Customer as avatar

Retailers look for real value in virtual worlds

1-800-Flowers.com launched a new online store in June, but it isn’t looking to traditional e-commerce metrics to measure the store’s success. For one thing, visitors to the new store can’t buy anything. What they can do is collect a free assortment of virtual flowers and enter contests such as the recently-concluded Virtual Bouquet Design competition or the Fields of the Virtual World snapshot competition.

They also can interact with other store visitors and communicate in-store with representatives of 1-800-Flowers.com. Meanwhile, visitors to 1-800-Flowers.com’s flagship e-commerce site can view and comment on snapshots from the new online store. It’s in these last activities that the company is looking for value from 1-800-Flowers.com in Second Life.

“We recognize that this is not just a place to jump into so we can sell more flowers and gifts,” says 1-800-Flowers.com president Chris McCann. “It’s a different environment and an emerging world.”

The comic-book look

1-800-Flowers.com is a recent addition to a small roster of major brands that have set up shop in Second Life, one of the most widely-known of a number of graphically-enhanced, 3-D, Internet-based virtual worlds where visitors interact with the environment and each other through online figural stand-ins called avatars. Owned and operated by Linden Research Inc., known as Linden Labs, the Second Life platform, and other virtual worlds like it, are attracting the attention of marketers on a continuous lookout for the Next Big Thing.

Under the usual metrics retailers apply to their e-commerce sites, Second Life doesn’t measure up. While a major online brand counts monthly visitor traffic in the millions, Second Life’s entire visitor population—defined as the number of resident avatars—though growing, was at around 9 million in August. And Nielsen/NetRatings market measurement reports a unique user base of 774,000 in May. Some experts say transaction functions in parts of the still-developing virtual world aren’t as robust as in the conventional online environment; while fulfillment in the real world provides another challenge.

The depiction of virtual products in Second Life–say a shirt for an avatar—is more comic book-like than photorealistic, the polar opposite of e-commerce site functionality that shows products in ever-greater clarity and detail. Merchandise in Second Life is paid for in Linden dollars, which could be purchased in August at in-world exchanges at the rate of one U.S. dollar for about 270 Linden dollars. So far, the revenue on sales, when converted back to U.S. currency, isn’t going to move the needle on any retailer’s financial results.

But none of this bothers the brands busy developing outposts on Second Life because that’s not why they are there. Which leads to the real question: What is the real-world pay-off for retailers in a virtual world?

Gaming roots

Visiting Second Life is akin to being in an online video game. In fact, that is one venue to which Second Life traces its roots. Popular multi-player online games such as World of Warcraft have helped introduce the concept of how human players could propel an avatar through a 3-D online virtual environment. Another foundation for the 3-D look of virtual worlds was the need to present in some comprehensible format the tons of data that supercomputers were spewing out 15 years ago, says Michael Rowe, manager of Internet and interactive at IBM Research. “They generated such a volume of data that it required some pretty complex visualizations to allow people to consume the data in a meaningful way,” Rowe says.

Sharing and manipulating that data and those visualizations among workers across IBM’s global network also suggested a better way for workers to collaborate. Last year, IBM formalized grassroots efforts within the company and formed a new division, the digital convergence emerging business opportunities unit, to look for ways to leverage that same knowledge base in new offerings.

One outcome of that initiative is Second Life’s IBM Island. IBM Island, which opened late last year, is home base to the virtual showrooms launched this year by retailers Sears Holding Corp. and Circuit City Inc. Linden Labs owns all the “land” on Second Life, but it makes “islands”—basically, servers capable of holding a defined number of avatars simultaneously—available for sale. To set up a facility on Second Life, companies buy an island or sublease land from someone who already owns one. IBM Island has leased real estate to both Sears and Circuit City; at the same time IBM works with both retailers to build out their presence there.

