When the digital transformation happened, luxury was slow to embrace the change. While mass-market firms were eager to adapt early and seek opportunities in e-commerce and social media, many luxury outfits (even as recently as two years ago) were still debating the role of digital. An example I remember particularly vividly was a discussion with the owner of a gourmet brand that has exquisite tasting experiences in select places around the world, including in some major airports.
With weak brand storytelling, the company was already facing stagnation. Its digital presence was merely a website with a depository of undifferentiated content. The story was a typical “category story” where they highlighted superlatives in quality. In essence, they were simply placing themselves on a quality vector within their category and believed that this was inspirational enough.
I asked about their digital ambitions and the short answer of the owner, running a multi-generational business, was that they never needed it and their business was different. When I challenged him with the idea that desirability-creation happens now in most cases online — and predicted his customer base would decline rapidly — he was doubtful. After all, the brand never needed a strong digital presence in the past and, as he insisted, the core service was an in-person experience at their gourmet locations.
Over the last two years, the business practically collapsed even as travel rapidly rebounded. The brand had no CRM system, no sufficient information about their Very Important Clients (VIC), and no digital customer engagement team that was able to connect with those who were already friends of the company. With the advent of the metaverse, luxury should learn this lesson. The magnitude of change and disruption has never been as great as it is now.
What luxury needs to understand is that, in 95 percent of cases, customers across luxury categories make their brand decision digitally. Preferences are built online. The competitive game happens on the internet. It’s the new moment of truth. This means data is becoming one of the most critical resources. Data management and real-time analytics through AI become the way to better understand behavior and preferences and needs to be the base to interact with customers. Luxury, after all, is a personal interaction (at least, it must feel personal).
With the moment of truth moving from the physical to the digital space, digital mastery is simply not optional anymore. It is the only way to grow in the metaverse: a world we are already living in. With Gen Zers spending 7 to 9 hours a day on average on digital devices according to the CDC, the metaverse is not the future. It’s now.
And technologies are getting increasingly immersive at an accelerated rate. Anyone who has tried a game, a meeting, or a social hangout on a Meta Quest VR headset or similar virtual reality device reports the same experience: it’s the next best thing to being there, in some cases even better. It’s immersive, engaging, inspiring, and captivating. It’s a space where emotions are forged. And luxury is emotion.
Look at what’s happening in art. Within just one year, NFTs shot up to around 15-20 percent of the total art market, according to Équité Research. Équité further estimates that the digital art market will surpass traditional art before the end of this decade. Completely new product categories emerge while traditional categories are being disrupted. And in the new immersive world, groups that lead the change will move into the pole position for years to come. Those who wait and see will become obsolete in a shorter time span than ever before. It’s a new game of luxury.
At this moment, I am working on several metaverse projects with well-funded luxury startups that will hit the markets within the next 12-18 months. Some of them will transform industries that had an unchanging business model for over 100 years. Many labels feel safe because they know their current categories and competitors. They underestimate the dramatic seismic shift coming from new players who are born in the metaverse, deeply understand Gen Z, are not bound by mindset restriction of “we have always done it this way,” and are eager to fix customer pain points.
There is no time for complacency. The digital disruption took about 10 to 15 years. Because everyone was slow, many brands who took their time adapting to the new reality survived. In the metaverse, they won’t have that luxury.
It is important not to tackle the metaverse through a siloed department within an organization, but rather think of a holistic strategy creating competitive advantage through all touchpoints: from brand story to a truly omnichannel customer-centric desirability-creation and retail execution. The metaverse, the new sense of urgency.