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What will the metaverse bring to the future of retail?
Whatwillthemetaversebringtothefutureofretail?
In this third episode of the Transforming Retail podcast, our panel discuss the metaverse and what it means for the future of retail and the shopping experience.
Our third episode features Thomas Harms, EY Global Retail Leader; Jon Copestake, EY Global Consumer Senior Analyst; Ian Johnston, founder of Quinine; and Nicole Srock.Stanley, CEO of dan pearlman Group.
Key takeaways:
How do retailers make sure they align their values in both the virtual and the real worlds?
How can the metaverse enhance the customer journey?
Will the virtual world become more than just a digital twin store?
Can the metaverse be assessed as a place to make customers’ physical lives cheaper, faster and more connected?
For your convenience, full text transcript of this podcast is also available.
Transforming Retail from EY
Kait Borsay
Hello and welcome to Transforming Retail, the podcast series from EY for leaders in the retail industry around the world. I’m Kait Borsay, and in this our third episode we’ll be looking at the metaverse and what it means for the future of retail. Welcome back to our expert panel, Thomas Harms, EY’s Global Retail Leader. Hi Thomas.
Thomas Harms
Hi Kait.
Borsay
Nicole Srock.Stanley, CEO of dan pearlman Group. Hi Nicole.
Nicole Srock.Stanley
Hi, wonderful to be here Kait.
Borsay
Ian Johnston, Founder at Quinine. Hello Ian.
Ian Johnston
Hi Kait, pleasure to be here.
Borsay
And Jon Copestake, EY Global Consumer Senior Analyst, Hello Jon.
Jon Copestake
Hi Kait.
Borsay
Alright Thomas, I’d love you to take us into the virtual world, the metaverse is largely conceptual at the moment, but what do you think the opportunities and risks are of an online 3D world for retail?
Harms
I agree Kait that it is currently more an experiment. But to me it is an extension of the internet, that provides consumers with an immersive, engaging, and virtual environment, and allows for a unique brand experience in this virtual space. So, if that is the case, the retailers also have to be there, because if they are not, the brands will take ownership of this new space. And I also think it is the fact that people spend time there. I see that with my kids. They have plenty of hours over the week in this new world. And if the shoppers are in this new virtual environment, the retailers have to be there as well. So maybe Nicole, if my kids use it for playing, is that the gaming industry and the gaming leisure? Is that what the metaverse will be all about?
Srock.Stanley
Well, I think the gaming industry is at the moment defining the metaverse. But the metaverse is nothing that's so defined right now that you can say it is exactly this or this or the other. It is just more like a huge stream of possibilities, I guess. It’s also virtual retail destination, or trainings tool, or advertising channel, digital classroom. It is so many things at the same time, and I think it would be really interesting to see how it's going to develop over the next couple of years, especially with the technology speeding up that massively. I think we can reimagine everything that we want. Also, the retail and the virtual brands.
Borsay
The scope of it seems absolutely huge. It is huge. Ian If we were in the metaverse now, I'd be speaking to your avatar, wouldn't I? But while you're with us in the physical, is retail bringing the virtual into the physical or the physical into the virtual?
Johnston
What a great question Kait. I mean probably I would be sitting as a hologram on the other side of a desk if we were, if we’re truly on our way to the metaverse. But without doubt there’s kind of two worlds, right? The physical dimension and the digital dimension if I think of those and kind of as a spectrum and those two worlds exist on that on either side of that, you know, we are going to experience, you know, sort of mixed realities. Both of these worlds want to you know enrich and enhance connection, community, commerce all of those things. Right? They build loyalty and trust. But we're going to see a kind of blurring of the two. A kind of mixed reality where the real world is enhanced by sort of virtual experiences and the virtual world will start to take on some of the qualities of the physical world. For me really exciting opportunities when the virtual world and the physical world that space in between. That merging and mixed realities the layering of these two worlds together I think will provide huge opportunities and new habits and new behaviours will emerge that come out of that.
Borsay
Jon, retail investment in the metaverse is already happening. So, if we look at the cultural and social implications, what will retailers need to think about so that their values align in both the virtual and the real worlds?
