SRI's notes from the Metaverse

Meta gets physical

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Reporting by the New York Times yesterday confirmed a well-circulated rumor that Meta, the company formerly known as Facebook, is planning to open its first physical storefront next month near its Silicon Valley headquarters.  The Times reports that the store will showcase Meta’s hardware, including the Quest 2 virtual-reality headset.

Meta CEO, Mark Zuckerberg, had previously commented that “the best way to understand virtual reality is to experience it.”  And what better way to entice consumers into the Metaverse than through an old-fashioned brick-and-mortar storefront!  The idea of “destination stores” where shoppers can get hands on with new technologies is certainly not new.  Apple opened its first store 21 years ago in Tysons Corner, Virginia.  That “experiment” in retail has since grown to more than 500 locations globally, stretching from Tokyo to Toronto, delivering over $30 billion in annual sales.  Still, retail is not a foolproof recipe for success.  Just look at Microsoft.  After opening roughly 120 store locations globally in the 2010s, Microsoft closed all but four in 2020 after COVID put the final nail in their retail coffin.  Likewise, Bose pulled the plug on its struggling retail presence in 2021, shuttering all its 119 company-owned outlets.

So what lessons should Zuck take away as he launches his retail portal into the Metaverse?

  • Retail takes talent. Before Steve Jobs opened Store No. 1, he hired retailing innovator, Ron Johnson, away from Target.  Jobs and Johnson knew that the Apple Store needed to be more than a place to discover and buy, it needed to be a place to learn and a place for support. That stroke of genius led to the Genius Bar and to the free in‑store classes that help customers master both Apple’s hardware and software products. Apple also knew that it couldn’t rest on its laurels, and as copycat concepts proliferated (see Microsoft, Bose, et al.), they broke their own mold and hired former Burberry’s CEO to bring new, differentiated style to the store’s design and merchandising approach.
  • Be careful not to overpromise and underdeliver. Consumer expectations are notoriously hard to manage.  If Meta does decide to go big into physical retail, they will certainly have a huge opportunity and a daunting challenge ahead to deliver on the hype and promise of the Metaverse, particular since much of the hardware and software platforms involved are still in their nascent stages.  Meta’s success in the Metaverse will hinge on how well its hardware marries with the software and content of its partners.  In that sense, they are less like Apple, who fastidiously controls its own hardware and its software, and are more like Sony, whose next-gen, high-resolution TVs are of little value without next-gen, high-resolution movies and TV shows.  Meta’s retail experience will likewise need to showcase the best available content from its partners to deliver the “wow factor” needed to live up to the hyperscale PR.
  • Follow the data…but only so far. Steve Jobs was well known for his enmity towards market research, arguing that consumers were terrible at telling you what they wanted until you showed them what they needed.  Still, the Apple Stores, via its retail associates and Genius Bars, became important data labs for learning more about what consumers loved about Apple products and what frustrated them.  There is surely a massive opportunity for Meta and its partners to experiment and learn from its users in a controlled retail environment.  They’ll just make sure to show them the future before asking for their input on how to design it!