Tech & Sourcing @ Morgan Lewis


Although the metaverse as a retail market is a relatively new idea, both established and emerging fashion brands are trying to make the most of this new way of engaging with customers. Combining aspects of virtual reality, augmented reality, and mixed reality, the metaverse allows businesses to connect directly with consumers and to conduct business on a new global, digital platform.

Individual avatars interact with this digital reality, including buying and selling assets, such as digital fashion to be displayed on the avatar or real-world physical fashion to be delivered to their homes. As more and more people experiment with this new global platform, can we expect to see a surge in the number of retailers setting up shop in the metaverse?

Metaverse and “Digital” Fashion

A key feature of the metaverse is that people can personalize their online avatars however they choose, including through digital fashion. For example, “Forever 21 Shop City” and “Nikeland” host virtual shops on the Roblox platform allowing users to try Forever 21 and Nike virtual products on their avatars when playing games online. The luxury market is also alive to the potential of this new market, as 2022 saw the launch of the first-ever Metaverse Fashion Week, a four-day event consisting of runway shows and panel discussions hosted in the 3D virtual world Decentraland.

Strategically timed to coincide with the Metaverse Fashion Week, major retail brands, including luxury fashion houses, released a series of branded non-fungible tokens (NFTs). This meant that as well as having a personal avatar dressed in the latest fashions, consumers could use these NFTs to prove ownership of the high-end digital fashion asset. The market has also seen a move to introduce “buy now, pay later” NFTs, such as those offered by buy now, pay later service provider Afterpay, meaning that there is greater short-term affordability of engaging in the online retail of digital assets through the metaverse.

However, the technical interoperability (or rather, lack thereof) of digital assets in the metaverse acts as a barrier to progress for this new retail market. As there is no single metaverse, but multiple metaverses, something you buy in one metaverse environment is not necessarily transferable to another, ultimately limiting the value of digital fashion products.

Moreover, brands offering these digital assets should be mindful of consumer rights that extend to the sale of digital content through the metaverse. Under UK and EU consumer rights legislation, consumers residing in the United Kingdom and European Union are generally entitled to a refund (following withdrawal or cancellation) within 14 days of the purchase of digital content, unless this right is waived by the consumer prior to entry into the contract. Although there are general exclusions relating to personalized products, retail brands should carefully consider their terms in light of this right to cancel, particularly if the digital asset is linked to an NFT, as the process of “returning” an NFT is particularly tricky.

Metaverse and “Physical” Fashion

Not only does the metaverse give fashion brands the opportunity to directly market their products to consumers as digital assets, but it also offers an alternative sales channel for retailers, which is additional to their traditional retail website. A user’s digital avatar could visit an online store in the metaverse, engage with a virtual sales team, “try on” and then purchase products, and then receive a physical version of the product in the post.

This new sales channel for brands has the potential to solve some of the biggest issues facing online retail today, such as waste reduction, sizing errors and accuracy of data on cross-selling/up-selling. In 2021, UK fashion retailers were reported to have faced return rates between 20% and 30% of all products sold, costing around £7 billion ($8.4 billion) to the industry. The hope is that by using digital avatars with true-to-life measurements, users will receive more accurate fit and size recommendations than by relying on sizing charts, ultimately helping retailers reduce the huge cost and waste generated by dealing with returns.

However, there are still significant barriers to entry with this approach, given the upfront investment required to achieve any material engagement with the metaverse. This includes investment in the necessary cloud infrastructure to set up a metaverse storefront that has the same essential function as retailers’ online websites.