Fashion And The Metaverse: Why Ralph Lauren Wants To Sell You Digital Clothing

In December, Ralph Lauren opened its newest stores, passing over sprawling metropolitan cities like Milan, Tokyo and New York for an enticing new location: the online world of Roblox, with 47 million daily active users. It stocked its virtual stores, open 24/7 and accessible to anyone in the world in just a few clicks, with virtual puffer jackets, checkered beanies and other retro skiwear for the winter season, priced under $5.

It’s just the latest example of how the fashion industry is beginning to delve into the so-called metaverse, with Ralph Lauren, Gucci, Balenciaga and others charging real money for digital-only clothing and accessories. As silly as it may sound, it’s being heralded as a potential new goldmine, with Morgan Stanley predicting that the metaverse could present a $50 billion-plus opportunity for the luxury industry in the next decade.

Here’s a quick guide to get up to speed on what the metaverse is, and why fashion brands are racing to set up shop in it:

Wait. Remind me what the metaverse is, again?

Frankly, that is still being figured out. But the idea is that it could be the next version of the internet, offering a more immersive and three-dimensional experience. In the metaverse, you have a digital persona called an avatar that can seek out experiences that are similar to what you might do in the real world — you can shop, eat at restaurants and attend concerts. While it has begun to take shape in various online gaming platforms, like Roblox, it remains largely theoretical.

Is this really a new idea?

Not exactly. People have spent time immersed in online video games for years, and brands got involved there too. Adidas, Armani and Calvin Klein experimented with digital fashion on Second Life, an online virtual world that had some one million members at its peak in 2007. In 2012, Diesel began selling clothing and furniture on The Sims. In 2019, Louis Vuitton developed ‘skins’ — an in-game purchase that changes a player’s appearance— for players in League of Legends.

Why are people talking about it again, then?

The pandemic has something to do with it. As public safety restrictions forced millions around the world to quarantine and socially distance, people began spending significantly more time online. According to eMarketer, adults in the U.S. spent 7 hours and 50 minutes a day interacting with a digital device last year, up 15% from 2019.

Facebook also generated a lot of attention when it announced it was changing its name to “Meta” in October, with ambitions of becoming a major player in the metaverse. It will spend $10 billion this year and more in years to come to make that a reality. Bill Gates recently predicted that we will be attending work meetings in the metaverse within the next three years.

Brands, which moved fashion shows online during the pandemic and have been thinking a lot about how to connect with customers in the digital realm, are now racing to figure out their metaverse strategy. Balenciaga is creating a metaverse division. Gucci, Burberry and Dolce & Gabbana are selling virtual fashion. Nike acquired a virtual sneaker designer.

What is in this for brands?

A couple of things. For one, it’s a way to attract the next generation of customers, namely Gen Z, who are digital natives and already accustomed to spending significant time online. “Their physical and digital lives have equal prominence,” says Michaela Larosse, who leads creative strategy at The Fabricant, a digital fashion house based in Amsterdam.

It also looks like an extremely lucrative new revenue stream. According to Morgan Stanley, the metaverse could help luxury brands expand their total addressable market by over 10% by 2030, good enough for more than $50 billion in additional revenues. More exciting, the bank says, are the profit margins, with the potential for 75% of that revenue to hit a profit measure called EBIT, or earnings before interest and taxes.

Think about it: With a digital item, there is no need to buy raw materials, spend money on labor, bother with manufacturing or ship something around the world. Brands already have a vast archive of collections to pull from and repurpose for the digital realm. Plus, they don’t only profit from the first sale. They can collect royalties each time an item is resold. This is made possible by embedding terms in a “smart contract” on blockchain technology, which will power the metaverse.

Digital fashion is also inherently sustainable, with the production of a single digital garment requiring 97% less carbon and 872 fewer gallons of water than a psychical garment, according to DressX, a digital fashion startup. Plus, there’s no leftover inventory at the end of the season that must be discounted, donated or destroyed.

Okay, but why would someone spend real money on clothing that doesn’t exist?

Good question. The answer sounds something like this: If you spend a lot of time online, you probably care about what your avatar looks like. Consider that one in five Roblox users updates their avatar on a daily basis, according to the company.

“As people increasingly spend more time in digital worlds, they are increasingly becoming more intentional about how they portray themselves in digital worlds,” says Dylan Gott, global technology innovation manager at Estee Lauder, which may soon offer makeup for avatars to use in the metaverse.

There’s also the attainability factor. While few 16-year-olds can walk into Balenciaga on Rodeo Drive and snap up the latest runway look, they can spend a few dollars to buy a digital version to show off online to their friends. “This generation is used to spending money on their avatars,” says Simon Windsor, cofounder of Dimension Studio, which helped Balenciaga put on a virtual fashion show during the pandemic.

For others, it’s an investment opportunity. If someone buys an NFT — a non-fungible token, which is a type of digital asset stored on the blockchain — and it grows in value, it can be resold for a profit. For instance, in 2019, The Fabricant sold a shimmery silver dress called “Iridescence” for 54 Ether, or about $9,500; Today it’s worth over $200,000. “It transpired to be a very good investment for the buyer,” says Larosse.

What does it cost?

Some virtual fashion is inexpensive. For instance, in September 2021, Balenciaga launched Fortnite “skins” priced at 1,000 V-Bucks (the currency used on Fortnite), equivalent to about $8. Ralph Lauren is selling its winter apparel on Roblox for $3 to $5.

Other items are selling for thousands or even millions of dollars, surpassing the value of any physical product. In August 2021, Gucci sold a Dionysus purse for 350,000 Robux (the currency used on Roblox), equivalent to about $4,100 — more than it charges for the real bag. In October 2021, Dolce & Gabbana auctioned a nine-piece collection of NFTs, including a digital tiara made with “gems that can’t quite be found on Earth,” for $5.7 million.

Where can you buy virtual fashion?

There is no single metaverse where you can shop your favorite brands. Instead, companies have sprung up on existing online gaming platforms like Roblox, The Sims and Fortnite. They are also beginning to sell their wares on a wave of new metaverse platforms, like Zepeto, a Softbank-backed company popular in Asia.

Typically, an item can only be worn on the platform where it was purchased. A big outstanding question is whether buyers may eventually be able to wear their virtual fashion across different platforms.

How could this change the fashion industry?

Designers will have more freedom to push the envelope. In the metaverse, a jacket can be on fire, made of water or change colors throughout the day or according to the owner’s mood. “You can forget the laws of physics in the metaverse,” says Windsor. “Anything you can conceive can be delivered.”

It may give brands a new way to test products, too, launching them first in the digital world, gathering feedback and assessing demand before selling them in the physical world. Shoppers who like the digital version might be able to click a button to order the physical version.

“We believe there should be a strong connection between digital and physical,” says Franck Le Moal, chief information officer at LVMH, a luxury powerhouse that owns brands like Louis Vuitton, Dior and Givenchy.

It could also open up the industry to more designers of various backgrounds. For instance, Zepeto lets anyone create their own digital clothing and sell it on the platform. The Fabricant launched a new initiative in September, in which anyone can design digital clothing, put it up for sale and share in the royalties.

To be sure, much remains to be figured out in the metaverse, and critics argue that it will never become mainstream. Regardless, in the meantime, the world’s biggest fashion brands are taking it seriously and moving quickly. “It’s a massive opportunity,” says Le Moal. “It’s become a regular topic of conversation.”