With a growing number of younger consumers drawn to the unique experience offered by AR and VR, retailers are interested in using these emerging technologies to build a greater competitive advantage and increase customer affinity for the brand.
Virtual reality (VR) and augmented reality (AR) are right at the intersection of retail and technology. As retailers search for new ways to provide an immersive customer experience, these technologies are leading the charge. VR and AR have the power to revolutionize our shopping behavior, alter our purchasing habits, and make our favorite brands more accessible. More than just changing habits, however, these new forms of reality promise to transform the entire customer experience as they add new layers of perception.
VR and AR Are Magnetic to Shoppers
Virtual and augmented reality hold out the promise of disrupting the entire retail environment. Applications using either of these technologies stand to eliminate customer pain points, elevate customer service, and create a differentiated, personalized customer experience. Plus, they’re just downright fun; they are novel, and have a game-like magnetism that no other retail experience can duplicate. Once customers become accustomed to the VR experience, they’ll be more drawn to seek it out and gravitate toward retailers who offer it.
Investors Are Taking Interest
The successful incorporation of VR and AR into retail models also has the potential to vastly change the way retailers think about stores of the future. Investment in the sector is heavy, with AR and VR startups raising $658 million in equity financing in 2015. Some projections put AR and VR investment in retail at close to $30 billion by 2020. A Statista survey estimates that in 2018, there will be 171 million active VR users. It’s important to note, however, that investing in VR requires the ability to take a longer view. With such a new technology, the ROI may be 24 to 36 months in the future, after a settling-in period. However, it’s increasingly obvious that the ROI, when it comes, is substantial.
Because of its nearly unlimited utility in a retail environment, the development of commercial VR and AR is accelerating. John Vary, innovation manager at retailer John Lewis, states: “We try to focus on transformative innovation–that’s our mission–but the pace of change is happening so quickly, what we think will take five years happens in two.”
What Exactly Are VR and AR?
A single, industry-wide definition has been difficult to agree upon, but from a high-level perspective, virtual reality is an immersive, three-dimensional, computer-generated environment that a user interacts with while wearing a special headset. Augmented reality is less immersive, but can be accessed via the consumers’ own mobile devices. It overlays information or computer-generated content on the real world, as seen through the device’s camera. “Pokemon Go” is the most famous recent use of AR. Virtual reality is forecast to hit $30 billion by 2020. There was plenty of intense chatter around virtual reality in the wake of Facebook’s purchase of Oculus Rift in early 2014. In a recent report published by Goldman Sachs, VR is named as one of the technologies “retailers will have to invest in to serve their customers and keep ahead of their competition.” John Vary has even coined a term that may be the best description of VR and AR shopping experiences: “retail theater.”
More Layers Than Just Real Life
Shopping with a smartphone and a virtual reality headset offers customers a fully immersive shopping experience. They move through the store just as they normally would, but they are simultaneously encountering products in a whole new sensory channel. AR and VR gives customers access to in-depth information on fit, manufacturing, uses and cross-sell opportunities. In fact, retailers themselves can use VR to test out store displays virtually before actually building them out. The number of uses is only beginning to be conceived.
Millennials Are Drawn to “Mixed Reality” Experiences
Retailers are interested in using these emerging technologies to build a greater competitive advantage and increase customer affinity for the brand. Research by Sonar shows that younger consumers are drawn to VR, AR, artificial intelligence, and the “mixed reality” that these technologies provide: 70 percent of U.S. millennials say they would be interested in brands that use these new shopping experiences, and 72 percent feel that these technologies will help the brand predict which products will be most appealing.
Lowe’s Pioneering on the Reality Frontier
One early adopter of AR and VR in a retail setting is Lowe’s. Lowe’s Innovation Labs (LIL) is a separate tech development engine, rolling out “narrative-driven innovation” to establish entirely new shopping environments. The main technologies for offering customers enriched three-dimensional channels are divided into various parts:
The Lowe’s Holoroom, rolled out in 2015 in 19 U.S. stores, is a “digital power tool” to help customers visualize and share the home remodel they’re designing. VisualCommerce enables Lowe’s to manage thousands of SKUs as virtual 3D objects, along with their associated metadata. With the ability to populate a 3D space with actual products stocked by Lowe’s, shoppers can design their perfect bathroom or kitchen and literally walk into it, share it via YouTube 360 and then buy the products to turn their virtual design into reality.