At Sears in Second Life, visitors can configure a kitchen in an immersive 3-D environment that may yield information not so visually apparent in a 2-D room planning tool, according to Rowe; seeing immediately, for example, that a planned sink is too far from a key appliance.

Reaching a new segment

Sears in Second Life doesn’t actually sell products, though visitors can click from Second Life to be transported to Sears.com. For Sears, as with other retailers having Second Life installations, today’s virtual world isn’t about sales. “This is a new way to reach a segment of the population for whom Sears may not have had the same resonance it did with their parents or grandparents,” a Sears spokesman says. “People are coming to the Second Life store, maybe folks that have not been in a Sears for a while, and they are saying, hey, these guys have some cool stuff. And if they do get transported to Sears.com, hopefully they are buying.”

While Second Life’s most frequent users overlap the early-adopter crowd, tech-savvy 18- to 24-year-olds typically aren’t interested in buying refrigerators. But Second Life reports participants’ average age as 35—within the range of peak home-equipping years.

Like Sears, some retailers also find value simply in being an early player in an emerging venue or enterprise on the chance that it might develop into something big. 1-800-Flowers.com, for example, has experimented throughout its history with new channels and new media, including toll-free phone numbers and the web itself, where it was one of the first retailers to open an online store.

Others see a presence on Second Life as a way to reinforce a brand image. Geek Squad Island opened on Second Life in March with the help of The Electric Sheep Co., a designer of software and experiences for 3-D virtual worlds. “We couldn’t see any reason why we should not be there,” says Rodney Bryant, channel manager at Geek Squad, a technology repair services company. “Geek Squad is known as a leader in being able to troubleshoot technology.”

That’s what the avatar agents on Geek Squad in Second Life—as powered by human Geek Squad agents—actually do. Bryant says most of the questions posed by avatars visiting the shop are technical, ranging from requests for advice on problems the humans behind the avatars have with their computers in the real world, to questions about how to maneuver in the virtual world. Avatar agents on Geek Squad Island also can set up an appointment to have a human agent visit a real-world location to fix a computer.

Transferring to the real world

Geek Squad Island represents Geek Squad’s first foray into online community-building, Bryant says. “As we go though this experience, we are looking at expanding the way that we speak to consumers online. We will distribute whatever we learn in Second Life not only to the environment there but also to any other online space we work in,” he says. He adds that the company is measuring success in what it learns about how to deal with people in an online community, the number of real-life Geek Squad agents who sign up to be Second Life agents, and the volume of consumer engagements and employee interaction in the space.

Geek Squad parent company Best Buy Co. Inc. is monitoring the Geek Squad experiment closely, as well as watching other virtual worlds as a means of connecting with customers, says a spokeswoman, adding, “The learnings here will certainly have an impact on what the broader organization does in the virtual space.”

Beyond covering their bets, building brand awareness and experimenting with community, early brand players say the immersive nature of virtual worlds offers an opportunity for deepening customer engagement with the brand that can’t be duplicated on a 2-D e-commerce site. “Most retailers aren’t actually looking at virtual worlds as a way to drive sales right now. There are other key metrics and there are more qualitative ways of looking at marketing, too,” says Chris Sherman, executive director of Virtual Worlds Management, which produces the annual Virtual Worlds Conference & Expo. “Virtual worlds offer a much more personal way for consumers to form groups and social bonds around a brand. That’s harder to measure, but it’s invaluable.”

Crowne Plaza Hotels, a brand of the InterContinental Hotels Group, is testing that notion with its installation on Second Life, launched in June. In the real world, the hotel chain positions itself as a venue for business meetings. Its “Place to Meet” Island, constructed with the assistance of agency Spunlogic, is a free venue for virtual meetings. The virtual meeting rooms provide privacy, banning uninvited avatars from access, and the reservations system is staffed by an avatar powered by Crowne Plaza staff in much the same way reservations are staffed in the real world.

