Despite the first mention of the metaverse found in Neal Stephenson”Snowfall(1992), it wasn’t until 2020 that the term became a pervasive buzzword in retail, technology and finance. And it wasn’t until October 2021 when Facebook officially announced that it is changing its name to Meta, that it has become a household trend term. Like any trending word, it is used with various definitions, most with similar attributes: virtual, blockchain, virtual reality interface, digital property and, of course, avatars.
For retailers and brands, the introduction of the metaverse and its derivative, meta-commerce, signals another channel and opportunity to shop and win over the consumer. However, for an overwhelming majority of retailers and brands, a meta store is completely foreign, just like e-commerce and online were. back to the 1980s. A comforting thought is that the Metaverse is new to all of us, and no brand or retailer has built a walled garden. There are a few early adopters, but no clear winning platform. So the question is who sets the rules and what are the pricing rules?
What we do know is that the virtual customer is younger and more experiential. Meta-commerce introduces new opportunities to attract and engage with buyers like never before, providing more interaction, better visual experiences, and merging elements of the physical world with an endless online dimension. “It will be more progressive”, specifies Serge Gianchedani, co-founder of Metamall, commenting on the physiological impact of a virtual store compared to a physical store. I called it “physical-digital”, the combination of the physical and the digital. Traditionally, retailers and brands have used physical stores for shopping and their digital presence to tell stories and live experiences. Next, the focus was on increasing commerce through their digital platforms and providing in-store experiences. However, in the metaverse, it’s an all-in-one submerged meta-commerce experience to get your consumer on-brand.
While the metaverse exists for digital purchases in virtual worlds (e.g. gamers buy in-game add-ons for their apps), many retailers continue to debate whether the trend is here to stay and whether the addressable market is worth the investment. Some of the early users to win the meta-buy box include:
- Gucci opened a virtual shop experience by purchasing digital land in The Sandbox, a virtual game world. Here, a number of Gucci items are available for users to buy, own and use in the game world.
- Nike launched a virtual world called “Nikeland”. It allows users to equip their avatars with unique Nike merchandise, along with best-selling and limited-edition drops.
- Adidas created its NFT collection, a mix of digital and physical items produced with collaborators including Bored Ape Yacht Club. The collection will consist of digital clothing that users can purchase and use on digital platforms as well as physical clothing to match.
- Louis Vuitton entered the meta market with an adventure-based game, Louis the Game, to celebrate its 200th anniversary. Vivienne’s mobile game character travels through six worlds collecting 200 candles and 30 NFTs created by renowned artist Beeple.
- walmart announced the launch of its NFTs and cryptocurrency to start selling virtual electronics, toys, home decor, and home appliances.
- Ralph Lauren opened its new stores in the metaverse. With just a few clicks, consumers can shop puffer jackets, plaid beanies, the brand’s signature polo shirts and other retro apparel for less than $5.
- Kaufland tapped into the new earth in a different way. The retail chain has built a Kaufland supermarket on an island in Animal Crossing, a series of social simulation video games. The new virtual store, called KaufIsland, demonstrates Kaufland’s sustainability strategy and aims to engage with young consumers.
The predominant number of fashion brands in this list is no coincidence. It shows the demand for fashion items in Web 3.0. According eMarketer, 27% of respondents would like to try on clothes via augmented reality/virtual reality before making a purchase. By making inroads into the metaverse, brands and retailers are trying to kill two birds with one stone. They respond to increased market demand and connect with young consumers by engaging with them in the space where they want to be. Brands are offering purchases to the younger generation of consumers in the metaverse rather than expecting them to come to physical stores.
Unboxing prices in Metaverse
The Global Metaverse Market should grow from $45.6 billion in 2020 to $344.8 billion by 2027. Due to this potential growth, brands are aiming to be the AWS of the metaverse and achieve a an advance on their rivals.
While the primary focus for many businesses now is brand awareness and presence in the metaverse, the next big thing will be pricing. Since the decentralized Web 3.0 ecosystem has no boundaries or rules and allows for pricing experimentation, retailers can take advantage of these opportunities and go beyond their traditional pricing tactics.
