Like many retailers, Chapeau Tres Mignon started preparing for the Christmas shopping frenzy in mid-November. There is just one tiny difference. The accessories shop – renowned for its owner’s signature hats – is located in Dreamworld East 183, 194, 21 on the information super highway, rather than on any real life High Street. But just because the framework of the store and everything inside it is built with bits and bytes rather than bricks and mortar, does not make what is on sale any less desirable.

About $1.5m is currently spent every 24 hours in the virtual world Second Life – a three dimensional multi-user platform that is less a game than a space where people can interact with each other through online representations of themselves called avatars.

The environment and everything in it from clothes and castles to skins and walks has been built using various design and scripting programmes by the people that have signed up to the world.

Megg Andrews is one content creator who through her avatar Megg Demina has developed a reputation for designing outrageous hats, which she sells in malls all around the virtual world including from her flagship shop Chapeau Tres Mignon.

She says sales in the week her winter collection launched this month matched those for the entire year as Second Life festive fun seekers and bargain-hunters flocked to her shop.

This is largely thanks to a range of stylish ice skates she designed for adroit avatars wishing to figure eight around the ice rink she paid to have built in front of her shop.

“There is a big market for everything Christmas related,” enthuses Megg, who is a real life stylist and part-time lecturer at the London College of Fashion.

“Second Life residents get really into it.”

Holly or folly?

Take a tour through Second Life, and it seems that there are Christmas trees of varying description everywhere, from inside a pub on the corner of a frighteningly detailed snowy replica of Dublin to a sunny promenade of a virtual Puerto Banus.

In addition, there are hundreds, perhaps thousands, of winter-wonderland themed events specifically put on for the holiday, with a number of locations offering sleigh rides, ice skating and the chance to take part in carolling.

Some of these are being offered by big real life brands eager to get involved with this emerging consumer base.

Last year, the US television network NBC Universal made its Second Life debut by holding a Christmas tree lighting ceremony in a simulation of New York’s famous Rockefeller Centre at the exact moment that the real event – an annual tradition – was being televised live.

According to Jeska Dzwigalski, the community manager at Second life creator Linden Lab, there were at last count 11 million registered players, or residents of the world, though not all will be logged on at any one time.

“Second Life is all about community and building relationships and social networks, so it’s not a surprise that holidays, such as Christmas, which is all about togetherness, is a big deal,” she says.

“One thing that trips up people who are sceptical of virtual worlds is that they see virtual content as not real, just pixels on a screen,” Ms Dzwigalski explains.

The key to making money is to understand that the digital products still have a value, in much the same way that Apple sells digital music through its iTunes store.

She adds: “One day, having a virtual representation of yourself will be as common as having an email address.”

Economic expansion

You may still think those indulging in cyber festivities are one chestnut short of a stuffed turkey dinner, but there are real people merrily cashing in on the Christmas spirit.

For example, of the thousands of Christmas trees proliferating the world, the chances are that a large proportion were bought from the chap whose avatar is Kris Lemon, a virtual-world tree retailer of some renown.

One festive tree he is selling is priced at 609 linden dollars, the Second life virtual currency that can be exchanged for real US dollars on the LindeX.

The exchange rate has been fairly stable for a while with between 255 to 265 linden dollars buying a real, folding US dollar bill.

This means Mr Lemon will make about $2.30 (£1.65) for each of the Christmas trees he sells.

And while that may not seem like a huge amount, the sheer volume of his business, his ability to duplicate his own design and sell it as a separate item, and the fact that his overheads are minimal, means that Mr Lemon is set to make a tidy sum from yuletide fever.

He is not the only one.

Formal-wear clothes specialist Simone expects sales to double in the Christmas period, pushing the total for the year to $200,000, as the number of festive cocktail parties drives up the demand for ball gowns and tuxedos.

Simone’s real life creator Veronica Brown is so positive about the future of the brand that she plans to expand early next year, opening a sister shop selling more casual couture – a marked contrast from the profit warnings and sombre trading updates from real life High Street retailers on both sides of the Atlantic.

“The difference is one of my mock Chanel creations will cost $1, considerably less than the real thing,” says Ms Brown, who lives in Indianapolis, the heart of the US Mid-West, which has been badly affected by a US-wide housing downturn.

“The entertainment industry tends to do well during recessions,” she says.

Virtual gifts

Seasonal goodwill extends to the exchange of presents, which are again computer-generated material for your avatar to show off and enjoy.

Linden Lab, which is based in San Francisco, said there were 16 million transactions between residents last month, with about four million worth 1 linden dollar, and 3,000 for between 100,000 and 499,999 lindens.

Unlike in real life, where most people are constrained by price limitations and the boundaries of reality, gifts in Second Life can range from a car or a house to an outrageous hairdo or different colour eyes.

Another virtual clothes designer is based in the Philippines and has an avatar called Shai Delacroix.

She plans to spend between 20,000 and 100,000 lindens on virtual gifts for her US boyfriend, whose avatar is the Christmas tree seller Kris Lemon, and whom she has never actually met in real life.

Return policy

But in the rapidly emerging virtual economy, law firm Field Fisher Waterhouse warns gift buyers and receivers that the laws governing their consumer rights are still unestablished, with most vendors operating a no-returns policy.

Piracy is also rife, making shopping a somewhat risky affair for the uninitiated.

“The level of protection consumers enjoy in virtual worlds is far from clear cut,” says partner David Naylor, who as a Second Life resident advises on legal issues when they arise.

“Try and be as certain as possible that you are buying from a reputable brand and be a little cautious about spending too much money because if unwelcome the recipient may find it difficult to return.”

The most positive aspect of a virtual gift could be its green and ethical credentials with no wrapping paper clogging up landfill sites and no risk of it having been cobbled together in a Chinese sweat shop.

As Megg Andrews puts it: “It is a gesture of love without the negative aspects of capitalist consumerism.”

And who knows, as more people go online to conduct relationships, from joining social networking sites like Facebook to fantasy universes like Second Life, there is a chance that virtual businesses might be able to offer consumers the best of both worlds.