E-commerce in The Metaverse - The Future of Online Shopping

The metaverse is poised to be the next breakthrough that will change how we view digital life. With all the industries the metaverse is looking to disrupt, e-commerce presents some of the most eye-catching benefits. And as the title of this piece puts it, e-commerce in the metaverse may be the future of online shopping.

The E-commerce Market

The emergence of e-commerce was one of the major changes that came with the internet, birthing giants like Amazon, eBay, AliExpress, etc. Shopping moved from walking into physical stores to a more convenient and fast process online. Merchants and customers could easily connect and conduct transactions from different ends of the world without the limitations of physical barriers.

Hence, it's no surprise the e-commerce market was worth over $26.7 trillion in 2019. In 2022, large economies like China topped global retail e-commerce sales, accounting for over 52.1%, with the U.S and United Kingdom coming behind. And e-commerce makes up a huge chunk of the GDP of most economies.

However, while e-commerce has improved commerce in many ways, it also comes with some limitations. For example, buying goods in physical stores enables customers to try them out before making payments. In-store shopping gives them a kind of foretaste of the services or goods they intend to purchase. A study by ShopKicks reveals that 82% of customers are more likely to purchase items when they can physically see, touch, and try them.

E-commerce limits such experiences as customers often have to take a leap of faith when making online purchases. On several occasions, customers have returned purchased items because they fail to match their preferences on arrival. As a result, increasing supply chain costs for merchants and delays for customers. This great divide between the immersive experience that comes with in-store shopping and the ease and convenience of online shopping has continually plagued e-commerce until recent developments of the Metaverse.

What is the Metaverse?

A straightforward definition of the Metaverse at this time is almost impossible, considering the concept doesn't entirely exist yet. But brands are expanding and pushing beyond boundaries through several technologies.

An open-ended way to put it is that the metaverse is the integration of several innovative technological solutions that facilitates the convergence of the physical and digital world. This includes innovations like NFTs, artificial intelligence, social media networks, augmented/virtual reality, digital currencies, etc.

The Metaverse introduces a new world that breaks the limitations of digital and physical by merging both into an immersive universe. Hence, the metaverse is considered by many to be the next big invention - like the internet - that will power a new kind of virtual economy. And just as the internet boom birthed e-commerce, the metaverse is also looking to reshape commerce and usher in mind blogging innovations that will drastically change the online shopping experience.

Integrating the Metaverse and E-commerce

The Metaverse presents numerous opportunities for brands and customers alike through innovative processes that will address not only current challenges but also introduce new revenue streams. Below are some of the ways the Metaverse will impact the e-commerce industry:

Increased Revenue: A study on Forbes reveals that brands can achieve over a 40% increase in conversion rates when they use 3D models to replace static images. The Metaverse will provide customers the ability to touch, feel and test products virtually before purchasing them. Hence, improving trust from customers which eventually leads to more revenue for brands. It would also reduce the need for businesses to have physical shops scattered across the globe because they want to provide an immersive experience. Instead, brands could have one centralised virtual shop that all customers can visit to try out products and directly make purchases.

More Personalised Experience: Brands can move beyond giving discounts and provide a more streamlined experience to their customers. For example, virtually walking in malls and discussing with customers can enable brands to identify the feelings and needs of their customers. Brands can, in turn, offer a great user experience through their conversations and virtual interactions. A general rule of thumb is that customers who will explore e-commerce metaverses aren't interested in seeing products but in experiencing them.

Reduction of Return Rates: Since the metaverse offers the same immersive experience as in-store shopping, the number of return rates will reduce for products like clothing, cosmetics, shoes, home furnishings, etc. Warby Parker allows customers to try out every pair of frames in its catalogue through a virtual try-on app before buying them. This enables customers to buy its product without later returning it. Amazon, through its View in Your Room feature, enables customers to see how furniture and other decorative items will look like in their space before making purchases.

Improve Customer Understanding: Brands can save themselves a ton of money and time when they utilise the virtual world to carry out product market fit. Before manufacturing a product, brands can make several collections that customers can experience virtually. The response of customers will determine if the product should continue, how much to produce and when to produce. As a result, brands can stay loyal to their customers and reduce waste.

Community Building: The metaverse can help improve communication in communities for customers to scale beyond regular followers to a cult-like community that have contributed on several occasions to the growth of your products. You can decide to create exclusive merchandise specifically for this set of customers who have become core community members. This will boost engagement and prompt other community members to follow suit.

Interactive Online Shopping: Shopping online, most times, is a lonely process, causing customers to make several mistakes. The best you can do most of the time is to act based on online reviews or comments. However, the metaverse transforms this experience as you can easily interact with other customers in a virtual store, consider their thoughts and ask for recommendations. Hence, making your online shopping experience more exciting.

New Streams of Income: The metaverse won't just exist to improve physical businesses. Many consider the metaverse to be another form of existence where they can live a second life that's purely digital. In so doing, they would also need to purchase digital items that will aid living in this new world. Video games already provide some sort of this experience where gamers purchase in-game accessories for their digital avatars. The metaverse further expands on the experience as people could work, attend events, discuss, collaborate, and live new lives in an entirely virtual plane. As a result, brands can enter the production of specific digital products that will cater to the needs of people in the virtual world.

Brands like Adidas and Nike are already positioning themselves by acquiring lands in metaverse environments like The Sandbox and Roblox, respectively. Nike also has a product line - through the acquisition of RTFKT studios - that specifically produces virtual sneakers. Other fashion brands like Balenciaga have partnered with the popular game Fortnite to produce digital clothing for avatars.

Cost Reduction: Most metaverses are poised to run on distributed ledger systems like blockchain technology since they will integrate NFTs and digital currencies into their environments. This can lead to a significant cost reduction for both brands and customers. For example, brands in the metaverse can integrate cheaper digital currencies as payment options in their virtual stores instead of traditional payment systems that charge users up to 2% of their money on international transactions. The charges for a typical international transaction using digital currencies like USDT or USDC costs $1 or less regardless of the amount transacted. Hence, allowing international customers to purchase items worth hundreds of thousands or even millions in the metaverse without paying transaction fees that can go above $30,000.

Possible Challenges

While the benefits of integrating e-commerce and the metaverse seem interesting, they also come with some potential drawbacks.

The metaverse is yet to fully come into existence and most of the benefits we discussed may take years before they are actualised. And who knows, the whole metaverse thing as enthusiasts envision it may never become a reality. Hence, transforming your business totally in response to a potential disruption may not be the best idea.

Additionally, regulations surrounding e-commerce trading differ across different countries and since the metaverse is looking to shrink both physical and international boundaries, it will be a serious challenge for governments and brands worldwide to navigate. For example, how does the government tax an asset that you use for generating income in the virtual world? How do they manage the use of digital currencies in the space, especially since only a handful of countries have adopted the use of cryptocurrencies or central bank digital currencies?

The cost to purchase metaverse-enabled devices may also be high for small-scale retailers, considering the high cost of current VR/AR devices.

Other challenges brands may want to consider includes the security of the space, their funds, digital products, and the privacy of customers.

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With key insights from a basket of experience across top talents in web3, our team at SIGNVM can help your brand strategically position itself to accrue value from the integration of e-commerce and the metaverse while safely navigating challenges that comes along with the process.

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