Introduction

What’s the Story? Coresight Research has identified the expanding metaverse as a key trend to watch in retail and a component trend of Coresight Research’s RESET framework for change. That framework provides retailers with a model for adapting to a new world marked by consumer-centricity, in 2022 and beyond (see the end of this report for more details). 5G is the fastest and most advanced cellular network yet, outperforming the latest generation of Wi-Fi. In this report, we explore how 5G is powering the metaverse and consider what brands and retailers should know about the technology. We also provide examples of notable 5G-driven strategies by major retailers. This report forms part of our Building Blocks of the Metaverse series, which presents insights into the core technological components of the retail metaverse, including important details for retailers to know in establishing a presence and operating in the virtual space. Why It Matters 5G is the fifth generation of cellular networks and the successor to 4G, 3G and 2G, which most smartphones previously connected to. Service providers began rolling out 5G globally in 2019, and the network is set to cover 75% of the global population by 2027, according to telecommunications firm Ericsson. Truly immersive AR and VR experiences that will keep users engaged for hours require extremely fast and low-latency networks. With widespread 5G coverage, metaverse users will be able to seamlessly connect to virtual worlds and experiences from anywhere, at any time, with their smartphones—even in areas where Wi-Fi is not available. Although Wi-Fi is also capable of producing powerfully immersive experiences, it can still suffer from slow data transfer rates and congestion. 5G has proven to be faster than standard Wi-Fi types in several 5G-leading countries, according to analysis by Open Signal, a mobile network analytics firm. 5G towers can also offer comparable data rates to wireline connection but can be installed much more quickly. 5G is vastly superior to previous cellular networks and will enable brands and retailers to provide customers with easily accessible, virtual shopping experiences, powering higher-quality visuals through reliable, fast connection. This could increase the amount of time users spend in the metaverse and improve interaction, loyalty and opportunities for brands to build immersive, shared communities. Metaverse and virtual world usage will drive global data usage by 20X by 2032, according to Credit Suisse. The speed of 5G connectivity will help to support this increase in data usage, and the number of 5G subscriptions—and therefore users who will be able to easily access the metaverse—is already rising rapidly and is set to total nearly 3 billion by 2025, according to Ericsson (see Figure 1).

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Figure 1. Estimated Global 5G Subscriptions (Mil.) [caption id="attachment_146931" align="aligncenter" width="700"] Source: Ericsson[/caption]  

Building the Metaverse—5G: Coresight Research Analysis

Benefits of 5G in the Metaverse We believe that the global metaverse ecosystem will benefit from 5G in three critical ways:

1. Simplifying access—Faster data-transfer rates and the use of satellites will enable widespread connectivity and access for users wherever they are, not just in Wi-Fi-accessible areas, leading to growth in the number of metaverse users.
2. Powering real-time experiences—5G digital twins will allow developers to replicate physical locations in perfect detail, powering AR experiences. Low latency and high data rates will also support more powerful visuals in AR and VR experiences.
3. Supporting increased global data usage—As more users begin to explore the metaverse and build their virtual identities, 5G will also help to combat huge energy consumption amid soaring data usage over the next decade.

We explore each of these benefits in more detail below. Simplifying Access As 5G coverage increases around the world (as discussed earlier in this report), more consumers will gain access to the metaverse. In previous years, for a truly immersive virtual experience, users would need to connect to a computer, laptop or gaming console in a Wi-Fi accessible area—a time-consuming and lengthy task with many initial hurdles and barriers. 5G, which tests at up to 20,000 Mbps (megabits per second) has faster data-transfer speeds than Wi-Fi, which tested at average speeds of 42.86 Mbps in the US, according to High Speed Internet. This will enable users to easily connect to encapsulating immersive experiences wherever they are, whenever they like. Presented with easier access to the metaverse, new users will be more likely to explore virtual words. Countries with large populations such as China and India represent large market opportunities for brands and retailers looking to enter the metaverse; each 5G tower constructed adds a large pool of potential virtual customers, which are theoretically accessible to brands regardless of the country they operate in. Furthermore, bringing 5G technology to rural areas that struggle to stay connected to the world will unlock new customer bases. Although 5G’s range is limited to less than a mile, 5G networks in rural areas will be able to use lower-band radio signals to connect to towers miles away. Such rural networks will not be as fast as networks in urban areas where 5G towers will be ubiquitous, but they will still provide remote communities with faster data-transfer rates than they have ever seen before. 5G technology will also make use of satellites that will extend networks through air and sea to remote areas with limited cellular coverage, improving general connectivity. Developers are also investing heavily to improve headsets, incorporating hardware (such as Qualcomm’s Snapdragon chipset and Samsung’s Exynos chipset) to connect to 5G networks.  5G-enabling chips can turn headsets into standalone systems that do not require Wi-Fi to create visuals or connect to platforms. Other developers, such as Nreal and HTC Vive, have designed lightweight AR glasses for real-time experiences.

