Why the Metaverse Is Fashion's Next Goldmine | The Business of Fashion Show
Would you buy clothes that don't exist? And how much would you be willing to pay? Earlier this year, Benoit Pagotto's design studio, RTFKT, worked with teenage digital artist, FEWOCiOUS, to sell 620 pairs of virtual sneakers, generating a total of $3.1 million in less than five minutes. I'm not looking at the fashion history to be inspired. We're looking at gaming, anime, sci-fi movies, that's our reference points.
Entrepreneurs in this space say that one day virtual fashion will become ubiquitous. The first step is understanding how the blurring of physical and digital worlds will change our definition of what's real. We have one consciousness, right? I can read Twitter and get pissed off. I don't get digital pissed off.
We kinda need to let go of this notion of kind of, oh, that's digital, this is physical. We've all been increasingly living in something called the metaverse. The metaverse is nothing but the internet breaking, kind of free, from that two-dimensional barrier and into this three-dimensional environment. And then we're gonna start exploring more and more with our daily life and our daily life becomes enhanced. Then that's what we see as the metaverse.
If it sounds a bit like science fiction to you, then you're on the right track. The de-materialization of fashion is here and it's going to change the fashion business as we know it. What we wear says a lot about who we are. Yet fashion is also a $2.5 trillion global industry that touches everyone on Earth. I'm Imran Amed.
I first started trying to make sense of the fashion business 15 years ago as it was being transformed by technology, globalization, and shifting consumer values. Now I'm on a journey to see how fashion is recalibrating amid the pandemic, to balance profit with purpose. This is The Business of Fashion Show. Join me to see how fashion shapes business, culture, and identity, and to meet the people forging fashion's future. As the world stayed home during the pandemic, there was still somewhere to go to get dressed up.
Welcome to the metaverse. The term may come from science fiction, but the business opportunities in this fast evolving convergence of digital and physical worlds are real. The metaverse has grown out of gaming, where players already spend over 100 billion dollars a year on virtual goods. 3 billion people, more than a third of the world's population, regularly play video games. 46% of gamers are women, and across generations people prefer video games over movies and TV shows, making gaming the world's leading form of entertainment.
Dressing avatars has come a long way from battleground beginnings. As gaming emerges as a lucrative channel for luxury brands to reach new customers, screen wear is the new street wear. A growing trend in this new fashion space? Matching real-life purchases with a digital twin. New breed creatives make playful tributes to their favorite brands. Real-world cities embrace virtual fashion shows and virtual department stores.
So don't write this off as a blip. It's a game changer, and we cannot yet know where it might go. Demand for one-off NFTs, unique certified digital assets, is soaring. In fashion, NFTs are the Couture of the metaverse, where the unfettered creations of digital artisans can out price those of global brands, and hyped assets, driven by scarcity, are crypto status symbols.
The upside? Measurable planetary savings. Production of a digital garment emits 97% less CO2 than a physical one. The downside? Minting and mining NFTs requires skyrocketing energy consumption in the real world. The shift to more environmentally efficient methods can't come fast enough.
Yet virtual fashion facilitates the expression of multiple selves in a virtual world where brands recreate the experiences that define fashion culture, while not forgetting our eternal joy of getting dressed up in real life. Paris is the global capital of fashion, and virtual fashion is no exception as the city sets its sights on becoming more technology-focused. My first stop is to meet with Ian Rogers, who moved to Paris from Silicon Valley in 2015, when he was appointed Chief Digital Officer of LVMH, acting as a kind of digital whisperer to C-suite executives of more than 75 luxury brands. Hey Imran. Hey! Welcome! Bienvenue.
Merci! Now, Ian is Chief Experience Officer of Ledger, whose security technology helps customers protect their crypto assets using bespoke hardware and software. Ian is the perfect person to explain, what exactly is an NFT anyway? So I was a part of a company in the late '90s called Nullsoft that made an MP3 player called Winamp. But this is actually the image of an NFT that I bought on the website Foundation.