They first design the space on the iPad, and then they put on an Oculus Rift VR headset and walk around in their new virtual design. This three-dimensional experience is the equivalent of trying on clothes in a store dressing room; it gives customers a spatial sense of how the new appliances and furnishings will actually fit together in their home space. Once users are satisfied with their selections, designs can be exported to YouTube 360 for viewing at home with a Google Cardboard.
This interactive “mixed reality” environment arose from a partnership between Lowe’s and Microsoft. Currently available in two pilot stores (Lynnwood, WA and Garner, NC), HoloLens technology allows customers to view physical objects in a real-life showroom, while viewing extra layers of information superimposed on them through the Microsoft HoloLens headset. With the merging of physical objects and holograms, customers can view a selection of design options and even “drag and drop” a kitchen island where they want it to be. Increasing sophistication will continue to be introduced to the HoloLens technology, including greater personalization and responsiveness. Customers will be able to let the HoloLens access their Pinterest boards, in order to acquire a unique sense of their preferences and tastes.
Scheduled for release in November 2016, Vision is a mobile app powered by Google’s Tango. Lowe’s describes Vision as a technology that “combines area learning, depth sensing and motion tracking to give devices the ability to see their environment in 3D.” The result of a collaboration between Lowe’s, Google and Lenovo (which is supplying the Phab 2 Pro, a Tango-enabled smartphone), Vision offers an entirely personal, portable mixed-reality system.
Lowe’s Innovation Labs Just Keep Working Their Magic
Probably the most disruptive aspect of Lowe’s technological integration is how it pervades every aspect of the retail experience. The Lowebot, for example, is a retail service robot that helps customers find what they’re looking for in stores, while also assisting with inventory management. The company is even experimenting with 3D printing of tools and parts in space!
Building New Consumer Expectations
While augmented reality and virtual reality still feel a little futuristic for commerce, big-name retailers are testing the technologies in ways that appear surprisingly simple and adaptable. As the technology becomes more popular, customers will come to expect this level of technological sophistication when making their purchasing decision.
Brand Identity Expressed Through Unique Experiences
The evolution from traditional brick-and-mortar stores to technologically innovative experiences is directly leading to a sharp rise in opportunities for consumer engagement. Tommy Hilfiger was a pioneer in this regard. CEO Daniel Grieder wanted to “offer retail experiences they (consumers) never thought possible.” Using a Samsung GearVR device, consumers can get a view of the runway and even take a sneak peek backstage of the Fall 2015 Hilfiger Collection.
In 2015, outerwear company The North Face, in collaboration with Jaunt, used virtual reality to provide shoppers with an immersive tour of California’s Yosemite National Park and the Moab desert in Utah. Late last year the two worked together once again and released the VR experience titled “The North Face: Nepal,” which allowed customers to immerse themselves in Nepal’s breathtaking landscape of ancient monuments and mountains.
The Era of VR Retail Is Just Beginning
There are still some early-phase issues lingering around VR, such as the general discomfort it can cause for some people and the cumbersome, unwieldy headsets. But with time these issues will be resolved; the streamlining is already underway. In early October, Google unveiled its virtual reality headset Daydream, which promises to be the most sleek and comfortable headset created to date.
This new retail landscape has been called Frontierless, as the boundaries between the layers of reality merge and the omnichannel shopping experience becomes “omni-reality.” It is no longer a question of whether IF retailers should use virtual reality, but how swiftly will they be able to notice the revolution of perception taking place on all sides. The power of VR and AR is only beginning to be understood, but retailers will partner with tech innovators to engage their customer base. As the future unfolds, mixed-reality shopping experiences will drive more than just buzz — they will become the engine of a profitable 21st century retail brand.