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Virtual fashion to provide sustainable revenue streams for Brands

January 18, 2023
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The Fashion Tech report just got released by The Business of Fashion and McKinsey and we summarized the trends and key takeaways through the lens of the phygital infrastructure company, Virtuall.

As fashion executives consider where to focus their attention and direct their resources, the report explores five technology-driven imperatives for the industry in this report:

  • Metaverse Reality Check: Virtual goods and extended reality
  • Hyper Personalisation: Data- and AI-led marketing and e-commerce
  • Connected Stores: In-store customer experience with mobile apps and micro-fulfillment
  • End-to-End Upgrade: AI-powered value chain integration
  • Traceability First: Blockchain and tracking technology for sustainability

Here are 7 most important trends covered in this report relevant to the Phygital and Virtual fashion

  • Fashion companies are using technology to become more resilient, transparent, and sustainable, with investments expected to increase from 1.6-1.8% of sales in 2021 to 3-3.5% by 2030, those brands that don't use advanced technology will face challenges.
  • Virtual goods spending reached around $110 billion in 2021, which is expected to increase to $135 billion by 2024. The report suggests that innovative fashion brands could generate up to 5% of their revenue from activities in the metaverse in the next 2 to 5 years, driven by virtual skins in digital worlds, and NFTs can help to solve industry pain points and bolster customer loyalty.
  • In 2021, 48% of customers who switched to online shopping did so because of the Covid-19 pandemic, 27% cited convenience, 11% cited product availability, and 11% cited promotions. Digital interactions with fashion brands also increased, with 72% of customers reporting online interactions in 2021, expected to stabilize at 66% on average in the coming year.
  • Brands have access to a growing arsenal of personalization tools and technologies to upgrade how they customize and personalize their customer relationships. 71 percent of global consumers want companies to deliver personalized communications and products, and 76 percent are unhappy when this is not offered.
  • The inexorable rise of e-commerce has forced fashion players to rethink the role of physical stores. Fashion executives can address consumer pain points by using in-store mobile apps to enhance the experience. Customers who engage with in-store technology spend up to four times longer shopping than those who do not.
  • In virtual spaces and on social media platforms, the appetite for creating and adapting online identities is high: approximately 70 percent of US consumers from Gen-Z to Gen-X rate their digital identity as “somewhat important” or “very important.” A similar appetite for virtual goods can be found in China, where 70 percent of luxury consumers have purchased or will consider purchasing virtual assets.
  • Some believe that mass consumer adoption of virtual worlds could create significant revenue opportunities for fashion brands, while others predict that the hype around the metaverse will fade as users prove hesitant to use virtual spaces. Either way significant revenue opportunities for fashion brands will emerge. The pace of adoption will be driven by technological advancement, the interoperability between virtual environments and social acceptance.