Virtual fashion for $8.99 is not the answer
This week, Meta began selling digital outfits from Balenciaga, Prada and Thom Browne. The looks can be purchased for $8.99 apiece from the company’s new Meta Avatars Store and viewed on Facebook and Messenger, as well as Instagram Stories and DMs.
When Meta’s Mark Zuckerberg and his director of fashion partnerships, Eva Chen, announced the move, many dismissed it as uncool. Meta said it was too early to share the first results, but a post about the launch of Highsnobiety, a hub for young fashion fans, drew a flood of comments such as “Make it stop”, “Literally , nobody wants that” and “They” I’m trying so hard to be cool.
The mixed response was hardly surprising. Big Tech is rarely trendy, even though Instagram has become an indispensable platform for the industry. But consumer demand for digital assets has grown dramatically since Louis Vuitton became the first major luxury brand to develop virtual skins for Riot Games’ League of Legends in 2019.
Now, there is a growing consensus that the digital goods opportunity is more than hype. But where do they fit into the luxury business model? Are virtual $8.99 outfits the answer?
The biggest luxury brands have built multibillion-dollar global businesses by extending their offerings beyond fashion and exclusive accessories to lower-cost, higher-volume categories like beauty, forming a pyramid of products starting with haute couture at the top and expanding into ready-to-wear. clothing, leather goods, eyewear, perfumes and cosmetics.
Although $100,000 couture dresses are beyond the reach of most people, they help generate a perception of exclusivity and quality that allows brands to make incredibly high margins on low-priced items, like lipstick, sold to millions of consumers.
In recent years, Alessandro Michele’s Gucci, Demna Gvasalia’s Balenciaga and Virgil Abloh’s Louis Vuitton have seized the opportunity of expensive T-shirts, hoodies and sneakers, adding streetwear to the luxury goods pyramid with results spectacular, thanks to its high margins and appeal to young people. consumers, engines of growth in the sector.
Today, approximately 70% of Gen X to Gen Z consumers in the United States consider their digital identity important, while 50% are interested in purchasing a digital asset, according to BoF Insights. Global spending on virtual goods reached around $110 billion in 2021, with around 30% attributed to digital fashion, according to BoF and McKinsey’s “The State of Fashion: Technology” report.
With the bursting of the crypto bubble and an impending recession, demand could suffer in the short term. But as we live more online, it’s not hard to imagine some luxury brands embracing digital fashion as a new entry-level category with the potential to extend their reach to new consumer segments and even to fuel a new phase of growth.
“Virtual fashion is a new layer at the bottom of the luxury pyramid, just above knock-offs which remain the gateway for all those who cannot afford luxury but do not want to be seen as have-nots. “, said Jean-Noël Kapferer. , author of “The Strategy of Luxury”.
Big luxury brands are adept at maintaining a perception of exclusivity while moving millions of units into lower priced product categories. But selling cheap digital outfits in high volumes comes with risks.
Is a luxury brand still desirable if tens of millions of aspirants wear its virtual looks? And does it make sense for brands to cede control of distribution and valuable customer data to platforms like Meta, as they have with social media?
While this may work for some brands, there is a compelling counter-argument to placing digital products higher up the product pyramid, positioning assets such as digital skins and NFTs as rare collectibles, steeped in creativity and digital savvy, with the potential to resonate with more sophisticated products. clients.
“It shouldn’t be less than beauty,” said Benoit Pagotto, co-founder of RTFKT, a virtual fashion startup acquired by Nike in December.
“It could surely have a positive impact on our brands – if done right,” LVMH Chairman Bernard Arnault said, referring to NFTs and the metaverse during his annual investor presentation in January. “It’s not our goal to sell virtual sneakers for 10 euros.”
Eventually, luxury brands could develop a wider range of digital products. But this is only the beginning and managers are right to be cautious.
Selling physical goods with “digital twins” that can be shared online and used to access online communities is the best place to start, advised Ian Rogers, a former digital director at LVMH who joined the crypto wallet maker. Ledger in 2020.
“$10 items in the avatar shop?” No thanks.”
NEWS IN BRIEF
FASHION, BUSINESS AND ECONOMY
Luxury sales expected to rise 5-15% this year, says Bain. The global luxury market accelerated sharply in early 2022, the consultancy found, but is likely to slow due to macroeconomic pressures and Covid-19 lockdowns in China.
