Original source: CB Insights
Original translation: Bai Ze Research Institute
Web3, a decentralized internet built on open, permissionless blockchain networks, is gaining traction.
Traditional brands and retailers embracing Web3, the Metaverse (collective virtual world) is not just about hype, as it is a matter of brand relevance and revenue opportunity. According to blockchain data aggregation site Dune Analytics, leading retail brands have cumulatively earned more than $250 million in NFTs to date.
Web3 is driving a transformation in the way brands and retailers sell and interact with consumers, creating new opportunities in revenue, marketing channels, community building, and loyalty.
There’s a sense of urgency among these traditional brands to figure out how to leverage Web3, especially after many brands (especially luxury brands) missed the initial opportunity to expand into e-commerce and have been left playing catch-up. Now, some are eager to avoid making the same mistakes again.
As Web3 technologies gain a foothold, digital interactions with users — from selling virtual goods to using virtual worlds as new marketing channels — present huge branding and monetization opportunities for brands and retailers in the beauty and fashion space.
How L'Oréal, Nike, and LVMH are entering Web3
There is no unified answer among leading fashion and beauty companies on “how to adopt Web3,” but most are experimenting primarily through partnerships to explore the best strategy for their brands, as partnerships offer a low-cost way to test and learn.
L'Oréal is focused on reaching new audiences from the Web3 world through initiatives such as offering digital assets on the Metaverse platform and airdropping exclusive NFTs. The company has been working with startups that are creating interoperable virtual goods, which are digital assets that can be used across different virtual worlds.
Meanwhile, Nike has been one of the first retail giants to explore virtual goods as a new source of revenue and a place in the Metaverse. The company acquired virtual sneaker developer RTFKT in December 2021, positioning itself as a leader in the adoption of Web3 technology.
Finally, one of LVMH’s major initiatives is to use blockchain technology to verify the authenticity of luxury goods and track products from raw materials to distribution.
L'Oreal
Since first declaring itself a “beauty tech leader” in 2018, L’Oréal has been a pioneer in the adoption of digital technology.
Now, the beauty conglomerate is embracing Web3. The company coined the term “on-chain beauty” for itself, positioning itself as an emerging platform where creators can interact with consumers and consumers can shop in the metaverse.
L'Oréal has partnered with several Web3 and metaverse startups to create new beauty experiences, including virtual collectibles, virtual avatars, and virtual products to attract more new consumers.
In October 2022, L'Oréal partnered with tech giant Meta and Incubateur HEC Paris to establish a Web3-focused accelerator program, further consolidating its commitment to exploring the Web3 space.
Ready Player Me
Relationship: Partnership
In November 2022, L'Oréal partnered with avatar company Ready Player Me to develop 3D hairstyles and makeup that users can use to customize their avatars in different virtual worlds.
Estonia-based Ready Player Me allows users to transform selfies into customizable avatars. The company’s goal is to let users use their avatars in different virtual worlds, allowing users to maintain a unified identity across different platforms.
Ready Player Me currently has more than 3,000 customers, including fashion brand Nike, Nike-owned RTFKT, and metaverse platform VRChat. The startup completed a $55 million Series B funding round in August 2022 from investors including A16z Crypto and Roblox CEO David Baszucki. With the funds, the company plans to improve its creation tools.
By partnering with Ready Player Me, a platform focused on interoperability, L'Oréal is maximizing opportunities for consumers to use its digital assets across platforms.
On a related note, L'Oréal also announced a partnership with another avatar startup, Animaze, which also focuses on interoperable avatars — again proving that this area is a priority for L'Oréal.
Arianee
Relationship: Partnership
L'Oréal has partnered with Web3 startup Arianee to create a digital wallet that allows consumers of its top cosmetics brand Yves Saint Laurent (YSL) Beauté to collect NFTs. France-based Arianee helps luxury brands create NFTs for Web3 consumer experiences, such as making NFTs of physical products.
When consumers connect their digital wallets to L'Oréal's Web3 platform, NFTs will be linked to real-life and online experiences — such as purchasing limited-edition products and accessing exclusive events.
