• Brands and retailers need to be present wherever the consumer is, engaging with them as they spend more time in new and emerging digital spaces.
• The metaverse will enable new ways for consumers to interact, co-create and share in the value they generate with the brands and retailers they favor.
• This will change the relationship between consumers, brands and retailers and could redefine the value chain and intellectual property.

The metaverse isn’t just growing, it’s evolving at a remarkable pace as more users, and more experiences, come online every day. By merging gaming, media, live events and social media into a new form of interactivity that blends digital and physical, the metaverse is rewriting the rules of the consumer economy.

This will be the inevitable next step to bridge physical and virtual worlds as the internet continues to evolve and influence our daily lives. As new environments emerge, they will help consumer products companies and retailers provide hyper-personalized experiences with increased opportunities for a single, unified view of the customer.

It may have its roots in gaming, but it’s the significant investments in gaming technology and experience that has seen the metaverse reach a tipping point, becoming more appealing to a broader audience and therefore to other industries too. It now has the potential to transform the consumer landscape by creating new end-to-end customer journeys, immersive experiences, and open spaces for communities to accelerate creativity.

The metaverse will also enable better business processes and operational improvements as its capabilities grow. These will all come together to fuel new growth and value creation opportunities. This means it’s critical for consumer-facing companies to understand the metaverse now and consider how to evolve their value propositions and strategies accordingly – or run the risk of being left behind.

Engaging with Consumers in a New Way

The metaverse is evolving rapidly, but it is years, possibly decades, away from realizing much of its potential. In simple terms, the metaverse blends physical and digital worlds into a larger integrated network of immersive 3D experiences based around eight key principles:

1. Decentralized: Distributed ownership across interconnected spaces
2. User-defined: Owned and shaped by the people participating in it
3. Co-created: Built in collaboration with users to enable them to generate assets, content, and value
4. Synchronous: Woven into everyday life so that experiences exist consistently for everyone
5. Live: Environments and users that interact in real-time
6. Persistent: Always on, and always evolving
7. Social: A place where like-minded communities can form, and people can interact in a cooperative spirit
8. Economically transferable: Value is created and transferred between different digital and physical spaces

The practical applications of the metaverse put users in control, giving them the choice of where they want to spend their time and how they share their data, and lets them create frictionless experiences in moving from one world to the next to work, play and live. It’s a step beyond the way consumer-facing companies have become accustomed to consumers using the internet and represents a different model of engagement.

Technology is Driving New Digital Experiences

The metaverse is built on a range of different technologies, best thought about as layers built on top of one another. Together, these layers make up the ecosystem needed for it to function. At the foundation are core infrastructure considerations and technologies (such as bandwidth, networks and cloud), blockchain (needed for cryptography, identification and ownership) and access technologies (AR/VR, apps and websites). These enable a set of core capabilities (commerce, marketplaces, co-creation and currencies) which underpin a set of products (physical/digital twins, digital assets and NFTs) and a set of experiences (hybrid shopping, live events and immersive content). Decisions about technology will drive the total experience created, so marketing and technology must work as one.

The technologies involved are rapidly changing too. 5G and fiber optic will provide the network to support vast upload and download requirements. New releases of AR and VR headsets will improve affordability and, therefore, access. And applications will develop to fully utilize these tools, such as product visualization or visual search tools in the near term, or fully immersive experiences in the longer term.

As consumers interact and make new demands, technology will adapt to satisfy consumer curiosity. Likewise, as the technology improves, consumers will find new ways to use it.

Consumers will Shape the Metaverse

The metaverse itself is no longer just the domain of the world’s 3.2 billion gamers.¹ In fact, our latest EY Future Consumer Index reveals 10% of consumers are engaging with the metaverse through other means such as using a crypto-wallet, buying virtual products or experimenting with virtual reality (VR) and augmented reality (AR).

Virtual worlds and ecosystems offer consumers a creative extension of reality to relax, meet people, develop communities, solve problems, experience new types of brand value and explore realities divergent to their own. Gaming opportunities (including NFTs, digital collectibles, virtual skins for avatars and the accessories that go with them), and immersive ecosystems (building on your own virtual land plot, for example) are plentiful.

Not only is the metaverse constantly expanding, but so is the interest that it is generating:

• 25% of consumers are expected to spend at least one hour a day in the metaverse by 2026.²
• 88 million VR/AR device shipments are expected in 2026 alone.³
• Gen Alpha consumers (born after 2009) are already meeting and socializing with friends through online multiplayer games like Roblox and Fortnite. In fact, Roblox boasts over 50 million active daily users.⁴
• E-sports and Massively Multiplayer Online Games (MMOGs) are increasingly attracting new audiences that behave as communities in novel, interoperable and co-creative environments.
• A growing number of events, from fashion shows to live music concerts, are being hosted by metaverse platforms attended by audiences of millions of simultaneous users.

Highly recognizable consumer brands are already producing digital collectables spanning art, sport, music and more. A virtual Dionysus Gucci bag sold for over US$4,000 on Roblox – more than the physical version of the same bag.⁵

Brand Relationships are Being Redefined

It’s not just about selling and collecting digital products, but also co-creating them – consumers can already develop and code their own collectibles and games on metaverse platforms. The advent of digital goods means “taste-making” has the potential to be both democratized (accessible and available to everyone) and niche (serving the needs and values of relatively small groups of people). In this increasingly complex ecosystem, brands and retailers need to harness the power of community to differentiate.

With this comes the potential to shift the definition of brand “ownership”, from “control” to “orchestration.” Rather than tightly curating defined experiences, successful companies will coordinate loyal communities of customers who co-create and redefine products, services and experiences with them.