On the blockchain, the art only has one owner. That's why it's a non-fungible token. Correct.
So if you have a photograph series where there's one, two, three, four, five, six, seven, eight, nine, 10, it matters if you have one of 10 or two of 10. On the other hand, if I owe you $20, you don't care which $20 I give you. Right. You just want $20 worth of value. Right? So non-fungible means it's gotta be the one.
So this is a one-of-one of a Winamp tribute art, which, yes, is displayed on a screen in my living room. And how much did it cost? I spent 1.137 ETH on it. ETH is a digital currency. Correct, so that's Ethereum.
Ian is uniquely positioned to give us foundational knowledge about the opportunities created as crypto technologies, gaming, and fashion converge. Fashion plays such a big role in helping people express their identity. And if lots of people are starting to spend a lot of time in virtual spaces. Yep. It seems natural, then, that they could use fashion as a vehicle for expressing their identity in those spaces.
Does that make sense to you? I think 100%. I think it's inevitable. I think that this is a generational shift and I look at my 14-year-old, and she has spent the last year and a half living in a metaverse. She doesn't even know that word, right? But her school is on Zoom.
She hangs out with her friends online in one form or another, actually in a whole bunch of different forms, right? In Instagram, in TikTok, in iMessage, in Fortnite, in Animal Crossing, in, you know, well, all of these different, you know, metaverses, right? And so for them, having a digital collection, it's completely natural. Look what happened to us even, you know, with photographs. We used to take photographs and, you know, have them developed and hang them up in our homes. And there were many companies that thought, oh, this digital camera thing, like who wants that, right? Most kids don't even have physical photos, right? They only have collections of digital photos. And so I think that you could expect the same thing with many physical things. Why would I want a collection of stuff that no one can see, when I can have a collection of digital stuff that everyone can see? I think, for our younger generation, this is just going to become kind of natural and obvious.
Do you see, you know, big luxury fashion brands, and fashion brands generally, do you see them in the foreseeable future getting into the place where they're just selling virtual goods? I think they will, but to be honest, I think it's a mistake. I would wait longer if I were them. I think it's inevitable, but I think that, you know, the reason that NFTs have taken off at the beginning of this year is because we have these NFT marketplaces.
You know, if you don't have a place to display these things, then it doesn't exist. So I think that the progression is more going to be that we start to get, that's why I say I'm excited about the things that happen at scale, where we start to get, you know, a collection of digital goods with our physical goods, we then start to take those into our metaverse worlds. So I think that once I can take that digital shoe, and it changes my character in Fortnite, ah, now the dominoes start to fall. And now you can sell me a digital good only, right? But you need that second piece.
You need the place for it to live in the digital world before it's really exciting to sell a virtual piece. So I think that, if I'm a brand, there's only downside in selling digital pieces right now, because either it doesn't sell for enough money, and that's a bad story, or it sells for too much money and then it's worth less next year, and that's a bad story. Where if I just work on getting digital with physical at scale, the other side of that marketplace will show up, and now digital goods will make sense. What is the underlying instinct or emotion that leads someone to value something that they can't touch? As human beings we have some innate desire to sort of prove we existed, and those things really happened to us, you know? I think that the digital collectors today, it's so early, they're speculators, you know? But there are, you know, like an art, there are people who see something before anyone else. And I think that any time that you give creative people, when you give a creative community a canvas, it's just a matter of time until they blow your mind. But how will we buy virtual fashion? To understand that question, I consult with the co-founders of THE DEMATERIALISED, a Berlin-based digital fashion startup.
They explain how the lines between physical and digital realities are blurring. So we like to think of THE DEMATERIALISED as the digital department store of your dreams. It's not like a regular online shop. It's something different. It's something that takes you into another space, another dimension, through what it looks like basically.
