The metaverse offers challenges and possibilities for the future of the retail industry

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In 1968, American computer scientist Ivan Sutherland predicted the future of augmented and virtual reality with his concept of the “Ultimate Display.” The Ultimate Display relied on the kinetic depth effect to create two-dimensional images that moved with their users, giving the illusion of a three-dimensional display.

While the concept of virtual reality only focuses on the creation of three-dimensional environments, the metaverse, a term coined by Neal Stephenson in his 1992 book snow shock — is a much broader concept that goes beyond this.

While there isn’t really an official definition of the metaverse, science and technology reporter Matthew Sparkes provides a decent definition. He defines the metaverse as “a shared online space that incorporates 3D graphics, either on a screen or in virtual reality.”

Read more: What is the metaverse and what can we do there?

Ever since the term was coined, the idea of ​​the metaverse has remained more of a fictional concept than a scientific one. However, with technological advances in recent years, the metaverse has become more tangible. Much of the recent hype happened after Mark Zuckerberg made the announcement to change the Facebook brand name to Meta. Since then, many retailers have jumped on the metaverse bandwagon.

Meta CEO Mark Zuckerberg announced Facebook’s name change to Meta in 2021. He said the move reflected the company’s interest in broader technology ideas such as the metaverse.
(AP Photo/Nick Wass)

Nike recently filed multiple trademarks that allow them to virtually create and sell Nike footwear and apparel. JP Morgan opened its first virtual bank branch. Samsung recreated its New York City flagship store on the virtual browser-based platform Decentraland, where they are launching new products and creating events.

While many retailers are capitalizing on the metaverse early on, there is still uncertainty as to whether the metaverse is truly the future of retail or if it will be a short-lived fad.

Dispelling the myths of the metaverse

Much of that uncertainty surrounding the metaverse stems from confusion about the technology. While looking at the top metaverse-related keyword associations on Google Trends, I found that “what is the metaverse” and “metaverse meaning” were the top phrases customers were searching for. To alleviate some of this confusion, it’s important to dispel common myths about the metaverse.

Myth 1: You need a virtual reality headset to access the metaverse

While the optimal metaverse experience can be achieved through a VR headset, anyone can access the metaverse through their personal computers. For example, customers can create their avatars and access the metaverse in Decentraland on screen without a VR headset.

A virtual avatar in a green shirt, black pants and sneakers standing in a virtual world
My virtual avatar in Decentraland.
(Decentraland Foundation), Author provided

Myth 2: The metaverse will replace real life interactions

Rather than replace existing modes of communication, the Metaverse provides a more interactive mode of communication. New technologies always bring with them predictions of the end of physical interactions. It’s useful to compare the metaverse to the rise of smartphones. Smartphones improve communication by allowing people to interact with their social networks, but they have not completely replaced face-to-face interactions. The metaverse will be the same.

Myth 3: The metaverse is just for gaming

While gaming remains the number one driver of user engagement in the metaverse (97 percent of game execs believe gaming is at the center of the metaverse today), it’s not the only activity in which people can participate.

In a recent survey, McKinsey & Company asked customers what their favorite metaverse activity would be in the next five years. Purchases were nearly the highest, followed by attending telehealth appointments and virtual synchronous courses.

Keep realistic expectations

In its current form, the metaverse lacks the technological infrastructure to meet market expectations. It may be appropriate to compare the metaverse to the dotcom bubble between 1995 and 2000 which was caused by speculation in internet based businesses.

Similarly, there seems to be enormous hype and expectations around what technology can deliver in its current form. A recent survey of 1,500 consumers found that 51 percent of people expect customer service to be better in the metaverse, 32 percent expect less frustration and anxiety when dealing with customer service agents in the metaverse compared to phone interactions, and 27 percent expect interactions with virtual avatar assistants from the metaverse to be more effective than online chatbots.

While such expectations may seem reasonable, metaverse technology is still in its early stages, where the focus remains on developing infrastructure and processes for the future. Unrealistic expectations can potentially lead to a metaverse bubble as reality struggles to meet expectations.

Challenges for retailers

As with any emerging technology, retailers must be ready for the challenges posed by the metaverse. Some of these challenges include the following:

  • Data security and privacy: With the newness of metaverse technology and the vast amount of personal data collected, the metaverse will be an attractive target for hackers. New approaches and methods should be considered for a secure metaverse that clients can trust.

  • Experienced talent: Having the right talent that can create, manage, and support experiences in the metaverse needs to be at the forefront of technology engagement. However, due to the newness of the technology, finding such talent will be challenging.

  • Regulation: Without clear jurisdictions and regulations, the security of virtual spaces in the metaverse can be compromised and end up driving customers away. Retailers must ensure that these spaces are safe and secure.

  • Management of customer expectations: Retailers need to educate their customers on what can currently be done in the metaverse and what customers should expect from businesses in the metaverse.

Despite these challenges, retailers will still be able to create novel shopping experiences in the metaverse; they will only require properly trained and qualified people to make it happen. With proper planning and preparation, retailers will be able to meet these challenges head on.

A woman using a VR headset standing in a shopping mall
The metaverse will have the potential to revolutionize the retail industry once the technology is advanced enough.

Retail Opportunities

As technology improves, the potential uses of the metaverse for retailers will grow. At the moment, the metaverse offers retailers three key opportunities to improve the online shopping experience.

The first is brand exposure. Retailers can expand their presence through virtual billboards and interactive ads with less noise compared to existing online and mobile channels. Cloud Nine, an IT services company, is one of the first companies to advertise its services on virtual billboards in Decentraland. Virtual billboard advertising is something marketers need to consider.

Second, the metaverse offers unique experiences for customers to engage with brands through events, contests, and game-like features. Such experiences could increase brand loyalty and engagement. Metaverse Fashion Week is an example of how retailers can create unique brand engagement opportunities. Retailers such as Tommy Hilfiger, Perry Ellis and Dolce & Gabbana participated in the pilot experience, leading the wave of immersive and unique customer-brand interactions.

Lastly, the metaverse gives retailers the opportunity to personalize customer experiences. Similar to how retailers can personalize online customer experiences through data collection, retailers can tailor customer experiences in the virtual environment. In Meta’s Horizon Worlds, for example, users can create their own virtual worlds, invite friends, and customize their own experiences.

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