• For more about headset and immersive technology, read the previous report in this series, Building Blocks of the Metaverse: Immersive Technologies.

Powering Real-Time Experiences The most common perception of the metaverse is a fully immersive and virtual experience powered by gaming engines, such as Decentraland or The Sandbox. However, there is another view in which real-world locations and objects are replicated virtually in perfect detail by using smart sensors to connect them with 5G networks, allowing retailers to capture real-time data about physical stores and locations. Objects equipped with 5G sensors, called digital twins, can be replicated in perfect detail in virtual settings, powerfully linking the metaverse with the physical world. In doing so, customers from distant corners of the world can experience popular flagship stores from their own homes. These two visions of the metaverse will, theoretically, be interoperable with one another, with customers able to carry key elements of their virtual identities, tied to crypto wallets, from platform to platform. A few leading technology companies, including NVIDIA with Omniverse and Matterport, are already beginning to create virtual versions of physical stores for clients. Utilizing 5G digital twins, retailers can re-create physical stores in real time to expand their customer bases and enhance the shopping experience by adding AR elements. This possibility represents a large opportunity, as an estimated 74% of US consumers believe that 3D virtual stores would be a more exciting experience than traditional stores, according to a survey conducted by Matterport in December 2020. Omniverse and Matterport have been utilized by various brands operating in different sectors, such as BMW Group, Kroger, NIKE and PepsiCo. [caption id="attachment_146932" align="aligncenter" width="700"] Virtual 3D version of a NIKE store in Milan using 5G digital twins
Source: Matterport [/caption]   Supporting Increased Global Data Usage As more people continue to invest more time in digital and virtual environments, global data usage is going to increase significantly. 5G cellular technology has proven to be 90% more energy efficient than 4G networks in terms of energy consumption per unit of traffic, according to Ericsson. Screen time will continue to increase as more users spend hours at a time immersed within virtual experiences. Additionally, while the average person is acclimating to the idea of spending time within a virtual world, the number of avid gamers continues to grow. Global revenue from VR gaming is set to increase from an estimated $1.6 billion in 2022 to $2.4 billion in 2024, according to PwC and Omdia—driving the need for the advanced connectivity and access of 5G. 5G will likely be capable of supporting the metaverse’s data needs over the next decade, but as the total user base grows and use cases evolve along with metaverse technologies and trends, 6G—enabled by 5G—will eventually become available to support even more data usage.  Background of 5G and Associated Metaverse-Enabling Technologies General research in 5G technology began as early as 2008, but in 2013, electronics companies Samsung and Huawei both announced major plans to invest heavily in 5G development. In 2016, Verizon began running tests for 5G networks, and soon after, many telecommunications and service companies began forming partnerships to start building out the global 5G network, which started providing coverage in 2019. Although each cellular network generation was a technological marvel at its time, successors have always been much more advanced. 5G has significantly higher transfer speeds than previous cellular networks (see Figure 2).

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Figure 2. Comparison of Cellular Network Speeds [wpdatatable id=1963 table_view=regular]