In addition to expanding consumer engagement through NFTs, L'Oréal also uses NFTs to pursue loyalty. The company launched an NFT loyalty program that allows consumers to obtain NFTs or other rewards while participating in activities.
The Sandbox、People of Crypto
Relationship: Partnership
In June 2022, NYX Cosmetics, a cosmetics brand under L'Oréal, partnered with leading metaverse platform The Sandbox and blockchain company People of Crypto, the former of which developed an extremely large virtual world and the latter of which focused on the diversity of Web3.
The Sandbox is one of the most famous decentralized virtual worlds. Through the collaboration, L'Oréal showcased a series of NFT avatars designed with virtual makeup.
Collaborations with metaverse platforms such as The Sandbox demonstrate L'Oréal's goal to interact more with consumers in the Web3 world and carefully design their journey.
Opensea
Relationship: Partnership
L'Oréal partnered with NFT marketplace Opensea in December 2021 to release a collection of 5 NFTs. The theme of these NFT series is red and female empowerment, inspired by L'Oréal Paris Color Riche's red lipstick. The starting price of each NFT is $1,500.
By increasing its presence on emerging platforms, L'Oréal is actively expanding new marketing channels and reaching new audiences, including Web3 enthusiasts.
Additionally, L'Oréal has previously said that targeting gamers is an emerging marketing channel for the company, highlighted by its partnerships with other startups such as Ready Player Me.
ModiFace
Relationship: Acquisition
Since acquiring augmented reality (AR) technology provider ModiFace in 2018, L'Oréal has become a leader in integrating AR into the beauty shopping experience.
In addition to pursuing virtual try-on technology, L'Oréal is working on virtual products and avatars, which are becoming increasingly popular in some virtual worlds. It has also launched virtual looks that players can use while playing games.
Nike
Nike was one of the first retail giants to show interest in Web3, the Metaverse, and virtual goods. In 2021, it filed several trademark applications outlining its intention to manufacture and sell virtual sneakers and apparel. It also established the Nike Virtual Studio in January 2022 to focus on blockchain, Web3, and the Metaverse.
The sportswear giant has already seen impactful returns from its Web3 efforts. According to blockchain data aggregation site Dune Analytics, Nike has earned more than $185 million in revenue and royalties from NFTs. That’s more than seven times the revenue of the next closest brand, Dolce & Gabbana ($24 million).
Nike’s subsequent moves indicate the company’s intention to bring its existing consumer community into the Web3 world while also attracting new consumers. Overall, Nike’s goal is to make digital assets and the digital economy a more important part of its future business model.
Qartium
Relationship: Partnership
In November 2022, Nike partnered with decentralized commerce platform Qartium to sell its NFTs.
A decentralized business model allows consumers to trade directly with sellers. In this way, both parties reduce transaction costs and enhance transaction security. This balances authentication, visibility, and community to achieve a business experience that users can trust.
Qartium is a fairly new blockchain project that is purportedly capable of selling a wide variety of items, both virtual and physical. Partnerships with high-profile companies like Nike and Amazon could bring legitimacy and more consumers to the platform.
RTFTK
Relationship: Acquisition
Nike acquired virtual sneaker developer RTFKT for an undisclosed amount in December 2021. The NFTs created by RTFKT are based on blockchain and allow users to prove ownership of their digital assets.
Since acquiring RTFKT, Nike has continued to think of new ways to monetize its brand in the Web3 space and attract new consumers.
In November 2022, the company announced the launch of its new Web3 platform .Swoosh, where consumers can buy, design, and trade virtual goods. The platform aims to make NFTs more accessible, allowing those who are not familiar with Web3 to still purchase and interact with virtual goods.
The platform will also allow fans and creators to participate in design competitions for different virtual assets and potentially share a portion of the revenue from the sales of their designs with Nike.
Nike said that all virtual goods it releases, from virtual jerseys to virtual sneakers, will be wearable in different games and metaverse virtual worlds.
Roblox
Relationship: Partnership
While virtual world platform Roblox isn’t currently considered part of Web3, it’s a bellwether in the metaverse, with an active user base and a thriving virtual economy that brands want to tap into. The company says that by 2022, more than 11 million creators had designed virtual fashions on its platform — a number that it estimates is more than 200 times the number of fashion designers in the United States.