Copestake
Well, it's an interesting question. I mean first of all let's establish I mean as Nicole hinted that the metaverse really isn't here yet in terms of the way that people might expect it to deliver on their expectations. And I think retailers probably need to think about the fact that you know the way that they invest now will have ramifications in five years’ time or more, rather than overnight. So, I think it's really important for retailers to level set themselves, but I think it's also important for retailers to avoid anchoring. So, at the moment many retailers when they imagine the metaverse, they imagine a 3D interpretation of their physical stores they might build the same sort of store in a 3D environment as they would in a physical environment. That's a missed opportunity. Retailers have the opportunity to really create transcendental experiences, experiences that completely decouple away from from the physical experience. And that's something that they should really think about as they experiment in the metaverse. And experiment is what they should do. They should definitely be there playing; at the moment it is very much a playground. But there's a big caveat, and that caveat is, that you know they need to be aware of the implications in the real world of what they do in the digital spaces because we've already seen you know the threats from things like you know, tax, regulation, cyber risk, brand reputation all of these things need to be considered. A retailer that just goes in blind without a pragmatic approach may find that they actually get caught out in some of these spaces.
Borsay
As the technology improves let's think about how the metaverse can enhance the customer journey. Let's get all your thoughts then as to whether this virtual reality this VR world could become more than just a digital twin store. Nicole, you've given us some hints already, but could this become a reality? Could it become the main place for selling? What do you think?
Srock.Stanley
Well, if you imagine in a topic world where everything is possible where you have no boundaries in form of bad weather, static, aesthetics, all the things that hinder you in the real world to build an amazing store. You can just run wild and design whatever you like. Unless the customer is following you, it's a bit of a tricky situation because we don't know how customers shop in the virtual world so far. But just imagine those wonderful spaces and all of a sudden you can just create wonderful immersive experiences that are highly customised and like we call it, are “bubble branded” and you can just immerse yourself and through those stories and shop around you have your virtual assistant. And it's all tailored around what I like, and you can connect with like minded people and build up communities. I mean we've seen in Roblox they have 55 million daily active users, mostly kids and they they hang out there and especially during the pandemic they celebrate their birthday parties together purely on Roblox and not in the real world. So, I think especially with younger generations the behaviour would change entirely and a virtual space is equally as important. And your personal avatar, as me as a real person in my real environment. So, I think yeah, the opportunities huge.
Borsay
You're giving me flashbacks, Nicole, to the pandemic now you've mentioned Roblox I’ve started to shake in my seat, but I totally understand what you're saying. The possibilities the fact that people choose and buy outfits there and have catwalk shows and celebrate events on there, ties in with this really well. Thomas pick up on this point as to whether the VR world can become more than a digital twin store.
Harms
I completely agree to everything Nicole said and maybe let me play a little bit with the word sets the two of you have used. Kait, you said buying in the metaverse and Nicole always talked about shopping. And I think there is an important distinction here because shopping is something you really love to do, you want to spend time, you want to get into an intimacy, personalisation world. And that is something I think this metaverse or this technology can provide us with. Opposed to the buying where it is more transactional, and there I don't think it's the best way to do this. And maybe to add on this as well is that consumers and shoppers don't think in channels anymore. So, they want to be reached and they want to express themselves and engage whenever, wherever they are. And then here we have an additional opportunity. And I think there's a huge risk for retailers if they view it as the next channel and drive it independent from the rest of everything they do.
Borsay
Ian, what do you think?
Johnston
I guess from from our point of view it's you know we all kind of said it there, you know it's about understanding the customer journey that we want. You know, my worry is that the metaverse becomes this transactional commercial space. And if it does that, we're all at risk, we're not doing good enough things when we reinvent this virtual world. And for the way we always try to think about it is you know define the journey first, understand what your where your customers are what they want the journey they want to go on. And if the metaverse or the virtual world has a place in that journey then perfect right? Then it makes sense. Not just going to the metaverse as a default to create journeys there. And so, for me interweaving and understanding where our customers are where they want to be and then designing the experience around it, rather than just defaulting to creating experiences and metaverse because everyone else is there.
Borsay
And you Jon, what do you think?
Copestake
So, if you think about, you mentioned that maybe the metaverse could become the main channel for selling, and I agree with Thomas effectively what we're thinking about here is that we shouldn't limit ourselves to thinking about the metaverse as a channel. The idea and this is going back to what Ian said earlier, is that how much can it augment physical experiences? You know if you're walking around a store, and you have access to AR why wouldn't that store define a much better reality for you as you wander around it? If you’re buying something digitally, why wouldn't you have something physical sent to you at the same time? So, there's a big element of actually thinking about how it supports and integrates channels rather than actually being a channel in its own right that people sell through.
Borsay
Nicole, we started with you. Let's just loop back to you just to continue on what Jon said about about kind of audience awareness I suppose.
Srock.Stanley
Yeah, I think the really interesting question is what kind of other business opportunities will involve. Because if we apply the the old rules to the new medium, we have kind of a very awkward hybrid environment. So, I think over the time we’ll have, and we are going to see much more new business cases that are purely borne out of the metaverse mindset, like digital fashion is evolving rapidly at the moment and other services. And I think this will be the very interesting point where also a lot of money will be made, and pure digital companies evolve and are not trying to bridge the real world and the digital world. So, it's going to be really interesting, I think.
