FROM PLAYGROUND TO PROFIT

By Steve Hennechart

Young consumers are engaging with luxury goods and virtual worlds at an earlier age than ever before.

Ten years ago, no child had more than 1.5 million subscribers by playing video games – yet RowdyRogan did it at 8 years old. No child would walk out with a bag worth tens of thousands of dollars – but Kim Kardashian's daughter, North West, recently carried a $10,000 Hermès Birkin Bag out in NYC. Indeed, Gen Z and, just after them, Gen Alpha, are unlike millennials or boomers; they are digital-native generations consuming luxury and accessing virtual worlds earlier than ever.

And brands have taken note

Brands have certainly noticed this largely untapped market in which luxury comprises 3.5% of the global childrenswear market versus 7.6% of the total apparel & footwear market. according to a Bain & Co. Report. The possibility of gaining significant market shares and reaching new customers have led to multiple luxury brands launching children´s collections such as Jacquemus in 2023. Similarly, such a trend has been broadly noticeable in digital luxury marketplaces such as Farfetch, which quadrupled the number of childrenswear brands on its marketplace from 2016 to 2017, as mentioned by the same report. The market's potential is undeniable, but the real question remains: how do we effectively reach this new demographic? Why not engage these digitally-native generations through their preferred digital platforms?

By taking gamification to the next level… by actually getting into games.

The entry of luxury and fashion onto major world-wide recognized videogames mostly Massively Multiplayer Online Game (MMOs) represent a strategic pivot towards engaging younger audiences, introducing them to luxury concepts in a realm where they are most comfortable and engaged. These initiatives not only underscore the brands’ dedication to innovation but also tap into the digital native’s inclination for immersive, interactive experiences. This approach not only familiarizes younger generations with luxury brands in a playful and engaging manner but also fosters a sense of brand loyalty and awareness from an early age, all within the expansive, limitless boundaries of virtual worlds.

We have seen multiple cases of luxury brands launching these initiatives, we saw in 2021 Balenciaga launching a set of skins (clothing for avatars) on MMO Fortnite, and Louis Vuitton doing the exact same thing on MMO League of Legends in 2019. Similarly, Gucci launched it´s project Gucci Garden on MMO Roblox in 2021. These collaborations between the worlds of fashion and gaming are not mere experiments; they are indicative of a broader shift towards a future where digital fashion trends are as influential as their physical counterparts.

When video games become much more than games

One of the biggest games in the world is Roblox, boasting a staggering 72 million daily active users by 2024—surpassing the population of countries like France. The platform's impressive growth from 2020 to 2024 underscores its widespread appeal, reflecting a trend where younger generations increasingly immerse themselves in virtual worlds from a younger age and in greater numbers. Roblox's success largely stems from its versatility; it isn't merely a game but a vast metaverse filled with interconnected gaming experiences, fostering endless opportunities for creativity and imagination.

From spending money in video games to making money

Roblox's metaverse is anchored by its own digital currency, Robux, taking the concept of virtual economies to new heights. The Robux enables users to purchase items for their avatars, access premium games, and enjoy a plethora of in-game benefits. The ingenuity of Robux extends beyond its in-game utility; it can be exchanged for real-world currency, blurring the lines between virtual gains and tangible rewards. This dynamic exchange mechanism highlights the platform's sophisticated economy, where creativity can be monetized, allowing creators to generate real income from their digital endeavors through User-generated Content (UGC).

The fashion industry, with its keen eye for emerging trends, has not been immune to the allure of virtual worlds. Digital platforms like Roblox offer unprecedented scalability and market reach, allowing brands and designers to connect with a global audience without the constraints of physical retail. This digital frontier has been embraced by traditional fashion houses and new-age designers alike, who see virtual platforms as arenas to experiment with avant-garde designs, engage with younger audiences, and gauge market reactions in ways previously unimaginable.

Brands can convert video games into their next revenue stream

The intersection of fashion and gaming is epitomized by the collaboration between the Chalhoub Group, the Middle East's largest luxury retailer, and Roblox. By venturing into the gaming sphere, Chalhoub Group tapped into new markets, transcending geographical and economic barriers. Their inaugural fashion drop on Roblox, featuring French silverware brand Christofle, was a resounding success, selling over 24 million items. By engaging their audience directly via digital platforms, brands bypass the traditional expenses associated with physical production, logistics, and marketing, incurring minimal variable costs alongside modest fixed costs. This shift allows the initial investment in the creation of digital products to be offset by the potentially unlimited resale value of these digital assets. Consequently, this strategy creates a lucrative, long-term revenue stream and an innovative new business model.

In the realm of Roblox and beyond, the fusion of virtual economies with the fashion industry signifies a paradigm shift in brand strategy resulting from a change in consumer behavior. As what we understand as an exclusively part of the physical world increasingly intertwines with the digital one, we stand on the brink of boundless innovation, collaboration, and growth. This journey, from virtual playgrounds to sophisticated economies, showcases how fashion is charting new territories, promising an exciting future where the digital and the tangible coalesce to redefine luxury and style for the next generation.

Disclaimer: The content of the following article was created with the assistance of Artificial Intelligence. It has been created within the framework of a study trip sponsored by the Chalhoub Group. Neither the author nor Sciences Po have received any compensation for the production of this article.

Visit the Learning Expedition page to find out more about the program.