Opening the door to the Metaverse to meet the growing digital demand for luxury goods will present brands with a $50bn revenue opportunity within the decade, according to a new analysis by Morgan Stanley.
In projections that are slightly difficult to compute right now, considering revenue streams for digital mediums for luxury brands are currently negligible, strategists at Morgan Stanley think this is all “about to change.”
“The Metaverse will likely take many years to develop; however, NFTs and social gaming (e.g., online games and concerts attended by people’s avatars) present two nearer-term opportunities for luxury brands,” they wrote in a note today.
Clubbed together, social gaming and NFTs could constitute 10 per cent of the luxury goods addressable market by 2030, upping the industry’s profit pool by around 25 per cent, according to the estimates in the bank’s “blue-sky analysis”.
When it comes to gaming and Metaverse platforms, the bank notes that one in five Roblox gamers update their avatars daily, demonstrating significant appetite for digital wardrobes.
“Image is everything in virtual experiences,” they wrote. “Luxury brands are exploring a number of collaborations with gaming and Metaverse platforms. Revenue share deals are on the rise and music events have potential to reach vast audiences of young spenders.”
Luxury brand Balenciaga made the first move into the gaming space with its collaboration with immersive game Fortnite, where it released limited edition drops of digital garments. If other brands follow its lead, it could add $10-$20bn to the sector’s total addressable market, the bank projects.
Meanwhile, fashion powerhouse Gucci has previously said it is “only a matter of time” until major fashion houses move into non-fungible tokens (NFTs). In late September, Dolce & Gabbana beat them to it with a definitive entry into the market when it auctioned a collection of nine NFTs for a total of 1,885.719 Ether (Ethereum cryptocurrency) – the equivalent of nearly $5.7m.
So, to game or to NFT? The strategists at Morgan Stanley believe there’s a little more money to be made in nascent NFTs.
“While gaming collaborations are, we argue, more advanced in their ability to generate revenue and a wider halo effect for the industry, NFTs present a more material EBIT upside opportunity over the remainder of the decade,” the bank said.
It forecast gaming collaborations to make up 40 per cent of its luxury Metaverse revenue bridge by 2030, but only 20 per cent of its profit bridge by then.
And it seems our avatars won’t be too fussed with accessorising …
“We expect the whole sector to benefit from the advent of the Metaverse, but see the soft luxury brands (ready-to-wear, leather goods, shoes, etc.) as particularly well positioned as opposed to hard luxury (jewellery and watches),” Morgan Stanley said.