Prices in the metaverse today differ significantly from those offered in physical and online stores.
For instance, Gucci’s virtual sneakers can be purchased for $12.99 while in real life they cost up to a thousand dollars.
Or vice versa. The average price of an item in the Adidas NFT collection In the metaverse is around $765 while on the company’s website the assortment is more affordable.
In fact, these awards are meant to create marketing buzz rather than achieve certain sales goals. However, these marketing tricks have already brought their first results despite analysts’ expectations. For example, Ralph Lauren’s investments in the Metaverse Roblox Winter Escape world has enabled the company’s turnover to increase by 27 percent and reach $1.8 billion.
Thus, the question of prices is still open. Pricing for items in the metaverse is approached like the wild Wild West. Some wonder if the answer is to add 10-30% to the customer’s actual purchases to give them a virtual outfit for their avatar. But as practice shows, the answer is “No”. At least for now, the majority of metaverse purchases are mutually exclusive of IRL purchases, and pioneers are focused on making purchases affordable for users.
In the long run, retailers can turn Web 3.0 into another sales channel with an expected revenue stream and elaborate pricing strategies. The main block here is where to start. The whole journey to metaverse commerce can consist of four major steps.
Data is a crucial element for effective offline and online sales. And the metaverse provides great opportunities to monitor and track information about user preferences, behaviors, needs, and choices. Retailers can connect these dots and get a complete picture of shopper profiles.
By checking the digital footprint of Web 3.0 users, retailers get a clue on how to meet these people and turn them into loyal customers, as well as become more aware of their willingness to pay for different products. Considering demographic peculiarities, search history, etc., retailers can segment their buyers and set a particular price for each group and even a single buyer. It also mitigates price discrimination, as a seller can interact with a buyer one-on-one and quote a price based on data pulled from user profiles.
When selling in the metaverse, retailers can also collect data on equivalent products in competitors’ assortments. Just like in real life, retailers can analyze information about item features and prices to simplify pricing in their metaverse store.
With data, retailers don’t have to make blind decisions. For example, a manager is trying to decide on a reasonable price for a pair of sneakers. Knowing the e-commerce competitors, the company can check if these brands are on Web 3.0 and what prices they offer for equivalent sneakers. Plus, it’s a great opportunity for a brand to learn about new competitors and use that information in their future pricing tactics.
Mono Brand Pricing
However, what price to offer if traders are selling unique goods? In this case, companies must consider the demands and needs of their customers as well as their willingness to pay for the uniqueness of the product. If there are no similar products in Web 3.0 and a brand does not want to set an arbitrary price, it is time to search for similar products in the metaverse. Pricing managers can select a few of them with the most similar characteristics and analyze the price of these products. Additionally, retailers can use e-commerce data as a benchmark when pricing similar SKUs.
Embrace the potential of algorithms
Ultimately, algorithms are a win-win solution for retailers across industries because they enable fast, data-driven decision making. Today, algorithms allow retailers to consider more than 20 price and non-price factors. For the metaverse, this number can increase significantly. Some of these factors will remain, new ones will appear and others will lose their meaning. So, as pricing experts and analysts test out trading in the decentralized space, the best decision they can make right now is to heavily integrate data and algorithms into launch pricing, optimization awards, promotional campaigns and other processes.
As the list of companies entering the metaverse continues to grow, the next essential iteration of this process will be to ensure the presence of well-known physical and digital stores in the virtual world and even monetize these efforts. The metaverse offers a plethora of options for companies ready to discover the sales potential of this new channel. The sooner retailers start collecting data and applying algorithms, the sooner they’ll come up with effective iCommerce solutions to increase revenue and provide customers with unique virtual experiences and personalized pricing.
Marina Dias is Senior Pricing Consultant at Competitiona pricing platform that enables retailers and brands across all retail industries and markets to increase customer confidence by setting and maintaining optimal pricing positions.