Virtual Closets: New revenue stream for fashion and luxury brands

Metaverse is already shaping how we interact with fashion trends, how brands will reach their consumers via new avenues and how this helps them open a brand new revenue stream. Digital avatar of your own personality or the many game characters – what started from the gaming industry years ago, is now taking center stage with Metaverse pushing the thin line between physical and virtual reality.
Virtual closets or virtual fashion can be defined as the design and sale of fashion items for digital platforms and avatars only. This disruptive innovation is a promising and revolutionary change for the fashion industry as it takes away the fashion industry from mass-production and wastage.

Global brands and social media applications like Snapchat, Instagram and few others have built exclusive AR/VR based content for leading brands like Gucci, Lakme among others to have their customers engage in virtual try-ons with a POS push marketing mentioning these virtual products as limited editions. Augmented and virtual reality played a crucial role in this process. Use of AR offered consumers to try on clothing, shoes, glasses to much more at the comfort of their homes, virtually, while also offering styling tips, guides and playbooks.

Example: Gucci partnered with an international leading gaming brand to build virtual GUCCI products, limited edition, sold within the AR/VR version of the game as rare collectables for the gamers, opening itself a whole new channel of sales by building a brand new product line, exclusive to gamers and people using community gaming application or brands own build and designed mobile application/ web experiences.

Read More: Luxury Fashion Brands at Paris Fashion Week 2022

Social gaming, NFT’s and virtual closets

While metaverse may take a few more years to fully develop and launch, NFTs – Non fungible tokens and social gaming like online games and concerts that are attended by people’s avatars have been two striking opportunities of the present for many fashion and luxury brands. Morgan Stanley has mentioned that both these aspects – NFTs and social gaming can help expand the luxury groups total addressable market by more than 10% in eight years time while boosting their earnings to close to 25% ( before interest and tax).

Analysts from Morgan Stanley have stated that the market size for virtual luxury goods itself can be as large as $50 billion by 2030.

Zuckerberg, the CEO of Meta, earlier known as Facebook, has been quoted to mention that this niche is only about to become much bigger in the metaverse. He quoted that avatars will be as common as profile pictures today, they won’t be static anymore they will be more 3D in nature, representing an individual and their expressions, gestures – making and counting for a richer experience. He expects that people will look for a realistic avatar for work during the day, a more stylized one for hanging out with friends and family, and then furthermore a fantasy one for gaming. All these will require you to invest in a virtual wardrobe for the different occasions.

Here is how virtual closets can help fashion brands build a new stream of revenue while also cutting costs from other aspects:

Eliminating overstock

Each fashion brand goes through a production cycle, builds their inventory and has end-of-season sales for a percentage of its stock. These sales at times get too extended and reach a over 50-70% discount that also depreciates the value of the brand while they suffer losses with the large discounts.

With virtual fashion items, brands can eliminate the over-inventory issue and sale issue. With offerings of virtual goods brands will not have to push sales into deep discounts to get rid of their overstock. In fact they can manage the supply based on the demand or build a new demand-supply curve with exclusive ranges, limited editions and rare collectable, exclusive partnerships with certain platforms or influencers.

Also Read: Louis Vuitton’s Historical Journey To Become A Luxury Brand

Big margins

In the real world, from acquiring raw material to the final product hanging in a store- every single stage counts for more money spent making margins smaller for the brands. In virtual goods, there is no raw material required to design the actual garment – making it a minimal design process that helps in building higher margins and big profits. Designers here have the leeway to design virtual goods since the market limitations of the retail world do not apply here.

Old designs – new look

While bringing back old design in the real world will not help in sales for long term- in the virtual world, brands can bring back their old design from decades ago and make them more exciting by re-branding them with an influencer, offering to only a limited target group of college students or build it as a rare collectable item with a gaming brand.

This will offer brands an opportunity to build themselves as legacy brands, offering information along with their old collections in new virtual versions. Nostalgia in fashion is always a powerful sentiment and a statement. This aspect again helps the brand to open a new revenue stream with minimal investment – offering high returns.

Resale revenue

When brands push out NFTs, they are essentially making themselves a resale revenue. This simply means that smart certificates or NFTs for virtual items include royalty fees or revenue share on sale/ future transaction when items are sold further by the users. This means an on-going revenue for the original designer, i.e. the brand in this case and lesser opportunity for knock-offs.

Also Read: India’s luxury palace hotels: Rajasthan Chapter

Let’s look into examples of a few brands are already working towards their stake in virtual world, metaverse


The Gucci Garden, done in collaboration with Roblox – where Gucci’s designs are sold, witnessed a single Gucci bag sell for $4,000 in real world money for a virtual product.

Also Read: How India Inspires Global Luxury Brands Like Gucci &LV


The brand built a string of playable NFT creations coined Sharky B, that live in Blankos Block Party from Mythical Games. The characters here are known to include accessories like jetpacks, pool shoes and more. It is known that the creation collection has a quick sell through of almost $400,000.

Dolce & Gabbana

This luxury brand has sold its famous nine-piece ‘Collection Genesi’ collection on digital luxury marketplace UNXD for $5.7 million.

Read more: How movies have influenced and re-emphasized fashion looks and how brands have monetized

In simple terms, experts have already highlighted that people will care what their avatars are wearing, and these are only some examples to reflect on what the possible market size of virtual closets is going to be. These virtual assets and goods  are considered to be of real value in the metaverse that can be rare collectibles for many that can be used to sell further to anyone on the digital platform to make more money. This is soon to become an expression for people to define who they are, a status symbol more like.

Be part of the luxury industry with MBA-ESG business school, offering a wholesome international experience you will gain a 360 degree understanding of the working of a luxury brand across globe. Master your skill sets with some of the best industry experts from our global connections, a skilled and curated set of faculty to guide your throughout your education journey and beyond. This is the next step for you luxury career development.

MBA ESG is committed to bringing excellence in the employable scenario of luxury and fashion sectors by producing management professionals who can lead these sectors and provide massive growth to the luxury brands in the country and abroad. Join our MBA in Luxury Brand Management.

Author: Mankiran