Virtual Fashion Is Big News. Can It Be Big Business?
On Monday, London’s fashion set will descend on the grand Royal Albert Hall for this year’s Fashion Awards, a linchpin of the city’s fashion calendar returning as an in-person event for the first time since the pandemic.
This year, those who didn’t get an invite can attend in the virtual world.
It’s the latest sign of fashion’s rapid embrace of cyberspace. At the ceremony, Gucci creative director Alessandro Michele is set to receive the Trailblazer Award, in part for Gucci’s forays in the digital realm.
Last week, Nike launched Nikeland, its vision for a virtual world on gaming platform Roblox, where users can speed around a track, play tag on trampolines and of course pick up some digital Nike products. It’s following labels like Gucci and Vans in creating brand-centric immersive experiences on the platform.
The global games market exploded over the pandemic and is expected to be worth $180.3 billion this year, according to Newzoo, a market research firm focused on the gaming industry. While supply chain disruptions and a global chip shortage are constraining near-term growth, Newzoo sees the value of the gaming industry topping $200 billion by 2023.
“I actually think the most rapid growth period in the video game industry is in front of us, not behind us,” said David Reitman, the global gaming lead at Accenture. (The strategy and technology services firm estimates the gaming industry is already worth $200 billion and growing.)
Brands are laying the groundwork to tap into the trend now. In the past few months alone, in addition to the tie-ups with Roblox, Balenciaga collaborated with online mega-game Fortnite and Burberry partnered with NFT-based game Blankos Block Party. There are more tie-ups to come.
But can gaming move from being the next big thing to being big business?
Some financial analysts are certainly projecting a windfall. Morgan Stanley estimates luxury companies could generate nearly $24 billion in combined sales from revenue-sharing deals with “social games” like Roblox and non-fungible tokens, or NFTs (unique virtual assets logged on a digital ledger known as a blockchain). In their most optimistic case, Morgan Stanley’s analysts believe such sales could surpass $50 billion.
They also noted these initiatives could help brands expand their total addressable markets and provide an uplift to their earnings.
Some brands have already scored windfalls from experimenting in the virtual realm. Dolce & Gabbana cashed in this October when it auctioned a collection of NFTs that brought in $6.1 million. Brands such as Rebecca Minkoff have had more modest sales.
Even so, NFT values are volatile, and there remain a number of constraints on how much brands can leverage virtual goods in games.
Right now, if you purchase a virtual jacket for your avatar in a game, you generally can’t take it with you into another game, making it more like renting the jacket than truly owning it.
In theory, NFTs could solve part of the problem by making it possible to track ownership of a digital item across platforms. But the concept still faces some practical obstacles. For one, games have their own visual styles, so there needs to be a technical solution that allows an item to render correctly wherever it appears. Game makers would also need to cooperate to enable this level of interoperability.
If the role digital items will play in boosting big brands’ sales numbers remains uncertain, the potential for gaming to become a key piece of their marketing strategies is much closer on the horizon. Reitman predicts in the near future any brand looking to target younger shoppers with a product launch will make sure gaming is factored into the campaign.
Longer term, BoF Insights’ digital fashion report found digital assets will be integral to future-proofing businesses as consumers spend a growing amount of time online.
But one question still to be answered is how fashion brands will measure the return on their investments in gaming.
“Our channel checks suggest that a number of these gaming and fashion collaborations to date have been done on a break-even basis — i.e., the fashion brand pays to cover the costs of design and integration in the game,” the Morgan Stanley analysts wrote. “There is a mutual halo effect benefit to both parties but revenue generation has so far been a secondary consideration to simply proof-of-concept.”
Stay tuned for BoF’s latest case study, How to Seize Fashion’s Gaming Opportunity, which launches on Monday on www.businessoffashion.com.
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY
Walmart, Gap and Nordstrom earnings reflect supply chain woes. Heading into the holiday season, chains from Gap Inc. to Nordstrom say they can’t capitalise on heightened demand as supply chain disruptions translate into empty shelves and disappointed customers. Meanwhile, big-box retailers like Walmart and Target have secured inventory, but are under pressure from higher costs.