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*Megabits per second (one megabit is the equivalent of 1,000 kilobits) **Kilobits per second Source: Coresight Research/Verizon/Qualcomm If the trend holds, 6G should be released sometime around 2030. The 5G buildout will be crucial for enhanced global data-transfer speeds and will provide the building blocks for the eventual 6G network, which could be up to 100 times as fast as 5G. Both networks will support increased global data usage as metaverse activity continues to increase. 5G is made possible by several technologies, including OFDM (orthogonal frequency-division multiplexing) and MIMO (multiple input, multiple output). OFDM OFDM is a form of digital modulation, a method for transmitting data used by cellular networks such as 5G and 4G LTE. In cellular networks using OFDM, information streams are spread among closely spaced narrowband frequencies that are overlapping, rather than a single wideband frequency. In traditional single carrier systems, such as CDMA (code-division multiple access, which previous networks such as 3G are based on), only a single radio frequency is used to transfer bits of information, sent sequentially after one another. With overlapping frequencies in OFDM, users are able to send multiple bits of information across different frequencies, reducing latency and multi-path distortion, and improving efficiency. These factors will be crucial for the metaverse with countless platforms and users interacting—transmitting data—in real time, allowing for multi-user access. 5G will differ from 4G LTE in that it features a specification, 5G NR (New Radio), for a 5G radio access network (RAN) which connects devices such as smartphones to the cloud. 5G NR, using OFDM, will also cover spectrums of waves not utilized by 4G LTE technology, significantly increasing bandwidth to support the increased data usage caused by the metaverse. 5G networks will not solely be limited to new radio waves; they will be homogeneous, making use of both licensed (owned by companies) and unlicensed (free for anyone) bands, improving instantaneous connectivity, interaction and communication in the metaverse. MIMO MIMO is a type of antenna technology that tower companies have been purchasing in large quantities to support 5G infrastructure. Critical for 5G’s speed, MIMO antennas strengthen the link between devices and 5G RANs by using multiple pathways to send OFDM signals. The pathways are not correlated with one another, meaning that networks using MIMO antennas provide the opportunity to transmit several data streams at once. 4G LTE towers operate on basic MIMO technology, whereas antennas in 5G towers will have more components. More complex antennas create a technology known as massive MIMO, a significant increase in spectrum efficiency (he rate at which bits of data can be transmitted to a given number of end users while ensuring quality is maintained). Higher spectrum efficiency will be crucial for improving immersion in the metaverse as many users connect to platforms and experiences from various locations. [caption id="attachment_146933" align="aligncenter" width="699"] MIMO antenna versus traditional antenna
Source: Samsung [/caption]   What Retailers Should Know  5G will make widespread Internet and metaverse access possible for impoverished and rural communities, which previously had not experienced fast-enough data rates for meaningful virtual experiences. The 5G network will also significantly increase the pool of digital customers to areas that were, for whatever reason, previously inaccessible to brands and retailers, transforming the way they shop. New digital customers (from all areas) will also enjoy a number of benefits, all of which support increased virtual and metaverse shopping activity (see Figure 3).

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Figure 3. Benefits of 5G for the Digital Customer

Higher Capacity	Devices in the home, vehicle and pocket can be connected to smart grids in cities to offer benefits for safety, convenience, environmental concerns and easing traffic congestion as users connect to various platforms from wherever they please.
Greater Bandwidth	Consumers can download movies and music much more quickly on their phones and make greater use of AR/VR.
Lower Latency	The greater responsiveness of virtual worlds will enable new games and improve the gaming experience.
Lower Power Consumption	5G networks promise to offer a 90% reduction in power usage, offering longer battery life and more time to connect to experiences.

Source: Coresight Research An estimated 3 billion people—37% of the world’s population—do not have Internet access, according to a report published in late 2021 by the United Nations’ International Telecommunication Union. Although the 5G rollout has been quickest in developed countries, such as Europe and the US, emerging areas such as Asia and South America are beginning to construct towers and provide high-speed data rates for impoverished communities and first-time Internet users. With such connectivity, 5G will eventually create a massive pool of new previously inaccessible digital customers that can only be reached virtually (or through the metaverse). The map below shows current global 5G coverage. [caption id="attachment_146934" align="aligncenter" width="699"] Data as of May 2, 2022
Source: nPerf [/caption]   Examples of Brands and Retailers Leveraging 5G Technology Many retailers have started partnering with service and telecommunications companies to power 5G-enabled AR and VR experiences for customers.

• Dior

French luxury brand Dior partnered with South Korea-based iOS and Android application and world platform Zepeto in July 2021. As one of the largest virtual platforms, Zepeto has over 300 million total users, who can explore virtual worlds and chat rooms and interact with one another. The partnership is the platform’s first beauty collaboration. It enables users to outfit their digital avatars with unique Dior-based digital wearables and makeup looks. As 5G coverage continues to grow, more and more users will be active on Zepeto’s platform, able to access it at any time wherever they are. The more digital traffic, the more “free advertising” for Dior, which puts itself in position to benefit from the increased global connectivity and accessibility that 5G will provide over the next decade. Other brands, such as Adidas and Ralph Lauren, are also positioned to benefit from Zepeto’s large user base. [caption id="attachment_146935" align="aligncenter" width="701"] Preview of a Dior makeup tutorial hosted by a Zepeto virtual human
Source: Zepeto’s Kaily Idol [/caption]   In October 2020, Dior had also formed a partnership with social platform Snap, through which Snapchat users can try on sneakers in an AR experience. After testing the shoes, users are either directed to Dior’s Snapchat profile for more information or directly to its website to make a purchase. As 5G continues to expand, a growing number of digital customers will interact with retailers and brands that do not have physical presences near these customers.

