Asia’s largest metaverse platform has a big fashion opportunity

This story is part of Next in Asia, a series exploring the impact of technological and economic transformations across Asia-Pacific and the influence on local style, community and culture. Read part one on the enduring appeal of Japan's luxury market, part two on South Korea’s next big fashion import, and part three on why fast fashion is flooding Japan. When Gucci staged its 2024 cruise show at Seoul’s Gyeongbokgung Palace, most consumers would be waiting a few months before the collection arrived on the shop floor. However, a select few were able to wear some of the pieces straight away. The catch? They couldn’t be worn physically. These were digital versions of the styles shown on the runway, which was streamed live on Zepeto, a South Korean app that lets users create 3D digital avatars and visit different virtual worlds that are available inside the platform. Hundreds of thousands of users tuned in to watch the Gucci show on Zepeto, where they could also interact with each other and take selfies. The drop marked the first time that Gucci — which is no stranger to the metaverse — live streamed a show on the platform and made a virtual version of the collection available for purchase, according to Ricky Kang, head of business at Naver Z, the subsidiary that operates Zepeto. For some brands, the metaverse has become a place to test see-now-buy-now. Tommy Hilfiger and Carolina Herrera have made digital wearables available as soon as they appeared on New York Fashion Week runways. Zepeto’s partnerships with some of the world’s biggest fashion and beauty brands is a key part of its global expansion strategy. Ralph Lauren, Bulgari, Christian Louboutin, Ami, Nike, Adidas, Dior Beauty, Nars Cosmetics and Kiehl’s have all appeared on Zepeto. Celebrities like K-pop stars Blackpink and actor Selena Gomez have also tapped Zepeto to construct their own branded digital experiences. While gaming culture has long been prevalent in Asia — Naver Z’s primary market — and used as a means for social interaction, it has been viewed as secondary to in-person social activity in the West, Kang believes. That changed during the pandemic, as people looked for new ways to connect and platforms that enabled collaborative consumption came to the fore. The challenge is maintaining interest now that lockdowns have lifted, and increasing market share across Europe and the US, where bigger rivals operate. Naver Z, which specialises in metaverse solutions, is owned by Korean technology giant Naver Corporation, which also operates the search engine Naver, Korea’s answer to Google, and acquired US peer-to-peer resale platform Poshmark in a $1.2 billion deal last October. Last year, Naver Z brought in $50 million — a slim fraction of Naver Corporation’s annual revenues of $6 billion. However, Naver Z is the most popular division with fashion and beauty brands — representing an immense opportunity, says Kang. Catching up Today, Zepeto has over 400 million users, making it Asia’s largest metaverse platform. Yet, it still has a long way to go to catch up with US rivals. Luxury fashion brands including Ralph Lauren and Tommy Hilfiger, and celebrities such as model Karlie Kloss, have launched digital fashion offerings with Roblox, a $50 billion gaming platform with more than 200 million estimated monthly active users. Meanwhile, Epic Games, owner of hit video game Fortnite, counts 68 million monthly active users and this year joined forces with Louis Vuitton and Dior owner LVMH to create virtual shows and fitting rooms. In contrast, Zepeto counts between 15 million to 20 million users a month. Of those, about 65 per cent come from Asia-Pacific, 15 per cent from Europe, and another 15 per cent from the US — currently its fastest-growing market. Zepeto’s focus on K-pop and fashionable avatars has drawn a predominantly young female audience, setting it apart from other gaming platforms. It also acts as an interactive social media network, rather than a gaming platform, Kang believes. That has appealed to investors including major K-pop talent agencies JYP Entertainment, YG Entertainment and Hybe, and Japanese investment holding firm Softbank’s Vision Fund II. “While our users do recognise certain popular brands, at the end of the day, whatever looks good on their avatar will be what’s in demand,” says Kang. More than 2.5 billion items were sold from April 2020 to June 2023 on Zepeto. With the potential to generate up to $5 trillion in value by 2030, the metaverse is “too big” for companies to ignore, according to McKinsey. Yet, excitement from fashion around the metaverse has dwindled over the past year, and many brands remain in the exploratory stages of their strategy. While the most immediate opportunity for brands may be more in NFTs, secondary sales and loyalty programmes, DAOs and those types of parts of the ecosystem, the metaverse and its long-term role in consumers’ digital lives shouldn’t be discounted, experts agree. Depending on how much a brand wants to commit to Zepeto, it can choose to work with Zepeto’s internal design team or creators on the platform to design a product or experience from start to finish. Brands also have the option to develop and execute virtual goods and experiences on their own. Working with platform natives can help build credibility in the metaverse, but direct management is more cost efficient and also allows brands to retain more control. In the lowest range, a partnership with Zepeto would cost brands $30,000 to $50,000. In the highest range, it would be seven figures or more. Kang is working towards winning over more luxury partners. “We want to work with the Chanels and Hermès of the world.” The biggest difficulty is convincing higher-end brands that fear it might impact their prestige and sense of scarcity, he explains. “Brands may think that if an item costs $10 in the virtual world it dilutes brand value, because the same product may be sold in a physical store for $7,000. But, it really depends on the economies where those brands operate. If the price of a luxury item is much higher than the average price of another product on the platform, it will be perceived as prestigious. On Zepeto, whoever wears Gucci is considered rich.” There’s also a loyalty element at play. “It’s not just about replicating and selling a physical product online. In a physical store, you have to sell to whoever comes to buy. In the metaverse, you can ask users to do a bunch of different tasks or missions, just to get the chance to buy certain items,” says Kang. “It gives more power to brands and their fans. By gamifying the experience, it means that only their most loyal consumers can get their hands on those virtual items. You can link those virtual challenges to access to physical goods or rewards as well. The opportunities are boundless.” In May, at an annual developer conference held by Google in Mountain View, California, Naver Z unveiled its plans to extend the reach of its avatars beyond its platforms — the first instance that this would be possible for the group. Avatars created on Zepeto are now accessible through software company GitHub, making them available to use across multiple services and platforms. Interoperability is a feature that many in the space have long been calling for, with Tommy Hilfiger launching a multi-metaverse hub and the augmented reality metaverse platform Over hosting a cross-metaverse wearable design competition — both during Metaverse Fashion Week in March. Also on Zepeto’s agenda is leveraging AI to improve its tools and features that enable creators to more easily or creatively design their avatars and virtual environments. “We want to offer more value to our users,” Kang explains. “We’re improving the ecosystem for our creators, who are the blood that keeps our system going.” Kang is hopeful that fashion will open its eyes to the opportunity. “I want brands to not be intimidated by the unknown of virtual, 3D social platforms. It’s a really unique way to directly interact and build a relationship with future consumers.” To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com. 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