Brands should beware the lure of the metaverse, says study

Using the increasingly popular metaverse doesn’t always translate to extra sales for brands, according to new research from the University of Stirling.

Launching digital versions of a brand at the same time as a physical one can dilute the brand and drive down overall sales, says the research, which recommends online activity first to maximise success.

As brands look to augment their sales with new revenue streams, many are turning to the metaverse, a virtual space where users, operating as avatars, can have immersive experiences.

Brand owners and retailers are launching Unique Digital Assets (UDAs) in the form of digital apparel and accessories, collectible cards, and art, which consumers interact with using virtual and augmented reality.

Brand owners from Nike and Disney to Christie’s have successfully engaged with consumers in the metaverse, through games, limited edition collections and virtual auctions.

However, if a physical version of a brand also exists, shoppers are less likely to purchase the UDA, according to the study, which suggests that the mere coexistence of a physical product with a digital one devalues the digital asset.

Researchers conducted six online experiments involving 1,523 consumers in China, creating fake products and shopping experiences, and analysing their purchasing patterns and interactions.

Sobering reading

The study makes for sobering reading for brand owners and retailers wishing to test out the metaverse as a means to boost business, say its authors. It also puts the strength of physical products in a new light, they argue.

Previous research has shown that, in isolation, physical products are typically more valued by consumers because they are tangible and tactile. The new findings suggest that the mere coexistence of a physical product with a digital one devalues the digital asset.

Rob Angell, Professor of Marketing at the University of Stirling Management School and co-author of the study, said: "When brand owners and retailers take a dual-format approach with products - pairing UDAs with physical versions - consumer perceptions of the UDA will diminish. So when, for example, a Gucci handbag is available in the metaverse and also in stores, shoppers feel that the digital equivalent is less unique and special. They see other consumers can potentially own physical versions so they have less psychological ownership of it.

"This has implications for how brand owners and retailers manage their products. For many of them, taking tentative steps into the metaverse often means extending their products from the physical to the virtual world. Our research suggests that would have limited success as the UDA will always be undermined by its physical counterpart. Our advice would be to offer a digital-only asset or, if a physical version is also to be released, that marketers and retailers are cautious."

The study is a collaboration between the University of Stirling Management School, University of Edinburgh Business School, Zhongnan University of Economics and Law in China, and Léonard de Vinci Pôle Universitaire in France.

While the study offers what it calls a “practical playbook” for marketers and retailers, the authors say future research should replicate this study across other international markets. UDA adoption rates and familiarity with digital ownership vary widely globally, according to the study.

The paper, Let’s (NOT) get physical: Cross-format dilution when launching physical counterparts with unique digital assets, is published in the Journal of Retailing.