Say I buy something on DEMATERIALISED to wear in the metaverse, how do I put it on and show it off and experience it? Well, there are different avenues. So the first thing is, you could wear it on your real self through an AR filter. So that's number one, and that's the part where technology is still, you know, a work in progress. It's going to get better and better, we know it. But still, you know, it definitely won't look like you right now.
It will look like you're digitally enhanced, which is a lot of fun. We can also do like a bespoke fitting, in which you get dressed by a digital tailor. Or you could take it into a computer game. So right now we have optimized it for a couple of computer games, and then you can take it there and wear the new avatar.
Clothes are a very physical thing. So why would anyone wanna buy a digital dress? I think it takes us back to the dematerialization of goods that we've been seeing since we have the digital technologies, that it comes from the gaming world, effectively, in which your avatar is part of your personalities. So I think as we, regular people, start transitioning more and more into the virtual world, spending more time in virtual environments, and that barrier between physical and digital starts blurring more and more, and we will start consuming digital fashion, digital sneakers, digital makeup, digital jewelry as well. I mean, I think, effectively, it's the biggest revolution the fashion industry has seen so far. One of the criticisms about digital is that it's impersonal or people don't think that it's real.
And we create very emotional experiences. The fashion itself looks quite unreal. So you could have a dress which is on fire, or a dress which is made of water. And that kind of instantly pulls the user in to say, okay, this is different. This is different to what I've seen before on a screen.
Say I have created a dress, and this was printed all over my digital dress. How does someone buy it? Can you walk me through it? We're working really hard in making that barrier of entry for regular consumers super low. Because right now, purchasing an NFT, or any crypto asset, per se, can be a bit complicated. And you need to understand how certain pieces of the technology work.
You need to be able to set up a wallet, potentially have Ether in your wallet in order to move your NFTs in the future. So we're trying to minimize all of that complexity to the bare minimum. So they can manage the ownership in a very simple way without having to understand how the whole crypto world works.
Now I'm on my way to meet someone who has collaborated closely with Karinna and Marjorie. Benoit Pagotto is one of the brilliant new creative entrepreneurs shaping digital fashion. A gamer at heart, he's the man behind one of the most lucrative NFT drops to date. A fine arts graduate and branding expert, Benoit runs RTFKT Studios out of Paris, but it was born in the metaverse.
I was always a gamer and always believed that the game world was the most innovative and amazing medium you could have. And so that's why, I think, we're living in this moment where I think I'm very, very lucky, because all the stuff I grew up with, I can combine all this knowledge together now to make something I truly, genuinely know how to do it, because it's just combining all of this stuff I've been learning and being passionate about for years. So RTFKT is a blueprint of the brand of the future that's evolving in a world where gaming is the main control reference. RTFKT, in a way, is like a digital atelier? Yeah, in a sense, because when you do 3D, and when you do game assets or digital items, there's a lot of craftsmanship going into it. It's a lot of traditional crafts you can just do virtually.
So it's sculpting, modeling, texturing. So it's a lot of things you can find as well in traditional fashion, because have the small hands "les petites mains", you know? So it is, there's a sense of craftsmanship in everything we do. So it's in a sense, it's an atelier workshop. You sold $3.1 million of virtual sneakers, in something like under 10 minutes.
Yeah. 5 minutes. 5 minutes. Can you walk us through the process to create that? And then how you took it to market? We love sneaker culture, and we think it's the fashion item that is the most, you know, culturally broad, it's touching everyone.
You know, whether you're a kid from the streets, or now every high fashion brand is, you know, going ham on sneakers well. And FEWOCiOUS, I detected him on Twitter, and I contacted him and I said, hey, like, do you want to make sneakers? And he said, it was his dream since he's a child, that one day he would make a pair of sneakers. All the designs were done in a week I think total. Then we put everything back in 3D to show him how it would look like before making physicals, because the goal was always to sell the sneakers as digital first, but for people to have later on a tangible reward of having the NFT, which is these shoes actually. So that's how it happened.
