It certainly appears that the metaverse has a place in retail's future. From high-end retailers selling clothing and accessories for avatars to wear to a virtual mall in Decentraland and Walmart's recent foray toward the metaverse, this is hard to deny. And as more major retailers stake a claim in the metaverse, physical retail investors are beginning to wonder whether it could pose a serious threat to their investments.
Decades-old fears that e-commerce could threaten physical retail have so far proven unfounded. But could the metaverse change that? Let's explore a few reasons why retail real estate investors shouldn't fear the metaverse -- and may even want to embrace it.
1. Experiential retail is a brick-and-mortar thing
An increasing number of retailers are drawing customers into their physical stores by transforming a shopping trip into an enjoyable outing. They might have professionals on staff who can coach customers on how best to use their products, offer fun ways to use the products with friends and family right in the store, or host special events.
The idea behind experiential retail is to offer an immersive experience. It's an opportunity to educate and entertain the customer while they interact with the brand in ways that are hard to duplicate virtually, and it's a growing trend. Dick's Sporting Goods has been a trailblazer in this area, opening locations designed to let customers play with the products. Even Walmart is getting in on the action, planning a redesign that will make shopping a more interactive, immersive experience. And it's something that the metaverse can't match.
2. The new emphasis on outdoor retail is another physical retail advantage
At the height of the pandemic, many people did everything they could at home. Not having to constantly rush out the door may have even felt like a small silver lining at first. But after a while of always doing everything from working and working out to going to school, dining, and having movie night at home, many discovered a new love for the outdoors. And an increasing number of retail real estate owners are taking notice and planning or redesigning their properties accordingly.
Some traditional mall owners are even "de-malling" their properties -- eliminating the interior common spaces so each store is accessible from the outside only. These shopping centers frequently include attractive seating areas and landscaping to encourage shoppers to linger. The metaverse doesn't have much to offer a shopper looking for some fresh air.
3. At the same time, the metaverse is a fantastic marketing tool
Rather than something for physical real estate investors to fear, retail's growing presence in the metaverse could actually be a gift. Giving customers the opportunity to buy designer clothing for their avatars and branded furniture for their metaverse homes may very well be the future of advertising. And even if shopping in the metaverse and having products delivered to your home becomes common, that's unlikely to make a majority of consumers stop visiting physical stores. It seems much more likely that some of the regular e-commerce traffic will be diverted instead to the metaverse.
Don't let the metaverse keep you up at night
Yes, it's true that the metaverse just seems to keep getting hotter, with no sign of slowing down. And it's certainly understandable that the number of retailers purchasing real estate there would be concerning for investors in physical retail. But the fact is that physical retail still has a lot going for it that the virtual world simply can't compete with. In addition, the metaverse can also become a marketing partner for physical retail.
Keeping physical retail alive going forward will be all about making that trip to the store as enjoyable as possible. And so long as retailers continue moving in that direction, physical retail investors can view the metaverse as a friend and rest easy.