An immersive experience

So far, the meeting venue has been used by avatars representing professional associations that have spring up in Second Life—for instance, Business Communicators of Second Life—and by those representing student groups, according to Del Ross, vice president of distribution marketing for the Americas at InterContinental Hotels.

In a real world where alternatives to face-to-face meetings include webinars, conference calls and video conferencing, what’s the practical value of sending avatars to do the job in a virtual world? Ross says the question, or one like it, comes up every time a new communications medium emerges. In the case of Second Life, he says, “It may not sound perfectly intuitive, but there is something about seeing a virtual rendition of a person that changes the way you behave. It changes the level of engagement you might have,” he says. “In Second Life, it is more of an immersive experience that encourages a different level of behavior. It’s a little bit more human.”

McCann of 1-800-Flowers.com says his company is watching measures such as the number of visitors who have entered 1-800-Flowers.com in Second Life, built with agency This Second Marketing LLC, and the number who have interacted with staff avatars there. While McCann didn’t disclose those numbers, he says the company is pleased with them but for now the real utility of being in Second Life is the insights the company hopes to gain from interacting with customers in that environment.

“As a company we look for all possible ways to get into a stronger relationship with our customer base by getting into a dialogue with them. Second Life provides a great way to do that,” he says. He adds that the Second Life environment lends itself particularly to gathering feedback, as the social opportunity to interact with others there is one big reason visitors go to the virtual world. As a result, he says, “People are much more open to giving feedback, where in other forums you have to go out and solicit them for it.”

McCann sees the gathering of feedback from the Second Life resident community as a critical first step in pursuing other opportunities that may follow in the virtual environment. “We are learning about this community and trying to figure out how our brand fits into it, as opposed to pre-supposing and jamming an offline commerce model into that world,” he says. Based on its initial experience on Second Life and on the feedback from the community, 1-800-Flowers has already announced plans for an expanded in-world build-out.

Not for everyone

Visitors to 1-800-Flowers.com in Second Life now can link out from Second Life to the dedicated page on 1-800-Flowers.com’s regular web site, though there are no links from Second Life directly to products on 1-800-Flowers.com. McCann calls the notion of Second Life visitors one day creating bouquets in the virtual world and then linking to the e-commerce site to order the bouquets they’ve designed in real flowers “nirvana,” but says for now, the fulfillment requirements are just too daunting.

Virtual worlds aren’t for every marketer, at least not now. Retailer American Apparel, which had sold T-shirts for avatars, closed the shop it had opened in Second Life and declined to be interviewed, citing a regulatory quiet period as it prepares to go public. Starwood Hotel Group pulled out of the hotel it had created on Second Life, saying it had gotten the market research information it was looking for, and donated its land there to the Second Life community.

But there may have been other factors worth mentioning for marketers eyeing virtual worlds. An “if you build it, they will come” approach doesn’t fly here. The service or product offered in Second Life must have some real value in the virtual environment. In the case of the closed hotel, “No one goes to Second Life to watch their avatar sleep—it’s not any fun,” says Ross of InterContinental Hotels.

Brian Haven, senior analyst with Forrester Research Inc., says retailers should see virtual worlds as a new market and not simply another channel: more like entering a foreign country than migrating shoppers from catalogs to the web. And some retailers just aren’t there yet. “I get a lot of calls about Second Life. But if you don’t understand blogs and social networks yet, you’re not ready for virtual worlds,” Haven says.

The best is yet to come

That said, do Second Life and worlds like it represent the next era of the web? Three years from now, will business be laughing at the retailers that thought they wouldn’t need a presence there? Time will tell, but the answer hinges partly on whether virtual worlds ultimately provide advantages to shoppers that aren’t available in other mediums, much as the web brought features to shopping that can’t be duplicated offline.

“The next phase will be for native differentiators to emerge in Second Life—things you can’t do in the physical world, but which make a virtual world experience much better,” Ross says. “I don’t know what those are yet because this is still new.”