Background: The fashion retail industry has undergone a major transformation due to the Covid-19 pandemic and the rise of technical innovations. This transformation led to the emergence of digital fashion, a new concept integrating experimental technologies, including artificial intelligence, and augmented reality, which further has progressed towards the Metaverse. The Metaverse is a new consumption space without precedent changing how people communicate, create value, and generate economies. The emergence of the Metaverse is predicted to generate trillions of users in the upcoming ten years across user and enterprise use cases, altering the fashion retail industry.

Research problem: Despite heavy investments in digital innovations in the retail fashion industry, the topic of innovation adoption remains understudied. As innovation is deemed one of the main drivers of business success, companies must know how to introduce them and understand the impacting factors of success. With Metaverse being the newest innovation that could alter the retail fashion industry, it requires more research and understanding of the impacting external factors that will influence its diffusion over time.

Research purpose: The purpose of this study is to close the identified gap by identifying the external factors that influence the adoption and diffusion of Metaverse in the fashion industry. Further, it aims to generate a greater comprehension of the overall attitude toward this innovation. 

Research question: What are the external factors and how do they influence the adoption and diffusion of Metaverse innovation in the fashion industry?

Method: This is an exploratory qualitative study with an inductive approach. It follows the social constructionism epistemology and the relativistic ontology. Along with the grounded theory, the data is collected through interviews and from the social platform Reddit and analyzed through thematic analysis. 

Conclusion: Our findings identify five external factors influencing the diffusion of Metaverse: Regulations, Technology, Digital skillset, Attitude, and Network effects. These factors interact with each other in the innovation process, and our conceptual framework offers a deeper understanding of its diffusion.