million dollars for his concert in Fortnite that lasted 12 minutes compared to the $345 million Taylor Swift made in 2018 from her Reputation Tour, which included 43 stops worldwide. Without touring, Swift only made $185 million in 2019.

 

Games aren't just for teenagers. Roblox is a massive multiplayer online game aimed at younger users. Roblox has 36.2 million users a day, 54 percent of them under the age of 13. What's more telling is that "455,000 of those young gamers purchased Robux, the platform's virtual currency—handing over real-world cash that totaled nearly $700 million in the first nine months of 2020."

 

And that's in one game. Combined, gaming is a whole economy ripe for digital goods. "In 2017, consumers spent around 30 billion U.S. dollars on gaming loot boxes and skins, and this figure is said to grow to 50 billion by the end of 2022."

 

Kids growing up learning and socializing via games through avatars have that experience as part of life. Like kids of the past chatting on phones, to instant messaging on AOL Messenger, those habits didn't fade. They morphed and evolved as the technology allowed that instant connection with people in more natural ways. That way happens to be gaming.

 

Gaming being the new social means that gamers, young and old, are ready to differentiate themselves from other avatars and default fashion choices. Glu Mobile created "Covet Fashion." A game that allows players to style models with digitally rendered designer clothing. It generated $53.4 million in 2018.

 

Burberry developed a multi-player game: B Surf. In B Surf, players race solo or with their friends while dressed in the latest Burberry garb. Hitting the TB Summer Monogram on the race track gives players a boost. The game was developed in-house by Burberry's digital teams. It was the fashion houses' third online game since 2019.

 

The FIFA video game started off as a soccer game in 1993. People could play as their favorite soccer stars from around the world. In 2019, FIFA 20 reached 10 million players. Nowadays, gamers can play as Dua Lipa, David Beckham, or DJ Snake. FIFA avatars aren't just for the gamers. David Beckham will make more from his 2021 FIFA Avatar than what he made playing at Manchester United.

 

Celebrities And Brands Need To Have a Virtualization Strategy

Dr. Helen Papagiannis describes the shift to virtual goods as the "digital lipstick effect". The original definition of the term applies when people buy small indulgences, like lipstick, during a recession or economic downturn. "Lipstick as a potentially accessible product becomes a metaphor in today's times, analogous to digital lipstick, or any virtual good," said Papagiannis.

 

Celebrities and brands can use this metaphor as the entryway to their virtualization strategy. Starting with small AR/VR indulgences is good for both consumers and brands. Shopify revealed that "products with 3D/AR content showed a 94% higher conversion rate than for products without 3D/AR."

 

Consumers don't just indulge in small items. They also shop in "micro moments", whenever the mood strikes them. Mobile has rewired the way consumers think about shopping. Virtual strategies should incorporate these two patterns. Small indulgences in quick, bite-sized chunks. Define the type of virtual strategy to go after, whether it's digital clothing in a game, virtual accessories on a digital influencer, or micro-moments via WebAR on a mobile phone.

 

As the AR/VR technology becomes more widely adopted, consumers will be more immersed in virtual spaces. It's where celebrities and brands can stretch their virtual imagination as to what digital goods they can provide and how to best do it. Fashion is a lot about looks. But it's also about how it makes us feel.

 

How Brands Can Start Preparing

Balenciaga, a luxury goods and jewelry company, partnered with Sketchfab to power their Fall 21 Lookbook. The 3D clothing and models are part of Balenciaga's video game fashion show, "Afterworld: The Age of Tomorrow." The video game is a walkthrough of the 2021 Fall line where people walk past models and clothes floating on the wall. 

 

The Ralph Lauren brand has become a fashion innovator in the augmented reality space and has launched several campaigns with Snapchat. Their latest one allows users to scan the highly-recognizable polo player logo through Snapchat and unlock some interesting AR features just in time for the Holidays.

 

Levi is branching out across virtual platforms. Besides being featured in Kohl's virtual store, Levi's is "complementing its AR retail strategy with digital tools like Squad, an online co-watching video app where friends can shop together." Levi's is a good example for brands to follow because they partnered up, started small, and are experimenting across platforms and experiences. What may work today for AR might not tomorrow. It's still a shifting landscape, and brands need to be agile to go where their target market is.

 

Brands can learn from these examples or start exploring what their brand's virtual identity will be in these evolving virtual worlds.

 

Three things brands can do to start preparing are:

●     Examine creating their own branded video game could translate into more than brand awareness and actually lead to sales of virtual goods that, in turn, arrive at a consumer's home in their physical form.

●     Partner with up and coming in-platform game creators in Roblox or similar platforms and create a campaign that is led by that creator and that can generate results in the platform's digital currency.

●     Explore creating their own virtual influencer like Ikea and other brands have done and have that next iteration of what a brand's voice is to inhabit those virtual spaces.

 

Making Virtual Goods Work Across Platforms and Trackable

Part of the circular fashion system is tracking garments and fabric. Fashion houses use Non-fungible tokens (NFTs) to design transparency and traceability into apparel production and distribution. They can do this because NFTs are built on the blockchain. Fashion houses can prove a garment is sustainable because its material, age, and the number of wearers are tracked. This helps customers choose what to buy with confidence.

 

NFTs also reveal counterfeit products or ones that come from ethically questionable production sites. "The total trade in fakes is estimated at around $4.5 trillion, and fake luxury merchandise accounts for 60% to 70% of that amount," according to the Harvard Business Review. The counterfeit industry may start to see its decline as Gen Z "tend to inform themselves about how the products they wish to purchase are made."

 

The study from McKinsey found that, "Gen Z behaviors, all anchored in one element: this generation's search for truth." Non-fungible tokens are a step towards the truth in fashion, not just to ensure the source of the garment, but makeup and value as something in this world. The digital identity of an item "gets transferred through Blockchain technology, which in turn makes it impossible to counterfeit the design." Thus, creating uniqueness and desirability.

 

Another major question that arises is how a user can use their avatar or their unique virtual identity across platforms, which would have major implications for fashion brands selling virtual goods.

 

Crucible has a consortium called BluePrints for the metaverse with the goal of allowing people to use the same avatar and virtual identities across platforms. They have tools for builders and creators so they can be part of building the open metaverse, and understand that the Direct-to-Avatar market as "digital property market for skins, avatars, digital fashion, and collectibles is predicted to be the largest digital economy in history, topping $1T this decade."

 

Once the infrastructure is more developed (blockchain, mixed reality, Cryptography, and Self Sovereign Identity) companies like Crucible Network (currently in Alpha) will be the go-to for brands. Instead of building multiple experiences across apps and platforms, they can build their product once and evenly distribute it across the metaverse.

 

The Future of Virtual Fashion and Retail is Now

Humans are constantly evolving and creating. Our desire to explore the unknown and live out our dreams or other worlds leads us into the digital expanse. Our identities become split and enhanced by digital mediums. Online, people can tune into the sort of person they want to be. It's an escape, a place of wonder, and an opportunity for brands and celebrities to expand their vision and goods. No longer being held to reality is a good thing when it means reaching more customers by creating new and innovative products. This is the Direct-to-Avatar economy. The future of digital goods has arrived. The future has arrived sooner than many brands expected and this part of fashion will only continue to move forward.

 

It's Game On! Moving forward, brands will need to level up the phygital fashion landscape and meet the consumer of tomorrow where they are today!

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