The advent of virtual possessions and direct-to-avatar product drops are pointing the way to the next era of retail in the metaverse. But what does this spell for brands who deal in physical products? Aglet is one app that offers some clues to how brands can bridge physical and digital consumption.

At its most basic level, the app lets sneakerheads collect and wear virtual versions of rare or limited-edition sneakers. But the implications are much larger. “The current view is there are two different worlds: online and offline or digital and physical. No one has connected them in a really compelling way for consumers," the brand said in a press release. “Everything Aglet does is about exploring and creating experiences at the intersection of that convergence. Aglet believes people don’t live online or offline anymore; they live ‘onlife.’”

Below, Aglet founder and CEO Ryan Mullins speaks with us about why the biggest opportunity for physical goods is virtual goods, an emerging brands-as-a-service business model and the future of virtual ownership.

What is the metaverse?

The metaverse is a virtual dimension that sits on top of physical reality. I look at it as the next phase of the consumer internet. We started with [making] webpages machine-readable so we can apply algorithms to them, aggregate attention, and then advertise. That was the model that Google perfected. And then there was monitor-mouse-keyboard; you sat down, you went online, and then you went offline and walked around. And then we got to this next phase, which was what Facebook perfected; making people and social networks machine-readable so that you can apply algorithms to them and then advertise. That was mobile-social-cloud, and the separation between online and offline became much more blurred. Where we’re going now is this ‘web 3.’ Now it’s about a spatial web—how does the virtual come off the screen and just be baked into the fabric of reality. It’s really about virtual and physical sharing the same space—which is just the world.

The metaverse is a persistent virtual layer that exists on top of physical reality. And I don’t mean that simply as augmented reality, like I hold my phone up and there’s Pokémon—I mean that more as reality augmented. It’s less, ‘hey there’s some digital objects I can see.’ I think it’s much more that the basic fabric of reality is now computation. That’s why my company is called OnLife [ed note: OnLife is the parent company to Aglet]. You’re not online or offline, you’re now “onlife.” We’re just in it—there’s no distinction anymore.

This creates a very interesting new kind of advertising experience for brands, where it’s not an ad as an impression, it’s an ad as a play. You’re playing Adidas.

How do you think the metaverse will impact the future of retail and commerce?

The biggest opportunity for physical goods is virtual goods. What has happened in our game, for instance, is we have virtual assets—virtual sneakers—in the game, and what we have seen is that our game builds up desire for our players to go purchase the physical goods. You have a virtual sneaker, and you’re wearing it in the game. That’s what’s very different about our game than an NFT platform; with an NFT, you just kind of stare at it on the screen, whereas what we’re doing is wearing the asset in the game—it’s getting dirty as I walk around. And so, the utility of the asset becomes much more obvious or—weirdly—tangible to our players, because you’re trading it, you’re digitally wearing it, you can see the sneaker get dirty, you have to charge it and repair it and clean it—there’s kind of like a Tamagotchi component to this.

What we see is that the more players start interacting with the virtual assets, wearing them and caring for them, it builds up a desire to go from the virtual to the physical and actually want to purchase the physical goods.

The mindset is still, here’s a virtual good and I own it, and here’s a physical good over here and I own. And it’s like, yeah, interesting, but what if you could connect those? So that’s where I think retail takes an interesting change, potentially, is how you start connecting all of these into an ecosystem where it’s virtual and physical.

How can brands leverage virtual products when selling physical goods?

For incumbent brands like an Adidas or a New Balance or Under Armour or LVMH or Kering maisons, the model has been to take a physical good that’s popular and toss it into Roblox or Fortnite. I’m more interested in an inverted model, where you release it in a game—it’s sort of birthed in the metaverse— and when it’s popular there, then you release it physically.

So, a great example of this is we released our own brand in the game, and we released our first sneakers, the Aglet 1, and that is now the most popular sneaker in our game, and we now know the demand of this. We can quantify the demand, and we will now be releasing that as a physical sneaker in December [2021]. So, building the channel. Do you want to just throw something out on Instagram and see how many hearts you get? Or, on our platform, you’re interacting with it, you’re wearing it, you’re caring for it and the amount of engagement and demand visibility that it gets can help a brand decide if they should release it or not, how many they should release, where they should release it because of the spatial data that our platform creates. So, I think that this creates a very interesting new kind of advertising experience for brands, where it’s not an ad as an impression, it’s an ad as a play. You’re playing Adidas.

The younger generation has converged a binary that the previous generations had: there’s online and offline, there’s physical and virtual, and one is more real than the other. What this new generation is now showing the world is that there’s actually no distinction between the two.

How do you see the value of virtual goods evolving?

I always say, we have a ‘real’ problem. Where is the value placed? What’s ‘real’ is physical stuff, what’s fake and not as real is the stuff in these virtual worlds. And I think that’s the more interesting thing about NFTs, is the idea of ownership of a virtual asset and we’re now seeing this balance of, one isn't more than the other. It’s like ecommerce or email; like “oh, you got an email, that’s not real,” that was the discussion back in the day, and now it’s just, "how do you even send an envelope?" I don’t think most people know.

So, there’s a balance there now, and I think it’s that OnLife point: the younger generation has converged a binary that the previous generations had: there’s online and offline, there’s physical and virtual, and one is more real than the other. What this new generation is now showing the world is that there’s actually no distinction between the two. One’s not preferable to the other, because it’s ultimately the same thing. If you ask a 15-year-old, "how much time do you spend online?" that’s like asking, "what does 13 smell like?" It makes no sense, that question. So that whole distinction is just gone, and by even bringing it up I think you kind of out yourself as not getting it.

How will this change brand growth strategies?

Off White was just acquired by LVMH. With Off White, and Heron Preston, and a lot of these up-and-coming streetwear brands, they don’t need help building up the community. But at some point, you reach a ceiling where you can’t really scale the brand and that’s when you get New Group, for example, that comes in and says “hey, we want 49% of the company and we’re going to connect you to our Italian manufacturing ecosystem, and we will help you scale the brand.”

Brand as a service or manufacturing as a service is a really interesting new business model when you have these very big brands that have access to manufacturing infrastructures that can then provide that as a service to new brands. I think you’ll start seeing more of that now.

It’s Adidas as a service. So, then you’re just opening up infrastructure. Collaborations are the name of the game anyway right now. That’s what Yeezy is; it’s just Kanye, powered by the Adidas infrastructure. Most kids don’t even know Yeezy’s Adidas.

If the metaverse is a persistent, real-time, ongoing world, how do you start thinking of your brand as a persistent, ongoing, real-time world?

What advice would you give brands looking to enter the metaverse?

There are so many of these platforms, but the problem is, there’s few people who are so involved in Fortnite that also are in Roblox, and also in League of Legends, and also in Decentraland, and also in “insert new virtual world platform here.” At some point, there’s just this multiverse of stuff, and it’s why the Gucci stuff for me—it’s cool that they’re exploring, but what impact would any of that have? Yeah, someone paid $4k for a digital purse, but we already knew people would pay big money for virtual goods; that’s not a big shocker. But what long-term impact would that have for Gucci, to just show up for a brief amount of time on a platform and then nobody plays it anymore? And I think that’s something that brands have to think a lot about: if the metaverse is a persistent, real-time, ongoing world, how do you start thinking of your brand as a persistent, ongoing, real-time world that people are going to always be coming to?

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