American Eagle Outfitters sales impress. The clothing, lifestyle and accessories retailer said its inventory levels jumped ahead of the holiday season as it spent more on air freight to overcome supply chain disruptions, after posting better-than-expected quarterly results.
Heading into Christmas, Mulberry sales rise to pre-pandemic levels. The luxury British brand said demand for its luxury products is back at pre-pandemic levels, with sales in the UK and Asia powering a 34 percent surge in first-half revenue.
Roland Mouret files for administration, shuts down Carlos Place store. The London-based couturier is the latest pandemic casualty in the high-end occasion-wear market. The label’s collapse follows that of Ralph and Russo, which announced it was entering administration in May.
US online spending surge indicates early holiday season consumer activity. Online consumer spending jumped 20 percent to a total of $72.2 billion this month through Tuesday in a sign that holiday shopping has started early, according to the Adobe Digital Economy Index.
ABG delays IPO plans following private equity investment. CVC Capital Partners and HPS Investment Partners agreed to purchase significant equity stakes in Authentic Brands Group Inc., giving the company an enterprise value of $12.7 billion. ABG owns brands including Forever 21 and Brooks Brothers and announced a deal to acquire Reebok from Adidas for $2.4 billion in August.
Lanvin Group — formerly Fosun Fashion Group — unveils its new brand identity. The group joins a cohort of other luxury players, including Burberry and Balmain, that have embraced sans-serif capital letters in recent years. A spokesperson told BoF there was no immediate plan for a change in the Lanvin brand logo.
Marks & Spencer takes a 25 percent stake in womenswear brand Nobody’s Child. The British retailer’s investment comes as it seeks to accelerate a revival in its clothing arm.
THE BUSINESS OF BEAUTY
Korean beauty retailer Olive Young is eyeing a $1 Billion IPO. The health and beauty chain, also known as CJ Olive Y
oung, is looking to raise $1 billion in a local public offering that sources told Retail News Asia will take place early 2022. The news comes amid a surge in Korean IPOs, which have raised $21.4 billion this year.
Recently listed Revolution Beauty eyes US expansion. The UK makeup company is ramping up its US expansion with plans to launch in 2,800 retail stores in the next three months.
Alessandro Michele, Ib Kamara to be honoured at 2021 Fashion Awards. Gucci’s creative director will receive the Trailblazer Award at the event on Monday for his work “positioning Gucci at the intersection of culture, art, music and film,” the British Fashion Council said. Meanwhile, Dazed editor in chief Kamara will receive the Isabella Blow Award for Fashion Creator for “his incredible contribution to the fashion industry,” BFC chief executive Caroline Rush said.
Estée Lauder reshuffles China, North America leads. The beauty giant said its president of Asia-Pacific Mark Loomis will become president of North America effective February 2022. Meanwhile, Joy Fan, who previously served as the head of its China affiliate, has been named president and chief executive of the company’s China business. Fan will report to group international president Peter Jueptner and oversee the company’s long-term growth strategy in the crucial Chinese market.
Neiman Marcus Group boosts executive ranks. The American luxury retailer promoted senior vice president Natalie Lockhart to an expanded role leading the department store group’s newly created growth execution office. It also expanded the responsibilities of its vice president of people and ESG, Chris Demuth. Elsewhere, it hired corporate communication consultant Tiffin Jernstedt to serve as its chief communications officer. The company said the new appointments would boost its efforts to “reflect a more modern growth mindset.”
MEDIA AND TECHNOLOGY
SoftBank invests in influencer marketing platform LTK. The 10-year-old company founded by fashion blogger-turned-entrepreneur Amber Venz Box and her now-husband Baxter Box said it raised $300 million from SoftBank. The investment valued LTK at $2 billion.
Chinese authorities announce new rules for celebrity promotions. The national cyberspace regulator has outlined new guidelines for celebrity-produced and celebrity-related content online, according to state media reports.
China’s tax authorities punish two top livestreamers. Xueli Cherie and Lin Shanshan Sunny will be punished for tax evasion and fined 66 million yuan ($10.34 million) and 28 million yuan ($4.38 million) respectively.
Compiled by Daniel-Yaw Miller.