Volatile Pricing in the Metaverse

By: Reagan Dunnam & B. Ellie Jin

The metaverse, a digital universe aiming to connect the physical world with augmented or virtual reality, is attracting huge brands. Ralph Lauren, Nike, and Dolce & Gabbana are just some of the players making their first move into this new society. The pricing structures for products, however, are vastly different between brands and products. 

Some of the lowest-priced products in the metaverse come from luxury giants such as Balenciaga and Gucci. Fortnite is a metaverse-type game that combines virtual reality with gaming, concerts, and worldbuilding. Users can choose an avatar to participate, and NFTs allow users to alter their avatars. NFTs are digital assets encrypted on blockchain that consumers can purchase, and consist of anything from virtual fashion to art pieces.

Balenciaga and Fortnite collaborated on a virtual Balenciaga collection for some of the Fortnite avatars. The most expensive of these cost around $12, or 1,500 “V-Bucks,” which is Fortnite’s cryptocurrency. Some of these digital creations will also be available for purchase in the real-world, such as a hoodie boasting the names of both brands (Bain, 2021).

Roblox is another game with key aspects of the metaverse that also provides customization of avatars, games, and experiences. Gucci staged a virtual exhibit called “Gucci Garden” on Roblox which attracted over 19 million people. The first digital asset sold by Gucci was a pair of virtual 3-D sneakers that can be added to a player’s avatar that sold for $12. In an interview with Business of Fashion, Gucci’s Robert Triefus states that he cannot “tell you how we structured our different deals [but] what I can tell you is that we have proven to ourselves through these collaborations that the virtual world can create a very significant revenue stream” (Williams, 2021). 

Rebecca Minkoff is another brand that has participated in an NFT launch, with their products at more of a mid-tier price. The brand offered 15 pieces, selling both virtual fashion and digital photos. The virtual clothing prices varied from $56 to $562, and the photos sold for $380 to $1,900. The virtual garments sold better than the photographs, but all 300 items sold out in under ten minutes. After this success, Rebecca Minkoff plans to release items on Dematerialised, a virtual fashion platform, quarterly (Nanda & Bain, 2021). 

Pairing physical renderings or experiences with digital assets allows brands and artists to charge higher prices, compared to the low- to mid-tier pricing strategies of above-mentioned brands that only offer the digital version of the asset or NFT. 

In October 2021, Dolce & Gabbana sold a 9-piece digital collection that brought in $6.1 million and paired some of the NFT pieces with another benefit. For example, a virtual rendering of the “Doge Crown ” sold for nearly $1.3 million was paired with a physical rendering in addition to “experiences such as a private tour of the brand’s Milan atelier” (Nanda & Bain, 2021).

Another recent combination of digital and physical assets was a collaboration between RTFKT, a digital design studio, and artist Fewocious. They created a collection of digital sneakers that totaled around $3.1 million for 621 pairs. As a ‘thank you”, they will also be sending a pair of the physical shoes from the collaboration to consumers (Nanda, 2021).

It’s not just high fashion that is making moves into the metaverse retailing world; streetwear is similarly in high demand. RTKFT later collaborated with Jeff Staple, a streetwear influencer and designer, to produce NFTs of digital sneakers. The sneakers “generally looked like high-tech Nike Air Force 1s pulled straight from a video game and several are now trading for upwards of $40,000” (Bain, 2021). Both streetwear fashion and NFTs are scarce and in high demand, creating the perfect coupling for profitability in the metaverse. These elements contribute to the high prices that they garner, in addition to high demand and prices on the trading market as well. 

It is still to be seen when, or if, NFT pricing will find some sort of balance. A $12 luxury item by Gucci simply does not exist in the physical world. For some, it is shocking to see high-end, couture brands pricing products at such a low costing structure. Table 1 below shows a comparison of the above-mentioned NFT offerings, price points, and the platforms they have been sold on. Some hypotheses that can be drawn from the table are that products with limited quantities in addition to products combined with physical products and experiences can charge higher prices. Will brands like Gucci and Balenciaga end up raising prices to match that of their physical products? How much will some of these products be worth on the resale market if the metaverse truly takes off? This pricing strategy seems to be successful for brands, but it is quite early in the development of digital asset sales and the metaverse, so brands must stay vigilant in analyzing and understanding pricing in the metaverse. 

Table1. Selected digital fashion products and its price on metaverse platforms

Sources Cited

Bain, M. (2021, November 19). Balenciaga and Fortnite are a match made in the metaverse. The Business of Fashion. Retrieved February 3, 2022, from https://www.businessoffashion.com/articles/luxury/balenciaga-and-fortnite-are-a-match-made-in-the-metaverse/ 

Bain, M. (2021, November 19). Why streetwear and NFTs are a perfect match. The Business of Fashion. Retrieved February 3, 2022, from https://www.businessoffashion.com/articles/technology/why-streetwear-and-nfts-are-a-perfect-match/ 

Nanda, M. C. (2021, November 19). What the NFT Gold Rush means for fashion. The Business of Fashion. Retrieved February 3, 2022, from https://www.businessoffashion.com/articles/technology/what-the-nft-gold-rush-means-for-fashion/ 

Nanda, M. C., & Bain, M. (2021, November 19). Unpacking fashion’s latest wave of NFT sales. The Business of Fashion. Retrieved February 3, 2022, from https://www.businessoffashion.com/articles/technology/unpacking-fashions-latest-wave-of-nft-sales/ 

Williams, R. (2021, December 10). Gucci’s Robert Triefus on testing luxury’s allure in the metaverse. The Business of Fashion. Retrieved February 3, 2022, from https://www.businessoffashion.com/articles/luxury/the-state-of-fashion-2022-bof-mckinsey-gucci-robert-triefus-metaverse-virtual-nft-gaming/