Nike partnered with Roblox in 2021 to build “Nikeland,” a world where users could buy virtual Nike apparel for their avatars. The 2-month experience attracted more than 21 million visitors.
Nikeland has also launched mini-games and digital experiences that correspond to real-world events, such as a Roblox version of LeBron James' cameo during NBA All-Star Week.
Nike continues to introduce new experiences in the virtual world to meet consumer demand for fresh content.
Roblox has become a popular marketing channel for brands and retailers, who see it as a testing ground for reaching a younger audience (two-thirds of its users are under 16). So far this year alone, Roblox has partnered with the likes of Burberry, Tommy Hilfiger, Walmart and Gucci.
LVMH
LVMH is the world’s largest luxury goods group by revenue, with revenues exceeding $68 billion in 2021.
Now, the company is entering the metaverse and exploring Web3 technologies.
While its approach to the Metaverse and Web3 is slightly more cautious, LVMH said it sees itself playing a role in the future of Web3 in key areas such as traceability, virtual worlds and digital twins (virtual goods that correspond to physical goods). In the future, the company also plans to allow consumers to pay with cryptocurrencies, as well as create a virtual world for its jewelry brand Bulgari.
RTFKT
Relationship: Partnership
In November 2022, Nike-owned RTFKT and LVMH launched an NFT series based on the latter’s luggage brand RIMOWA, requiring consumers to complete challenges to mint their NFTs.
The two companies are also connecting the real and virtual worlds: in addition to NFTs, the company is also releasing limited edition suitcases.
Altava
Relationship: Partnership
Singapore-based Altava raised $9 million in seed investment in March 2022 to develop customizable digital worlds for brands. In May 2022, LVMH and Altava co-created Livi, the first Metaverse Ambassador.
The following month, Livi co-hosted LVMH’s awards ceremony at VivaTech, a technology conference in Paris.
Virtual humans are becoming increasingly popular, especially in Asia. These computer-generated characters have a certain appeal in themselves and often come with fewer risks and restrictions.
With the rise of the Metaverse, virtual beings like LVMH’s Livi could become the “prominent personalities” of the future as they serve as new channels for engaging with fans and consumers.
ConsenSys
Relationship: Partnership
In 2019, LVMH joined forces with Microsoft and blockchain development company ConsenSys to create Aura, a platform for verifying the authenticity of luxury goods through blockchain. Aura allows customers to track their products from design to distribution, while providing LVMH with additional protection against counterfeit goods and fraud.
In April 2021, other brands including Prada and Cartier joined to form the Aura Blockchain Consortium, which opens the Aura platform to any luxury brand that wants to use blockchain-based solutions to track its goods.
Additionally, in November 2022, LVMH partnered with publicly traded blockchain development firm Security Matters to more closely track its raw materials and reduce waste using blockchain.
These partnerships demonstrate the high priority LVMH places on authenticity of luxury goods, right down to the raw material inputs.
Looking ahead
Today, traditional brands and retailers are competing for consumers’ attention through digital content with streaming giants, gaming platforms, and social media. This challenge will only grow as the rise of the Metaverse further changes the way consumers spend their time.
As competition for consumer attention intensifies, adopting Web3 technologies can unlock new opportunities for brands in terms of new revenue, marketing, and brand relevance.
As more brands enter Web3 and the Metaverse, increasingly creative approaches are required to stand out.
Looking ahead, we’ll likely see more brands experimenting in the Web3 world. For example, L’Oréal said it’s exploring the creation of the first “decentralized record label” to help creators in Web3.
As virtual goods continue to gain popularity, interoperability across virtual worlds — where consumers can use digital assets across platforms — will open up more possibilities for Web3 and the Metaverse. As the lines between the real and virtual worlds blur, digital twins will become increasingly popular. Consumers want to be able to purchase virtual goods in exchange for a physical good or related experience.
Additionally, as Web3 grows, investments and M&A beyond partnerships will provide a more concrete roadmap for how brands can incorporate Web3 into their business models.
