The initial hype surrounding the metaverse, decentralised finance (DeFi) and non-fungible tokens (NFTs) may have faded, but the fashion industry is quietly adopting the underlying technologies for a more practical purpose – a new generation of projects focuses on utility and building stronger customer connections.
In this context, the Middle East is becoming a hub for innovative fashion experiences through tokenomics, move-to-earn programs, and digital identity solutions.
Beyond the metaverse hype cycle
Metaverse hype exposed the gap between its revolutionary promise and practical applications, as evidenced by Garner’s report and Meta’s 2022 stock performance.
Considering the aggravating effects of the “crypto winter” and stricter SEC regulations in the broader sector, the focus has shifted towards artificial intelligence, where the next-gen chip emergence is up to the hype.
While DeFi and NFTs could have emboldened metaverse proponents back in the day by bringing a more efficient smart contracting infrastructure, their self-enclosed nature, mainstream focus on virtual assets, and pressure to deliver financial returns contributed to a speculative frenzy that overshadowed their practical utility.
“Think of a digital version of the covered “Birkin Bag” or exclusive ‘Supeme’ drops”
In the fashion sector, Gucci Vault is one of the most vivid metaverse players among luxury brands. It is crucial, however, to distinguish the Vault NFT project from a standalone product of value – it is an auxiliary branding and loyalty tool that adds more exclusivity layers for their high-end spenders.
This is a vivid example of how digital tokens and other emerging tech, integrated with the traditional sector, can perform better when buttressed by real-world and real-economy connections. Bitcoin performance after ETF issuance offers a more recent mainstream example.
Promise with practical limits
Despite the initial excitement, the metaverse faces a “duration mismatch”—it’s too far behind the promised potential, which the market had heavily priced in. However, recent hardware developments and applications, such as Nvidia’s new GPU presentation, spill over into the metaverse and help alleviate the mismatch. Still, the practical applications for the mass market remain unclear.
Furthermore, unlike gaming, the metaverse thrives on the “phygital” experience, blending physical and digital identities. This offers exciting potential for loyalty programs and customer retention strategies that enhance real-world connections. Purely meta-centric fashion shows, however, seem far-fetched and out of reach with the current state of technology.
While the global focus has shifted, the Middle East is actively exploring the token economy. The UAE’s Central Bank’s digital dirham and the first explicitly crypto-focused regulatory agency prove the point. The digital dirham has the potential to massively improve payments and revolutionise traditional banking structures.
How does tokenomics shapes the experience?
Tokenomics, designed to distribute digital tokens within an ecosystem, offers a path toward a more brand-immersed and loyal customer base. Eventually, it can evolve into a “super-app” brand experience that seamlessly integrates customer ID, digital wallet, payments, and customised loyalty programs into the metaverse and gamification experiences—all powered by tokens. Such an approach could turn customer retention around for brands.
At the same time, tokenomics could be leveraged in the luxury fashion segment from a different angle. Instead of mass customer engagement, high-end brands can use tokens to create more exclusive multi-layered access points and unlock new incarnations of rarity and prestige. Think of it as a digital version of the covered “Birkin Bag” or exclusive “Supeme” drops.
Move-to-earn rewards engagement
The move-to-earn concept can be a powerful tool in a modern rewards program. Its architecture enables consumers to receive special offers and discounts based on their rate and intensity of engagement with the brand’s product. While this approach might surprise you, it is already used in the MENA region.
As a prime example, Dubai’s STEP App offers special deals and discounts based on data from physical user activity. However, the key focus for such projects should be community building and interactive elements rather than quick financial return. In other words, move-to-earn can foster brand loyalty organically and ingeniously.
Digital identity: The future of fashion?
Beyond loyalty buildup, personalisation, aided by tech developments and metaverse mediation, unlocks a fascinating potential: transforming fashion items into data units. The founder of Net-a-Porter, Natalie Massenet, once compared a secure digital product identity with its array of digital or phygital avatars to the railroad train at the start of the Industrial Revolution. Just imagine clothing with a verifiable record of origin, personalised style recommendation, stakeholder record, and royalty reimbursement for first-tier providers on the resale market.
“Just imagine clothing with a verifiable record of origin, personalised style recommendation, stakeholder record, and royalty reimbursement”
Thus, digital IDs can refine every step of the product lifecycle, foster supply chain transparency, establish fair royalty structures, and enhance the customer experience. The metaverse can serve as a perfect facilitator for these functionalities and a marketing medium to increase and address key challenges in e-commerce.
Like Tesla, Dojo software features have become more critical in valuing a company than the car carcass per se. Likewise, personalisation and digital IDs can transform our experience with apparel. With its embrace of AR/VR technology benefiting from new AI applications and blockchain experimentation, the Middle East presents a prosperous ground for the next generation of sound projects in the metaverse.
