How metaverse is challenging the future of retail industry and offering possibilities

The metaverse offers exciting possibilities for retailers to revolutionize their business, from enhancing brand visibility and engagement to creating personalized customer experiences. While the technology is still developing, businesses need to be aware of both the challenges and opportunities that the metaverse presents in order to successfully navigate this new frontier in retail.
Published on
July 12, 2024

How metaverse is challenging the future of retail industry and offering possibilities

In 1968, the 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 Crash, is a much broader concept that goes beyond this.

While there isn't really an official definition of metaverses, science and technology reporter Matthew Sparks offers a decent definition. He defines a metaverse as "a shared space on the Internet that includes 3D graphics, either on screen or in virtual reality."

Since the term was coined, the idea of ​​the metaverse has remained more of a fictional concept than a scientific one. However, with the advances in technology in recent years, the metaverse has become more realistic. A lot of recent buzz came 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 chief executive Mark Zuckerberg announced Facebook’s name change to Meta in 2021. He said the move reflected the company’s interest in broader technological ideas, like the metaverse. (AP Photo/Nick Wass)

Nike recently introduced multiple brands that allow them to virtually create and sell Nike shoes and clothing. JP Morgan opened its first virtual bank branch. Samsung has recreated its New York City flagship store on the virtual browser-based platform Decentraland, where it launches new products and creates events.

While many retailers are capitalizing on the metaverse early on, there is still uncertainty about 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 the uncertainty surrounding Metaverse stems from confusion about the technology. While looking at the top metaverse-related keyword associations on Google Trends, I've found that "what is the metaverse" and "meaning metaverse" are the first terms customers search for. To relieve some of this confusion, it's important to dispel common myths about the metaverse.

Myth 1: You need a VR headset to access the metaverse

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

Meta chief executive Mark Zuckerberg announced Facebook’s name change to Meta in 2021. He said the move reflected the company’s interest in broader technological ideas, like the metaverse. (AP Photo/Nick Wass)

My virtual avatar in Decentraland. (Decentraland Foundation), Author provided

Myth 2: The metaverse will replace real world interactions

Rather than replace existing communication styles, Metaverse provides a more interactive method of communication. New technologies always make predictions about the end of physical interactions. It's useful to compare the metaverse with the advent 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 only for gamesWhile gaming remains the number one driver of user engagement in the metaverse (97% of game administrators believe gaming is the center of the metaverse today), it's not the only activity people can engage in.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 attendance at telehealth appointments and virtual concurrent courses.

Keep expectations realistic

In its current form the metaverse lacks the technological infrastructure to deliver market predictions. It might be appropriate to compare the metaverse to the dotcom bubble between 1995 and 2000 that resulted from speculation in Internet-based businesses.  

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

While such projections may seem reasonable, the metaverse technology is still in its infancy, with the focus remaining on developing infrastructure and operations for the future. Unrealistic expectations can lead to a metaphoric bubble as reality struggles to meet expectations.

Challenges facing retailers

As with any emerging technology, retailers must prepare for the challenges that the metaverse presents. 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 would be an attractive target for hackers. New approaches and methods must be considered for a safe metaverse that customers 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 handling technology. However, due to the newness of the technology, finding these talents will be challenging.
  • Regulations: Without clear legislation and regulations, the integrity of virtual spaces in the metaverse could be compromised and end up driving customers away. Retailers must ensure that these spaces are safe and secure.
  • Managing customer expectations: Retailers need to educate their customers about 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 new shopping experiences in the metaverse; only qualified people with the right skills will be needed to make this happen. With proper planning and preparation, retailers will be able to meet these challenges head on.

The metaverse will have the potential to revolutionize the retail industry once the technology is advanced enough. (Shutterstock)

Retail opportunities

As technology improves, so will the potential uses of the metaverse for retailers grow. Right now, the metaverse presents retailers with three major opportunities to improve their online shopping experience.The first is brand presentation. Retailers can expand their presence through virtual billboards and interactive ads with less noise compared to 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 can increase brand loyalty and engagement. Metaverse Fashion Week is an example of how retailers can create unique brand engagement opportunities. Retailers including Tommy Hilfiger, Perry Ellis and Dolce & Gabbana participated in the pilot, resulting in a flurry of unique and immersive brand interactions for customers.

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