In turn, the organization’s value chain will evolve too, reflecting the new capabilities required to deliver a mix of digital and mixed reality experiences, as well as building the new skills required to develop end-to-end experiences, driving community engagement and orchestrating collaborative design and development. These will be underpinned by digital IP protection, revenue sharing models and cybersecurity.

Intersecting with the Metaverse Creates a New Path Forward for Retailers and Brands

As consumers invest more in their digital identities, they are buying more digital products and spending more time in digital experiences. These digital identities are becoming as important as their physical selves, fusing digital and physical worlds.

Fundamentally, as consumers spend more time in new digital spaces, brands and retailers need to be there too. But it’s not just about being present. The metaverse offers unparalleled opportunities to create unique and differentiated experiences to engage consumers and build brand excitement, goodwill and trust. Failure to do so risks irrelevancy.

The metaverse is still taking shape, and brands still have the power to build their offering. Here are four considerations when building a strategic, meta-first roadmap to navigate the future:

1. Be Focused on Developing Brand Relevancy for the Consumers of Tomorrow

Gen Z and Gen Alpha are already spending increasing amounts of time engaging with aspects of the metaverse. As they get older and the metaverse grows, their engagement is likely to grow. When they become more economically empowered in the coming years, time spent in the metaverse will translate into a significant share of wallet. To be relevant in the future, brands must lay the groundwork now to understand emerging consumer preferences and prepare their business for the metaverse. This means putting these consumers at the heart of the planning of every metaverse experience and product created. This focus should be embedded into broader business planning to build brand awareness. Doing so will secure brand equity and evolve the company’s value proposition to fit a future forward and “phygital” (physical and the digital) strategy as well as create a consistent digital identity in these new platforms.

Build measures that protect and govern the use of consumer data and branded IP – these new channels and products are still nascent with emerging cybersecurity risks that executives will need to understand and mitigate.

2. Be Proactive in Engaging with Digital Consumer Communities

Positioning the metaverse in the context of a new retail and social channel can help you grasp the bigger picture. As new communities emerge and interact in the metaverse, brands must find ways to identify and engage with them through a medium representing the next generation of the internet that combines, and transcends, existing channels of mobile, social and voice commerce.

To create intimacy and a new level of experience, go beyond attempting to replicate physical stores with aisles of products or scores of brand options in a virtual world. Engaging with, and developing communities around, brands and experiences to enable co-creation will require companies to open-up their systems to communities of developers who will drive innovation and enable new applications and products to be created. This participation will be rewarded with new forms of payment and digital rights to ensure communities share in the value they create while brand rights are maintained. Co-creators can become powerful brand ambassadors.

3. Be Open to the Creation of Viable New Revenue Streams

Digital products are already a multibillion-dollar business. Creating innovative, profitable revenue streams, with the potential for sustainable, long-term growth, is essential. For example, NFTs are already generating revenue and providing a gateway for consumer brands to tap into the metaverse and reframe what consumer loyalty can mean going forward. These routes could help you earn royalties based on resales in secondary markets, similar to the way video games are increasingly released for free but bolstered through in-game purchases.

The metaverse also opens new avenues of value creation in the data it will generate – driving an exponential increase in the capacity to capture and understand consumer behaviors. This will drive value in trading or using data to better segment, target and personalize for individual consumers. However, as consumers come to terms with managing their own digital identities, this relationship will grow and trust will be needed to enable data to bring benefits to both the brand and the consumer.

4. Be Creative in Unlocking Operational Benefits through Virtualization

Expanding into the metaverse requires efficient processes that are primed for the virtual world and a rethink of the value chain. It also offers up opportunities to improve your employee experience and operations.

The metaverse isn’t restricted to consumer experience; as the consumer metaverse evolves so will the industrial metaverse, which will provide environments for visualizing processes in virtual reality and understanding system inefficiencies, enabling remote design team collaboration, helping inventory management or simulating a manufacturing process, and addressing IP rights and control issues.

Leverage the metaverse as an opportunity to make your business more effective and potentially reduce risks at the same time.

Disrupting Your Organization to Lead in a Metaverse Market

In an environment where disruption is the norm, getting ahead in the metaverse may not be a top priority, especially when building your metaverse presence could mean rethinking organizational structures and operating models. However, moving away from tightly curated, clearly defined customer experiences to co-creating products, services and experiences with customers will ultimately drive enterprise-level change and build long term relationships with future consumers.

It will also require a new spirit of experimentation across your business, as well as new skillsets and capabilities (from security by design to creative direction) and potentially a new strategy. There is no one-size-fits-all approach, but there are four stages to consider along the journey:

1. Secure: Protect your business and your consumers – with new channels and assets still nascent, the metaverse deserves close understanding of cybersecurity risks and blockchain technologies beyond digital strategies, before securing brand equity.
2. Experiment: Test and learn how your business and your brand are relevant in the metaverse. Explore new ideas for revenue streams today and build organizational learning for tomorrow.
3. Integrate: Develop communities around brands and products to co-create the experience.
4. Evolve: As part of your digital-first strategy, consider meta-first scenarios for the future, rethinking how activities will be conducted in the future and optimizing for a consumer that may adopt physical, virtual or mixed reality modes of interactions.

Above all, your leadership must be prepared to embrace this opportunity, set the tone from the top and guide the organization through the metaverse learning curve.

An interoperable metaverse is still taking shape. Where we are now is certainly not where we will be two, five or ten years down the road. But history reminds us that digitization picks up speed quickly, web-based technology evolves rapidly, and today’s metaverse limitations will disappear sooner rather than later. Acting now can position retailers, brands and other businesses to lead the change, instead of react to it.

The article was first published here.

Photo by Mediamodifier on Unsplash.