The Metaverse: The next retail frontier

The metaverse has burst onto the scene as the next big thing, with Meta CEO Mark Zuckerberg dubbing it the "successor to the mobile internet". So, what is the metaverse exactly? It’s a group of 3D virtual worlds, built by multiple entities, focused on social connections, that merges both physical and digital environments. Through virtual and augmented reality tools, it promises to deliver users and brands a new place to work, learn, play, shop and create – an “embodied internet.” Such is the metaverse’s potential, Zuckerberg has rebranded Facebook’s parent company to focus on positioning the metaverse at the centre of everything the company produces. This enables it to potentially deliver an evolving virtual world to its 3.6 billion monthly active users across all social applications, transforming the mobile commerce (mCommerce) experience in the process. This has forced big brand retailers sit up and take notice. Data from the British Retail Consortium and KPMG revealed that 38.5% of UK retail sales were made via eCommerce in March 2021, representing a 38.9% increase over pre-COVID-19 eCommerce sales. Therefore, the opportunities to offer exciting, new shopping experiences in a new dimension of eCommerce, to new and existing users, are endless. With the metaverse’s potential to reshape how big brands interact with their customers, what opportunities – and risks – are there for retailers looking to replicate great customer experiences from the physical and ‘traditional’ eCommerce world, into the virtual world? How can the Metaverse Improve Customer Experience (CX)? We are seeing more retail brands look to deepen their customer relationships by experimenting with the metaverse to replicate the experience of brick-and-mortar shopping specialness. Ralph Lauren, H&M and even Walmart have recently spoken about launching metaverse stores in which customers can interact with and try on clothes, with the choice to purchase their clothes physically or digitally. The blending of the physical and digital world provides a new definition of shopping. Samsung revealed its virtual store last September, modelled on its physical location in New York City. The virtual realm can be a space for brands to test new products, styles or colourways in a store environment, gauging consumer interest before physically manufacturing products. Allowing for more precise orders to be placed, reducing inventory surplus, and catering more specifically to consumer desires, are all benefits of creating a link between digital and physical and improving the customer experience across all channels. Digital twinning creates virtual versions of homes, shops, offices, and customers, which will allow for a seamless relationship between the physical and virtual worlds. Consumers will be able to visualise and interact with products, such as IKEA furniture in their own home. They will also be able to visit twinned retail outlets, trying products before buying physically. These future possibilities could dramatically decrease return rates for businesses and increase overall customer experience, streamlining the real-world through the virtual. Beyond digital twinning, users of the metaverse will also be able to create avatars that may differ from their users in terms of identity, style, mannerisms, and societal choices as seen in Roblox or Fortnight. The possibility for consumers to have multiple identities in the metaverse creates an opportunity for merchants to interact with an increasingly wide-ranging audience, each with different needs. New consumer groups will form and methods for targeting them will also be needed. The task for brands will be to convert existing physical consumers to digital, but also convert new digital consumers (avatars) to physical. It is only logical that brands embrace this innovative technology and discover the amazing possibilities in this experimental playground as the next step in their eCommerce roadmap, albeit at a predictably high cost. Uncertainty within the Metaverse However, this new digital frontier is uncharted territory. You have consumers who want to try exciting and innovative technologies, but it is the brand's responsibility to mitigate any risks as much as possible, just as consumers would expect of them in the physical world. If they do not, they leave their businesses exposed to attack and fraud. The possibility of creating multiple identities in the metaverse provides an opportunity for fraudsters to create false profiles and place fake bids on items. Automated bots could be used to impersonate legitimate users, creating unnecessary digital traffic that can slow down these virtual spaces, similar to reseller activity in the real world. Bots can also intentionally decrease prices of non-fungible tokens (NFTs) by placing fake bids and cancelling accepted bids on items. These items are then relisted at a lower price, and subsequently scooped up by scalpers. Fraudsters can also intentionally raise prices of NFTs by sweeping tokens with an alternative smart contract that bypasses selling rules applied to listings, and subsequently reselling items for a higher price on a secondary market. This is done to give the impression that they are worth more, but this also creates artificial market trends. This illustrates the scale of the fraud issue already presenting itself for eCommerce in the metaverse. Vulnerabilities such as these could be exploited, leading to damaged brand reputations and discouraging users from visiting that ‘site’. In a time of great uncertainty in the metaverse, merchants need to cultivate high levels of trust with consumers, giving them the confidence to explore and enjoy new environments safely. What is unclear is how fraudulent activity will develop, be monitored in the metaverse, but merchants need to be proactive in their preparations for all possibilities. In order for brands to continue to innovate around customer relationships and experiences, retailers need to understand and recognise who their customers are, linking real-world personas with digital personas through the use of automated identity-based technology. This will enable merchants to respond to new and emerging threats rapidly and proactively. However, As it stands, the current lack of regulation benefits cyber criminals. Payment and Regulation in the Metaverse Blockchain technology has the security and scalability to power a secure, global peer-to-peer payments network. But this also creates challenges for regulators. A global system of interconnected nodes, with transactions bouncing across the world, raises questions around how a virtual environment like the metaverse can be regulated. Will companies have to comply with the laws and regulations of multiple jurisdictions? Who governs this virtual reality? Authentication is another area of contention: how can users identify legitimate retailers and products? This is where NFTs could provide the answer. A 2019 patent filed by Nike links footwear with the Ethereum blockchain, providing proof of authenticity for physical goods. This not only provides proof of authenticity for goods but a method that brands could employ to link physical and digital commodities. According to research by Finder, 6.1% of the British public say they own cryptocurrency as of March 2022. With cryptocurrency potentially the preferred method of payment within the metaverse, it highlights the real concerns that businesses need to be able to address. Even though it is an emerging, but not widely adopted currency, if retailers choose to solely use cryptocurrency as a payment method, they could also face alienating mass consumers, with some unable or unwilling to adopt cryptocurrency. Should traditional payment service providers choose to operate in the metaverse and offer consumers the ability to purchase with real money, how quickly will the entire payments ecosystem be able to adapt and authenticate transactions? Mastercard has already signalled its intentions to extend its payment processing systems into the metaverse. Furthermore, will this involve traditional means of authenticating payments, or will automated, identity-based solutions be able to ascertain the link between real consumers and their digital counterparts? Regardless, the overall uncertainty surrounding regulations and payment within the metaverse emphasises the need for caution and adaptability. The Future of the Metaverse The metaverse is the biggest retail market disruptor since the pandemic-driven digital commerce boom. The unknown of the metaverse creates a world of possibility and potential danger. While it is too early to wholly assess the full impact, the winners in the metaverse won’t necessarily be first, they will be those who can create a safe environment and personalise a unique experience for their consumers.

The Metaverse: The next retail frontier

Written by Aaron Begner, EMEA General Manager at Forter

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