Chanel will travel to Senegal for the next Métiers d’Art show. The luxury house will launch its next Métiers d’Art collection with a show in Dakar, the capital of the West African country, on December 6. In West Africa, Senegal enjoys the reputation of the regional capital of sewing crafts.
H&M closes Shanghai flagship store, hurt by closures and consumer backlash. The world’s second largest fast fashion retailer entered China in 2007 with the opening of the flagship store in Shanghai. It had more than 500 stores in mainland China at the start of last year, but its website currently lists only 376.
Zalando plunges after slashing forecast on deteriorating economy. Shares of the German e-tailer fell the most in more than three years after Europe’s biggest online retailer cut its profit forecast, blaming worse-than-expected macroeconomic conditions.
Nike will completely leave Russia, decrease in the coming months. Three months after suspending operations there, the US sportswear maker announced in an emailed statement on Thursday that it would leave the country altogether, joining Western brands such as McDonald’s and Google.
Mango to franchise Russian stores to local partners. The first two of the 55 stores that Mango operated directly in Russia will be transferred this week to local partners, the Spanish company said in a statement on Monday.
Harrods delays summer sale as new season products are slow to arrive. It’s the latest example of supply constraints hitting industries ranging from automotive to high-end fashion, with shortages made worse by China’s Covid-zero policies and the war in Ukraine.
JD Sports’ annual profit more than doubled. The retailer’s pre-tax profit rose to £654.7m ($800.2m) for the financial year ended January 29, from £324m a year ago. The company, which has been the subject of several investigations by Britain’s antitrust watchdog, is splitting the position of chairman and chief executive and is in the process of filling both positions.
European fashion councils form alliance to push sustainability policy. The French Haute Couture and Fashion Federation and Italy’s Camera Nazionale Della Moda are among 25 members of the European Fashion Alliance announced on Tuesday and led by the Fashion Council Germany.
Mike Ashley’s Frasers Boosts Hugo Boss Exposure to $937M. Frasers (formerly Sports Direct) is moving upmarket, said it now owns 4.9% of Hugo Boss shares directly and a further 26% indirectly through the sale of derivatives called put options.
Hop Lun sells majority stake to Platinum Equity. The financial terms of the deal between one of the world’s largest producers of intimate apparel – which makes lingerie, underwear and swimwear for brands including H&M, Fenty and Victoria’s Secret – and the company investment capital were not disclosed.
THE BEAUTY BUSINESS
Hailey Bieber’s Rhode Skin sued for trademark infringement. Hailey Bieber’s Rhode Skin brand – which launched on June 15 – is being sued by fashion brand Rhode, which alleges in a court filing that Bieber’s unauthorized use of the “rhode” brand represents a “case of ‘school of reversed confusion’.
Glossier to raise prices as costs rise. The beauty brand put a banner on its site announcing that the price of certain products would increase by $1 to $4 from July 6 due to “higher production costs”.
Harry Styles collaborates with Gucci. During a presentation during Milan Men’s Fashion Week on Monday, the Italian luxury giant revealed that its creative director Alessandro Michele had collaborated with the English singer on its latest men’s collection, titled “HA HA HA”.
End. appoints a new CEO. LVMH veteran Parker Gundersen will succeed co-founders Christiaan Ashworth and John Parker, who remain on the board.
Boohoo appoints former Asos and Amazon executive as CFO. The UK-based fast fashion retailer announced that Shaun McCabe will succeed Neil Catto in a regulatory statement on Tuesday. It joins Boohoo from the Trainline online rail ticketing platform.
MEDIA AND TECHNOLOGY
Chinese fashion tech company Linctex Digital raises $100 million. The money was earmarked for international expansion and further development in digital fashion, he said on Tuesday.
China’s JD.com posts slowest growth ever in ‘618’ purchase event. Total sales rose 10.3% in the 18 days to Sunday in the first major shopping festival since a recent Covid-19 outbreak, the company said, down from 27.7% growth in the event in 2021.
Compiled by Joan Kennedy.
Disclosure: LVMH is part of a group of investors who together hold a minority stake in The Business of Fashion. All investors have signed shareholder documentation guaranteeing the complete editorial independence of BoF.