• Lowe’s

Lowe’s Innovation Lab focuses on the development of several AR and VR reality technologies, dubbed “Spatial Commerce”, which offer customers the opportunity to transform their homes into virtual experiences. The iOS app leverages lidar (light detection and ranging) technology for customers to scan and create 3D models of physical spaces to overlay with products, along with real-time estimates and room measurements. [caption id="attachment_146936" align="aligncenter" width="660"] Lowe’s Innovation Labs’ iOS application
Source: Lowe’s [/caption]   In partnership with Microsoft, the lab is also developing in-store project visualization and offering customers the opportunity to visualize theoretical projects using Microsoft’s HoloLens VR headset. 5G networks, faster than even the fastest Wi-Fi networks, will be able to overlay augmented elements and offer project visualization with more accuracy and less delay, and bring this opportunity to distant customers in rural areas. In the future, if the metaverse—as well as cryptocurrencies—continues to gain significant traction, experiences will be interoperable. Customers will be able to maintain elements of their digital identities, tied to cryptocurrency wallets, from AR and VR experiences based on the real world, such as what Lowe’s offers, to fully immersive gaming experiences such as Decentraland or The Sandbox.

What We Think

5G is a powerful cellular network that will enable the metaverse in multiple ways. Its technology will reduce barriers to access for users, power new types of real-time and virtual shopping experiences and support the increase in global data usage that is likely to come with increased virtual activity. Without it, connecting to a virtual experience or world becomes a time-consuming, arduous task that, ultimately, will be a significant hurdle to metaverse user growth. 5G will enable shared community experiences involving consumers all over the world, which increase brand loyalty and interaction and could be completely reinvented through AR and VR experiences. Although cellular network technology is rapidly evolving, with 6G on the horizon, 5G coverage will continue to be important for decades to come, as emerging countries and users in rural areas connect to the Internet at rapid rates for the first time. 5G will connect a massive pool of customers to the global metaverse ecosystem, and understanding how to utilize 5G technology for customer offerings will be crucial for brands and retailers to accessing them instantaneously in virtual settings, no matter where the brand or retailer operates from. We believe 5G will unlock Internet access, increasing the global number of accessible digital customers, by offering faster data speeds. Many retailers and brands are beginning to take advantage of the technology by partnering with telecommunications companies to power virtual 5G experiences for customers. The number of 5G subscriptions—and therefore the number of potential metaverse users—continues to climb, and brands and retailers should begin to study how the technology can help them to access a massive pool of global customers with AR and VR offerings.

Appendix: About Coresight Research’s RESET Framework

Coresight Research’s RESET framework for change in retail serves as a call to action for retail companies. The framework aggregates the retail trends that our analysts identify as meaningful for 2022 and beyond, as well as our recommendations to capitalize on those trends, around five areas of evolution. To remain relevant and stand equipped for change, we urge retailers to be Responsive, Engaging, Socially responsible, Expansive and Tech-enabled. Emphasizing the need for consumer-centricity, the consumer sits at the center of this framework, with their preferences, behaviors and choices demanding those changes. RESET was ideated as a means to aggregate more than a dozen of our identified retail trends into a higher-level framework. The framework enhances accessibility, serving as an entry point into the longer list of more specific trends that we think should be front of mind for retail companies as they seek to maintain relevance. Retailers can dive into these trends as they cycle through the RESET framework. The components of RESET serve as a template for approaching adaptation in retail. Companies can consolidate processes such as the identification of opportunities, internal capability reviews, competitor analysis and implementation of new processes and competencies around these RESET segments. Through 2022, our research will assist retailers in understanding the drivers of evolution in retail and managing the resulting processes of adaptation. The RESET framework’s constituent trends will form a pillar of our research and analysis through 2022, with our analysts dedicated to exploring these trends in detail. Readers will see this explainer and the RESET framework identifier on further reports as we continue that coverage.

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Appendix Figure 1. RESET Framework [caption id="attachment_143517" align="aligncenter" width="700"] Source: Coresight Research[/caption]