Gartner declared in 2018, “An efficient and customer-friendly online commerce experience is no longer a differentiator—it is mandatory.”
But retail is changing so fast that even this advice is reaching its expiration date. Soon, a presence in the metaverse will be an absolute necessity, and retailers stranded in today’s e-commerce environment will be left behind. That, at least, is what is being argued by proponents of the “embodied internet,” a decentralized Web3 and the digital world of immersive experiences.
The Current State Of Retail
Retail has moved from the physical store, with its human contact and tangible goods, to the remote processes of mail order and telesales and then, more recently, to the even more distant and abstract digital world.
Many retailers, though, are still struggling to reconnect with customers and sustain brand loyalty. IDC says more than half of retailers (download required) consider e-commerce processes the most challenging for their businesses, while 94% regard customer retention as a key performance indicator.
As the next stage in retail’s life cycle, the metaverse offers the promise of closer links to customers and higher service levels, including greater personalization which, today, seldom extends beyond discounts and product recommendations. Enabling buyers to try out clothes and other goods, such as furniture or cars, virtually and in three dimensions—possibly even with haptic, touch technology—could also reduce returns.
According to the U.S. National Retail Federation, about one-fifth of today’s online purchases are returned, meaning billions of dollars worth of goods whose value is lost while they are in sales limbo, plus the hidden costs of mark-downs, inventory shortages and extra labor.
One major potential reason for the high return rate is BORIS: buying online, return in-store. Sizes, color matches, context and style could be built into the data underpinning the customer’s immersive experience so accurately and engagingly that returns fraud is ruled out and BORIS is pointless. The metaverse makes customers a part of the value chain, investing them in the brand by increasing their confidence in the choices they make.
How Retailers Can Prepare For The Metaverse
Changing online habits will almost certainly benefit suppliers, but it will also put them under new pressures. Where one photograph of a product in a catalog was enough, for example, three to five became the norm online, followed by a video. The cost of doing business in the metaverse will include developing 3-D digital assets where traditional photography once sufficed.
As e-commerce aims to turn browsers into buyers, it is critical for the online experience to be seamless and easy. A recent survey showed that revealed that many customers were frustrated by slow-to-load or difficult-to-navigate web pages. To that end, to succeed in the metaverse, metastores will need to be welcoming and easy to shop.
But before customers can move around the metaverse as easily as drifting around the mall, developers must perfect a decentralized structure capable of interacting with whichever extended reality (XR) platform customers favor.
Beyond this interoperability, the people building the metaverse still have to overcome various issues relating to cybersecurity, privacy, regulations and fraud protection. Between them, developers, suppliers and retailers will have to decide whether and how to share the sensitive data used to build 3-D models of their products.
The most likely means of protecting intellectual property will be blockchain authentication. The hope is that the environmental gains from more agile production, slimmer inventories and fewer physical goods in transit will outweigh the data-processing impact.
The Metaverse Evolution
The metaverse concept has been around longer than Gen-Z customers, whose expectations and values will drive its development. Their willingness to shift from screen-based e-commerce to immersive buying, playing and communicating will depend on freeing the metaverse from the burdens that could limit accessibility and create exclusion while providing a community that is flexible and open to all.
Professional services giant PwC sees the development of the metaverse as “an evolution, not a revolution.” It is already splitting into new species of retail.
Brands such as IKEA, Zara and Selfridges have chosen lower-risk routes into the metaverse that leave the customer clutching real-world products in their hands. Louis Vuitton, Balenciaga and Nike favor collectible, virtual products, even accepting cyber currencies and creating non-fungible tokens.
While the metaverse is being built, bricks and mortar retail is also searching for new ways to engage the customer. Ironically, this includes the trend of “retailtainment,” the merger of retail and entertainment, often in an immersive way, that is part of the promise of the metaverse. The future of retailing is neither all online nor all metaverse; we will continue to operate in a hybrid, omnichannel world.
When Facebook became Meta in 2021, Mark Zuckerberg expressed the hope that “within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce, and support jobs for millions of creators and developers.” While the metaverse has some way to go before retailers are compelled to engage with it, its rapid emergence means they must plan. The trick will be to focus on the customer, not the technology.