Everything was done in the lapse of two weeks, from the design to the content, to the launch. It was really two weeks. And we were all surprised that we never expected to make as much. And it happened in five minutes, so it was funny because we were just all watching the numbers and seeing everyone buying. And then we took our calculators and went, man, we just made $3 million.
It was really, everyone was surprised, and I think the really great thing was that we are a new brand. We used digital sneakers first as a way to launch a product, and we did that with an 18-year-old artist that no one knew. And we completely changed the game of how you can think of releasing a fashion item or releasing a drop of sneakers. So that's, I think the impact is going to be much, much bigger than the $3 million. The really, really interesting part was the process of how we did it, and how we managed to completely, I think, make history at this time, that still today, people are making it a reference of, remember that sneaker drop that sold out in five minutes for $3 million dollars. The NFT itself is like a, like a subscription service of exclusive access.
Only if you have that item, you can have access to these extra experiences or products we're going to release. RTFKT is at the forefront of luxury NFTs, and being a first mover has its advantages. In April, 2021, Benoit and his co-founders raised an $8 million funding round led by Andreessen Horowitz, one of Silicon Valley's most storied venture capital firms. Tell me a little bit about the reaction from investors.
Silicon Valley does not have a reputation for understanding fashion. Nothing in our business is linked to the legacy business of fashion. And Andreessen Horowitz have been very active in investing in very, very cool new, innovative game studios, and actually they invested from the gaming fund, in us. So that's why I think they understood very well that the world of gaming and fashion were merging, but that there's very, very few people, who can actually put it together and make that bridge and make something that is culturally impactful and, you know, successful as well, and finds a product market fit.
And us we demonstrated product market fit with, you know, millions of dollars. You mentioned the FOMO from the fashion brands. When they call you, what are they asking you about? What, you know, what are they trying to learn? How can we learn from you? What can we do together? Some of them, they were just really trying to fish for information for free. And we detected that very, very early. So culturally, they are not understanding, and you can't understand it from one day to the other. So they need to hire the right people.
I think it's really an HR problem they're going to have. And second is just that, yeah, it's in any case, at best, it's going to be their innovation team taking care of it. And honestly, I mean, I didn't meet all of them, but I didn't see innovation coming from fashion brands in a long time. Virtual fashion is clearly a space to watch, but for now it only attracts a niche crowd. How long will it take before the full vision becomes reality at scale? I think it's just the case where the storytelling gets ahead of the reality. So this is exactly what caused the dot com bubble in the late 90's, you know.
And the excitement was real and it was deserved, you know. The internet has changed humanity. It just, you know, the storytelling, I think got a little bit ahead of the reality. There was more work to do before all these things were built up. And I think it's the same here, you know? People want to kind of fast forward to the end, but A, you can't see the end, B, this technology is still really nascent. You know, the way that we do something like NFTs, it's not very mature.
I think we will see a lot of power players emerging from completely different places, de-centralizing the powers within the fashion industry. There might be an amazing designer in Kenya, and is 13-years-old. If she or he gets his hands on a computer, and can enter the market, then we should be there to allow them to do that. The real application is going to be once we have augmented reality glasses, and you'll be able to see these virtual garments everywhere, and, you know, buy them, or see who's got an expensive NFT-based fashion item. That's when augmented reality glasses will be mainstream.
Us, we do already today. We just like, you know, use your phone with Snapchat filters and the technology is still clunky, but you can see it's going there for sure. That's when it's really going to start that big shift, I think the towards mainly buying digital items, and physical items being more, just like very, very practical, comfortable stuff that you can wear daily when you spend most of your time in augmented worlds.
Historically, fashion has had a poor track record in anticipating and adapting to new technologies and platform shifts. But this time around, the big brands seem to be moving faster. Whether they can compete with the digitally native entrepreneurs defining the space? Well, that remains to be seen.