We have seen unprecedented digitalisation over the last few years, with the COVID-19 epidemic serving as the primary driver. This entirely unexpected circumstance prompted economies and all industries to search for quick and alternative ways to adjust their enterprises under the constraints of governmental regulations. The pandemic’s effects have been one of the largest problems for the fashion business, which was dependent on physical contact earlier. Manufacturing facilities were shut down in a couple of weeks after the virus stuck, and quick fashion and luxury brands had to fire staff members and postpone fashion shows and other related events. As a result of these harsh restrictions, retail sales significantly decreased. Consumers’ life shifted to the digital platform. Post-COVID era expedited the evolution of digital space and gave rise to Metaverse.

Fashion businesses have a ton of opportunities to interact with highly desirable younger consumers in this real-time virtual world, which also provides new opportunities for creativity, community development, and commerce.

In this evolving landscape, there are a myriad of opportunities for virtual fashion, encompassing gaming interfaces, digital imagery, augmented reality films, and even Non-Fungible Tokens (NFTs). This presents an intriguing possibility for the industry to reach new cohorts and boost its revenue. To transition into the future, fashion designers and businesses will need to develop the ability to combine the real and the imaginary.

According to a study done by Pilar Gonzalez from Politecnico di Milano in the year 2020, metaverse is not a new phenomenon. The report says that the vision of a virtual world began in the 1980s and 1990s but did not gain momentum for quite some time. Neal Stephenson notably used the term ‘metaverse’ for the first time in his 1992 book Snow Crash, which described a 3D virtual world populated by avatars of actual people. As computing and graphics continued to advance in the 1980s and 1990s, it gave rise to several shooting games, fantasy role-playing games, simulators, and other digital virtual worlds. This forms the foundation of today’s metaverse.

There are more examples from the 2000s that can be used to define social 3D spaces such as video games like Club Penguin or The Sims 2. Through a penguin avatar, users of Club Penguin could personalise their virtual ‘houses’ or ‘igloos’, interact with friends or play online games for cash. Users of The Sims’ could build avatars, homes, communities, and a parallel virtual life.

Ninety per cent of Gen Z identify as gamers, which also explains the current preoccupation of luxury brands with video games. These brands are attempting to reach this audience by providing smooth, individualised, and immersive experiences through gaming, such as customised online and offline shopping excursions. Games are now a popular way to promote and reach younger people. Games also give fashion firms the chance to develop fresh, original experiences and forge closer connections with their customers.

It is impossible to ignore the way video games are today altering the fashion industry. Nearly all fashion houses have already entered the market, including Marc Jacobs, Burberry, Dior, and Guerlain, to name a few. Some of these fashion houses are currently showcasing their newest collections within video games, while others are working closely with leading companies in the sector to provide gamers with the option of dressing their avatars in looks from the most recent collections. In only seven minutes in 2021, the online retailer RTFKT sold 600 pairs of digital trainers for a total of $3.1 million.

According to the report by Gonzalez, the size of the worldwide fashion market is presently estimated to be close to $3 trillion, and while digital fashion is still a relatively new business area, it is quickly gaining market share because of the fact that games like Fortnite generate a substantial portion of their $2.4 billion in annual income through Avatar skins. Luxury and mass merchants should be interested in the metaverse because skins, or customised add-ons that enable you to change an avatar’s appearance (think clothing, accessories, etc.), are one of the biggest prospects for in-game revenue.

The metaverse has established a concrete resale marketplace where users of all ages have the opportunity to generate income. For example, the digital Gucci bag on Roblox which resold for over $4,115 (more than the real version) after the Gucci Garden experience, demonstrates the theoretically limitless potential for brands to monetise in the metaverse.

As days progress, there will be more and more avatars live. These will be 3D representations of people, their attitudes and actions. In fact, avatars are likely to become as common as profile pictures today. Experts predict that people will have a virtual wardrobe of outfits created by various designers for various activities and situations.

According to Ryan Gill, co-founder and CEO of Crucible, “Direct-to-Avatar (D2A) refers to an emerging business model selling things directly to avatars—or digital identities—bypassing any supply chain management like dropshipping, and logistics of how to get a physical object to a consumer’s door.”1 D2A brands are offered at social or competitive virtual settings like games or open worlds where users may project themselves as an avatar. Last year, Ralph Lauren introduced a 50-piece digital apparel line that could be bought on social media. Likewise, American Eagle announced the launch of a digital apparel line for Bitmoji avatars. Gucci and The North Face unveiled a combined line of Pokemon GO avatars. Additionally, Gucci produced virtual trainers that can only be worn with AR.

Thus, the metaverse provides a range of possibilities, and the strategy to benefit from it need not be the same for every company. The most effective strategy will rely on a number of factors, including the size and goal of the brand. The approach might vary depending on the level of immersion as well as the platform used. Whatever the strategy, all fashion firms must begin developing plans to modify their business models to account for these new realities. Given that younger people spend the majority of their daily lives in digital and virtual settings, this is going to be crucial for marketers targeting them.