Retailers are walking back their metaverse expansion plans suddenly, causing some to question the future of this virtual world. Brands have been using the metaverse to build brand experiences and marketing, but many have yet to report on its conversion rate. With the threat of recession, retailers and brands are likely to pare down unprofitable areas of their businesses.
The metaverse is a broad term that refers to 3D-enabled digital spaces where people can socialize and live their personal online lives. In recent years, brands saw the metaverse as a means of elevating their virtual experiences and reaching Gen Z in particular. Walmart launched Universe of Play on Roblox in September, while Disney’s division focused on crafting interactive storytelling methods using technologically advanced channels. Retailers of varying sizes were attempting to incorporate the metaverse in their strategies.
However, while brands were optimistic about the metaverse, consumers didn’t seem to match their sentiment. Melissa Minkow, director of retail strategy at digital consultancy firm CI&T, found that 81% of respondents haven’t made a purchase in the metaverse and 45% said that they don’t ever see themselves shopping in it. Meta initially set a 500,000 monthly active user target for its metaverse offering, Horizon Worlds, by the end of last year but then changed its goal to 280,000, indicating how the company underestimated people’s engagement level with the platform.
“Long term, it has the potential to be a profitable business, but many brands aren’t there yet, and the threat of the recession could force some brands to reconsider their pricey metaverse ambitions,” said Kyle Wong, chief strategy officer at customer experience platform Emplifi.
Pacsun released an NFT series called Pac Mall Rats last year that the company positioned as part of its metaverse strategy. Overall, Pacsun’s goal with the NFT series was tied to expanding its presence in the virtual world. However, reporting from Sourcing Journal last year indicated that after Pacsun sold its first NFT, every token was sold for less than the ones before it. The report states that the retailer attempted to auction off an NFT artwork by artist Sara Shakeel last year with an opening bid of 0.327 ETH or $1,000 at that time and received no bids by the time the auction closed.
While it’s never been clear whether brands and retailers were ever truly welcome in the metaverse, or if it was just an intrusion into a space meant for pure entertainment and disassociation from the real world, it seems the investments retailers have made have not paid off.
One alternative strategy is augmented reality (AR). AR technology can elevate the shopping experience by integrating virtual elements into the real world, allowing customers to visualize products in their own surroundings. Moreover, AR technology can boost customer engagement by offering entertaining experiences, increasing the likelihood of a purchase. Additionally, AR can help retailers create a more personalized and interactive shopping experience, which can foster customer loyalty.
Snap, parent company of Snapchat, has been instrumental in promoting the adoption of AR commerce, having invested in AR for over a decade. It recently launched a Shopping Suite that includes a range of try-on and sizing tools tailored for retail, particularly for clothing, footwear, and eyewear. The company said in a press release that more than 250 million users engage with AR on Snapchat every day.
Despite the potentially high cost of implementing AI and AR tools, Snap aims to enhance accessibility of the technology for retailers. That said, last month, in an interview with Modern Retail, Carolina Arguelles Navas, Snap’s head of AR enterprise product strategy and product marketing, emphasized that the company prioritizes both delivering realistic experiences and streamlining the integration process for retailers.
While retailers may be walking back their metaverse expansion plans, this doesn’t mean that they won’t resuscitate their strategies in the future. However, it does show that brands need to be cautious about jumping on the latest tech trends without a clear understanding of their target audience and expected ROI.
As the metaverse hype and reality continue to clash, the question remains: what is the future of virtual shopping experiences? AR technology seems to be the more practical and profitable solution for retailers looking to enhance their customers’ shopping experience. Unlike the metaverse, AR offers a more personalized and interactive experience that can be seamlessly integrated into the real world.
Snapchat’s AR tools have been employed by retailers such as Prada and American Eagle, allowing their customers to virtually “try on” and purchase products such as sunglasses and sneakers. With the introduction of AR Enterprise Services (ARES), which debuted in March, retailers can now integrate these same tools into their websites and product pages, affording them greater authority over the shopping experience and user data.