Borsay
Alright. Well, in a moment we'll round off with our panels Metaverse recommendations for retail. That's next.
MUSIC
Transforming Retail.
Borsay
So for retail to harness the metaverse how should it be assessed as a place to make your physical life cheaper, faster and more connected perhaps. Also, with the threat of cybercrime customers are going to need to feel safe and confident. Let's get our panel's recommendations for retailers then as this new age of the Metaverse era approaches. Ian let's start with you.
Johnston
Something we haven't touched on is the sort of environmental impact that this digital world actually you know creates. We don't really know what it what it means yet. I heard a great statistic that talks about you know one Bitcoin transaction equals five hundred thousand visa transactions, right? And so, you know having a thousand dresses in the virtual world isn't necessarily a sort of environmental position that some brands want to take forward. And so, as you're going towards this metaverse you know think about the environmental impact. You know from the start; this is going to have a much bigger impact than we actually know.
Copestake
Actually, from a sustainability perspective it's a really important point. The metaverse is something that gives with one hand and takes away with the other because obviously there's a lot of energy and carbon that's going to be required to build the infrastructure and support the operating environment that the metaverse might represent. But equally if people are consuming more digitally, they’re consuming less physically, and there's also opportunities to educate, change behaviours and engage in that way.
Johnston
And I think Jon you're you know we're in this moment where we can actually use the physical space to educate people a little bit. You know NFT’s, cryptocurrencies, where are we learning those new behaviours? If you're not a gamer, right? Right Nicole. Like obviously those gamers are learning that behaviour intrinsically and I think that's what the gaming industry is doing well, right? It's defining these new habits and new behaviours that that we're going to adapt. But for folks like us and some of the in-betweeners, you know, how are we going to learn how are we going to how are brands going to walk us to that Metaverse. We need someone to hold our hands in many ways to build that trust, build that loyalty. Because it's going to be a frightening world for many people.
Srock.Stanley
One thing as Ian mentioned there the important thing is also to develop a value focussed strategy and then test, learn, and adapt. It's just a very new medium. And the thing about it is nobody knows the right way, and nobody now has the right solution for the perfect shop environment or platform. So it is about testing, evaluating and then prepare to scale if you're successful with your business case. So, I think it is this huge opportunity just to play and to redefine who you want to be as a retail brand or as a brand overall.
Borsay
And Thomas, what about you?
Harms
Well, some thoughts. So, one is we have not touched that there is a huge additional revenue opportunity because we have new products. So, we always talked about what we may do physically and virtually but there are some products and solutions that you can only use in the virtual world. So, if you play golf or if you have a horse in this virtual world. You buy a blanket for this horse that you never get physically. So, there's huge additional sales potential here for this virtual world. And then for your statement at the beginning I completely disagree that it would make our life cheaper, faster. I think it's far more about creating this intimacy. So, I'm a simple man. I always think in structures. So, my structure is we have three value propositions for retailers. So, one is becoming invisible. That would be this cheaper faster. On the other extreme we can become more intimate with the consumer and that means personalisation, giving them the opportunity to engage. And I think that is actually what this new world will be about.
Borsay
In just a few words then tell me how much this new world excites you, Jon.
Copestake
It does excite me. I'm incredibly excited about what it could become in the future that there is the caveat which is that it's still in the future. I think it's not going to transform everything overnight. It will be an iterative process.
Borsay
Nicole?
Srock.Stanley
I think what's so exciting is that everything is still fluid and will likely continue to be like this. So, it means we can shape it and shape it really quickly and with the development of the technology, it will look nice in the end.
Borsay
Thomas.
Harms
First, I think I am in a very positive way curious how this metaverse and all the technology around this will evolve. And of course, it is exciting to be involved in this development from the first minute on, so looking very much forward to it.
Borsay
And Ian.
Johnston
Well, of course it’s exciting but it's also a bit scary the way this new world shows up. I'm interested to understand how you know Maslow's Hierarchy of Needs shows up in the metaverse right? What does it really mean to us and how does it impact us going forward and what new habits and behaviours will emerge. Hopefully it's more exciting than scary.
Borsay
Well, that's it for this episode. Thank you to Nicole, Ian, Jon, and Thomas for such a fascinating conversation. Join us again soon when we'll continue to look at how retailers can transform to stay relevant. Also, do subscribe to this series so you won't miss an episode, from me Kait Borsay, thanks for listening and goodbye.
Transforming retail, back soon.
