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11 February 2022

Meta-Street

The world of shopping seems to constantly evolve, and it is up to businesses to stay ahead of the innovation curve or simply get left behind. Look at the countless fatalities of the collapse of the high street and we can see that companies such as Debenhams and Arcadia-owned Topman have had one thing in common: a failure to adapt to changing consumer preferences.
 
Back in the heyday of physical retail, innovation was performed through simply selling new products to consumers, either upgrades of existing items or completely new products. This was a relatively easy process and one that could be performed by each and every manufacturer and retailer, regardless of their size.
 
However, things have changed since then and consumers now expect a wider variety of options, competitive prices, and online delivery options, all in conjunction with the relatively recent concept of ‘experiences’. JD Sports has managed to deliver this more successfully than many of its competitors in the UK by offering exclusive products from Nike and Adidas through its physical and online offering, as well as performances from live DJs in its stores in order to keep consumers coming back.
 
The Metaverse has the potential to combine all such characteristics into one immersive experience. Much like online retail, the Metaverse is expected to offer consumers the ability to browse and shop from almost any company, all from the comfort of your own home. However, the Metaverse brings convenience, choice and experience together in a package that not even e-commerce can offer. The ability to virtually ‘walk into a shop’ combines the best aspects of retail and internet commerce, allowing customers to try on clothes, speak to customer service representatives and have the items delivered straight to their door, all the while reducing instances of shoplifting and the cost of a physical presence for the shop. The pandemic has given rise to an explosion of non-traditional assets, with Bitcoin perhaps being the most obvious example, but talk of the technology that it runs on and the ability to hold and use a decentralised currency plays quickly into the hands of the Metaverse. Many have grown tired of the outdated and tightly controlled traditional forms of payment, leaving a gap in the market for innovative payments methods. Blockchain, the technology that many cryptocurrencies rely on, provides a secure, decentralised record of crypto transactions across a vast database that stores information electronically and among the nodes of a computer network. In essence, this provides a virtually unhackable database as it is stored across millions of computers in multiple countries. This safety has led many to question whether such technology could be used in and for the Metaverse, given its digital presence.
 
Apart from the obvious example of Meta Platforms (previously Facebook), other such companies known for their innovative approach to business have started to prepare for a potential shift in retail habits. Nike, the US sportswear giant, has filed seven trademark applications around the creation and sale of virtual branded footwear and clothing as it plans to protect its intellectual property in the new age of shopping. Amongst the trademarks are some of Nike’s most recognisable brands and slogans, including ‘Air Jordan’, ‘Just Do It’ and ‘Nike’. The company even went a step further, recently purchasing virtual sneaker maker RTFKT which will, according to its CEO John Donahoe, help Nike take “another step that accelerates its digital transformation”. There is of course the question surrounding government regulation of not only the Metaverse itself but also the many components used in its running. Regulators across the globe, but especially in the US, have failed to keep pace and recognise the rapid adoption of such assets and therefore risk either consumer safety or a rapid regulatory clampdown which could harm business investment. Many can be excused for a lack of understanding, however, failure to recognise the potential for a further change to shopping could ultimately hurt both consumers and businesses as well as regulators.
 
Still, the Metaverse as a concept for use in daily life still remains a question. The idea of putting on a VR headset for hours a day is not something that many people relish and, while the technology has come far in recent years, it is still a niche area. The social aspect of meeting in person and shopping at a physical store is something that many people still prefer and see as a luxury they would not want to give up.
 
Still, Meta is investing billions into the idea of future generations relying on the Metaverse for everything from education and shopping to dating and media and with companies now piling into the space from luxury goods to sportswear manufacturers, the investment needed is certainly starting to be provided.

This article was taken from the December 2021 Market Insight. To continue reading please visit the issue. To subscribe to our investment publications, please visit www.redmayne.co.uk/publications.
 
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
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