The latest evolution in the digital landscape, the metaverse, has been called by Mark Zuckerberg, founder and CEO of Meta, 'the next generation of the mobile Internet' But what exactly is this concept?
The Metaverse is a set of 3D virtual worlds created by multiple entities and centred on social connections where real and virtual environments merge. Using virtual and augmented reality (VR/AR) tools, the metaverse aims to provide a new place for consumers and brands to work, learn, play, shop and create an "embodied Internet".
The metaverse's potential is so great that Mark Zuckerberg has rebranded Facebook's parent company as Meta in order to position this new universe at the centre of everything the company produces, to provide an ever-evolving virtual world for its 3.6 billion monthly active users in its various social applications, and to reshape the mobile commerce (mCommerce) experience in the process.
This shift has obviously not eluded the retail sector. According to statistics from the French Federation of E-Commerce and Distance Selling (FEVAD), e-commerce has grown strongly in France during the COVID pandemic. Online sales have indeed gained nearly 4 points, rising from 9.8% in 2019 to 13.4% in 2020. Online sales of products have grown by 32%. In short, the possibilities of offering all kinds of users - new and existing - exciting and novel shopping experiences in a new dimension of e-commerce seem endless.
But given the potential of the metaverse to transform the way brands interact with their customers, what are the opportunities - and of course the risks - for retailers seeking to emulate virtually the experiences their customers have in traditional shops and on existing e-commerce sites?
The opportunity for a unique customer experience?
It's a fact that an increasing number of brands are looking to deepen their relationships with their customers by recreating the in-store experience in the metaverse. Leading brands such as Ralph Lauren, Zara and even Walmart have recently announced the launch of virtual shops where customers can 'interact' with and try on clothes before continuing to shop in person or online.
The merging of the physical and digital worlds is leading to a new definition of shopping: for example, Samsung unveiled its virtual shop last September, "built" on the model of its shop in New York.
The virtual world provides a space for brands to test new products, styles or colours in a familiar environment to gauge consumer interest before manufacturing an item. Linking the digital and virtual spaces and improving the customer experience across all channels has major benefits, such as making orders more accurate, reducing excess inventory, or meeting consumer expectations more accurately.
Digital twin technology allows for the creation of virtual versions of homes, shops, offices and even customers, creating seamless links between the physical and virtual worlds. For example, consumers will be able to view and interact with products such as IKEA furniture from the comfort of their couch, as well as visit 'twin' stores and test products before purchasing them physically. Such a development will allow companies to significantly reduce their return rates and improve the wider customer experience by streamlining the real world with the virtual.
Beyond digital twins, metaverse users will also have the ability to create avatars that are potentially different from their users in terms of identity, style, behaviour and societal choices, as is the case in Roblox or Fortnite. This ability to use multiple identities in the metaverse allows merchants to interact with an increasingly large audience with diverse individual needs. As new consumer groups emerge, new methods of targeting them are being invented. Brands will have to convert physical consumers to digital, but also new digital consumers (avatars) to the physical world.
It makes sense that brands are embracing this innovative technology and discovering the tremendous possibilities offered by this experimental playground as the next step in their e-commerce roadmap, despite the predictably high cost.
Threats to the metaverse
However, this new 'digital frontier' is still largely uncharted territory. Some consumers are keen to try out exciting and innovative technologies, but it is incumbent on brands to minimise the risks to them as they would in the physical world, otherwise they are at risk of attack and fraud.
The ability to create multiple identities in the meta-verse allows scammers to create fake profiles or raise false bids on items. Automated bots can be used to impersonate legitimate users, generating unnecessary digital traffic that can slow down the operation of these virtual spaces, similar to the activity of real-world retailers.
Bots can also purposely drive down the prices of NFTs (Non Fungible Tokens) by placing false bids and cancelling accepted bids. These items are then re-listed at a lower price, and then picked up by malicious resellers. These fraudsters can also intentionally raise the price of NFTs by replacing tokens with a "bis" smart contract that circumvents the usual selling rules, and then reselling the items at a higher price on a secondary market.
This technique is used to give the impression that items are worth more, but it also creates artificial market trends, highlighting the extent to which e-commerce is already occurring in the metaverse. Exploitation of such vulnerabilities could damage brand reputation and discourage users from visiting these 'sites'. In an era of uncertainty in the metaverse, merchants must ensure that they maintain a high level of trust with their customers by encouraging them to explore new environments safely and without fear.
While it is still uncertain how fraudulent activity will develop and how it will be monitored in the metaverse, it is in retailers' best interests to be proactive and anticipate the various contingencies. For brands to continue to innovate for the customer relationship and experience, retailers need to understand and recognise users by linking real-world personas to digital personas through the use of automated identity-based technologies. This approach will empower retailers to respond quickly and proactively to new and emerging threats. As things stand, however, the lack of regulation benefits cybercriminals.
What regulation for payments?
Blockchain technology combines the security and scalability needed to power a secure global network for over-the-counter payments. But this is not without its challenges for regulators. A system of interconnected nodes processing transactions around the world necessarily raises questions about how a virtual environment such as the metaverse can be regulated. Will companies have to comply with laws and regulations in multiple jurisdictions? Who will govern this virtual reality?
Authentication is another area of contention: how will users identify legitimate retailers and products? This is where NFTs can provide an answer. A patent filed by Nike in 2019 links shoes and clothing to the Ethereum blockchain at the comma, providing proof of authenticity for physical goods. In fact, in addition to proof of authenticity, this method could allow brands to link physical and digital goods.
According to a study by Finder, 8% of French people owned cryptocurrencies in March 2022. Cryptocurrencies are a priori the preferred method of payment for the metaverse, highlighting the real issues that businesses will need to address. Even though it is an emerging currency and still far from being widely adopted, retailers who choose to use cryptocurrencies exclusively as a payment method risk alienating mass consumers, as some are unable - or unwilling - to adopt these virtual currencies.
If incumbent payment service providers decide to operate in the metaverse and offer consumers the possibility to pay with real currencies, how quickly will the entire payments ecosystem be able to adapt and authenticate transactions? For example, Mastercard has already indicated its intention to extend its payment processing system to the metaverse.
Furthermore, will this evolution affect the traditional means of payment authentication? Will automatic identity-based solutions be able to link real consumers with their digital twins? In any case, the general uncertainty surrounding regulations and payments in the metaverse underlines the need for caution and adaptability.
The metaverse is the most important disruptive technology to hit the retail market since the boom in digital commerce and the onset of the pandemic. The fact that this environment is still largely unknown opens up a world of possibilities, but also of potential dangers.
While it is still too early to fully assess the impact of this revolution, the winners of the metaverse will not necessarily be the first to arrive, but probably those who know how to create a safe environment while offering their customers a unique and personalised experience.
Comments