Dec 22, 2021

Fashion Brands & The Metaverse

The term Metaverse previously did not receive widespread recognition, until mid-October 2021 as Facebook announced it’s brand transition to Meta. First coined by sci fi novelist Neal Stephenson in 1992, Stephenson described the Metaverse as a space “where humans, as avatars, interact with each other and software agents, in a three-dimensional virtual space that uses the metaphor of the real world”.

The next generation successor of the mobile internet, the Metaverse can be conceptualized as digital layers over our physical world and immersive worlds we experience through our avatars. Pokemon Go serves as a great example to gain a basic understanding of how users can experience virtual characters set in a real world environment viewing through their smartphone.

Emerging technologies have yielded the ability to build and advance upon what already exists, allowing for Stephenson’s Metaverse to become a reality. AR, VR, IoT, and digital twins allow for continuity and interoperability of our digital and physical worlds. With the Metaverse still in its infancy, much of the technology needed to realize its full potential does not yet exist.

Blockchain technology, NFTs and cryptocurrencies collectively act as the keystone of the Metaverse economy. In the Metaverse, it is possible to buy digital assets and transfer them between virtual experiences as well as generate value that is recognized and accepted by others. Brands have a plethora of new ways to interact with their customer base, allow their customers to experience their products and services all while generating new streams of revenue without ever having to physically ship a product. This is one of the reasons why brands have a heavy interest in delving into this captive market.

We’ve seen fashion in the metaverse that is (a) a combination of physical and digital and (b) fully digital; items sold directly to avatar.

Digital collaborations are often accompanied by physical collections, and it is trending that the physical items are routinely outperformed by their digital counterparts. High fashion brand Balenciaga was one of the first to collaborate with Fortnite. Balenciaga virtual designs are available for purchase in the video game with the incentivization for players to share images of their avatars in the brand’s merch. Back in the real-world, the Balenciaga x Fornite garments are available for purchase in select Balenciaga boutiques. Gucci has followed suit with their own digital collection available for Roblox avatars.

Already, copycats and counterfeit goods are cropping up in the Metaverse, so how do brands protect themselves? As we dive deeper into the Metaverse the scope of what is possible continues to broaden, but so do the potential risks and need for regulation, specifically surrounding intellectual property.

Nike has immersed themselves in the Metaverse in a big way. In November 2021, Nike moved to register its logo, word mark and signature slogan “Just do it” as trademarks for downloadable virtual goods (“for use online and online in virtual worlds”). Nike also began recruitment efforts to build out a team solely responsible for creating products for the virtual world. By registering their key assets as downloadable for virtual goods, Nike is able to take some control over the terms and conditions of use of their products in the emerging ecosystem. But what happens if you are a brand owner who is not taking an active role in the Metaverse?

Some brands are excited to jump head (or VR headset) first into the Metaverse, others not so much. Take Hermes for example, a brand that has expressed their disinterest in participating in the Metaverse, but are being forced to protect their IP rights in the virtual world regardless.

Hermes, the historic French luxury design house, has taken aim at artist Mason Rothschild and his collection of 100 faux fur Birkin bag NFTs dubbed “MetaBirkins”. Hermes’ highly coveted Birkin bag sells upwards of $12,000 (entry level) and garners millions at auction from collectors seeking rare Birkins in exotic skins. The problem? Rothschild’s MetaBirkins have been trading on OpenSea for anywhere from $13,000 to $400,000. In an article in the Financial Times, the company commented that “Hermes did not authorize nor consent to the commercialization or creation of our Birkin bag by Mason Rothschild in the Metaverse,” and noted that the brands exquisitely high standards for the “tangible expression of handcrafted physical objects” is their motivation behind intentionally omitting their presence in the Metaverse. Hermes has not publicly announced their plans to mitigate this issue.

Rothschild has spoken out that his art was an homage to the luxury brand, calling it a “tribute to Hermes’ most famous handbag” and acknowledging that his NFTs “are not affiliated, associated, authorized, endorsed by or in any way officially connected with Hermes or any of its subsidiaries or its affiliates”. So where do brands draw the line? Content in the Metaverse will be largely user-generated. When does “fan-art” stay art and when does it impinge on a brand’s intellectual property? Do brands register their IP in the Metaverse regardless if they have a brand strategy or desire to immerse themselves in it? And furthermore, how will we tackle the mountain that is regulating IP across vast Metaverse platforms? Navigating this new territory is exciting and most certainly challenging.

The explosion of possibilities within the Metaverse is unmatched and all encompassing. Many brands see the value and necessity of defining their future in the Metaverse and, like Nike, are pioneering those efforts. Other brands have no plans to participate or are still on the fence. Only time will tell how consumers respond to this new reality and if brands successfully adapt.

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