How Virtual and Augmented Reality Can Boost Retail

How Virtual and Augmented Reality Can Boost Retail

COVID-19 has accelerated the adoption of e-commerce in retail, while increasing the demand for solutions that enhance the shopping experience. Whether it’s fashion, beauty, eyewear, furniture or home goods: so-called immersive technologies such as 3D modeling, augmented reality (AR) and virtual reality (VR) are making their way into numerous product categories. Interfaces such as WebXR and WebAR also offer new ways to interact with consumers, which can be used to develop direct web-based solutions that don’t require an application download. Additionally, the expansion of 5G services supports more digital content and removes previous limitations on the use of immersive technologies.

3D, AR and VR in particular are likely to fundamentally change the global retail landscape: According to studies, 68 percent of consumers in the Asia-Pacific region and 58 percent in Europe are open to immersive technology experiences. According to a survey conducted by Insider Intelligence, almost 20 percent of the US population (66 million users) want to experience virtual reality in the next two years. 33 percent (110 million users) would use AR at least once a month. These numbers show that consumers are ready to incorporate immersive technologies into their daily lives.

A call for retailers to rethink digital commerce and take into account the growing demand for virtual experiences. The following examples show how retailers and brands can capitalize on immersion possibilities.

Virtual adaptation and 3D models

Most of us have heard of virtual try-before-you-buy experiences, and maybe even used them. Application areas range from furnishing the apartment to previewing how makeup or glasses fit the face. However, immersive technologies go beyond simply displaying products. More and more clothing and shoe manufacturers are using AR to measure their customers’ body or shoe sizes. An example is the “Nike Fit” feature, which is based on a combination of computer vision and artificial intelligence and determines the appropriate shoe sizes for mobile device users.

Since manual processes can be replaced by digital processes with AR-enabled 3D products, these technologies are also sustainable. Time to market is accelerated through the use of digital mockups instead of physical samples, and traditional logistical challenges such as product training or e-commerce photo production and packaging design are eliminated. Consumers, in turn, have the opportunity to try items at home and make better choices.

This reduces the return rate, which is often a challenge for furniture retailers, among other things. Because many customers who liked a piece of furniture in the showroom do not find it suitable in their own home.

IKEA Place, for example, can help here: IKEA’s AR-enabled app, which customers can use to try on furniture and furnishings virtually, was downloaded around 300,000 times in August 2020 alone. Not only does it automatically adapt the product to dimensions of the respective room, but also shows how the texture of a fabric or different types of lighting works in the client’s home. Thanks to the AR app, IKEA was able to increase its e-commerce sales by 43 percent in 2020 compared to the previous year.

Virtual pop-up stores

Changing consumer behavior is forcing retailers to be more creative when it comes to product launches as well. Many rely on virtual pop-up stores that enable AR-based store experiences for customers around the world at any time. It is no longer just about announcing new products, but also about attracting more visitors to physical stores. For example, fashion brand Burberry has coordinated its pop-up stores around the world with the launch of a new collection of bags. The AR experience around “Olympia” was inspired by Greek mythology and modern classicism.

Other brands use immersive experiences to reach global audiences through social media. An example of this is a joint Footlocker and LeBron James AR poster campaign: transformed from a 2D poster to a 3D digital model, the creative was viewed more than 1.25 million times within an hour of launch.

Transactions on gaming platforms

This brings us to another important future theme for digital retail: large gaming platforms are increasingly serving as marketplaces, driving transactions in various product categories such as automobiles, art, fashion, media and entertainment. With consumers spending more time indoors due to the pandemic, global spending on video games has increased by about $10 billion each month and game time has increased by 75 percent.

The online game Fortnite, developed by Epic Games, has an incredible 350 million monthly active users (MAU), more than the entire population of the US. The game Minecraft has 126 million users. Roblox reaches 158 million MAU. Even at concerts, virtual environments become hubs that generate huge usage and sales statistics. For example, the huge EDM festival “Tomorrowland” created its own virtual online experience using Epic’s Unreal Engine. One million tickets were sold at $20 each. In Fortnite, a concert by artist Marshmello had around ten million visitors in 2019. Travis Scott’s “Astronomical Experience” in Fortnite even had almost 28 million users in 2020.

Retailers should definitely pay attention to these usage and sales statistics. Because the modern digital world, in which people attend events, meet friends and spend a lot of time, also requires a corresponding retail environment. A few years ago people spent a lot of time in physical malls, now they are online. Today’s retailers are presenting themselves on Instagram, Snapchat or YouTube to reach new audiences and improve contact with their existing customers.

As a new form of virtual space, the so-called metaverse, the combination of “meta” and “universe”, offers a digital overlay of reality. The convergence of e-commerce, social media, and entertainment will have a huge impact on business models and the way people interact with each other in the future.

Increased proliferation of avatars and NFTs

According to the analysis platform CB Insights, the virtual goods market has grown to a volume of 190,000 million dollars. The growing demand for virtual characters (avatars) and the appearance of non-fungible tokens (NFT) have also contributed to this. The concept of direct-to-avatar (D2A, as opposed to direct-to-consumer / D2C) commerce drives the adoption of pioneering, digitally native brands. Because it creates socially engaging shopping experiences that are difficult to achieve through other online channels. For example, Jordan Brand, Levi’s, and Ralph Lauren have partnered with Snapchat to sell outfits for Bitmoji avatars. Nike, Gucci, and Louis Vuitton also offer virtual outfits along with Fortnite, Roblox, and League of Legends.

Virtual avatars, that is, artificial people for whom the user acquires an online identity, are becoming increasingly popular. In addition to sharing creative images on Instagram, Gen Z in particular have discovered avatars as a new means of expression. The better they dress or adorn their virtual selves, the better their social standing, similar to how reputation improves with a growing number of followers or likes on social media.

For retailers looking to innovate, immersive technologies like 3D, AR, and VR offer seemingly limitless potential to engage with customers in unique, interactive experiences. What just a few years ago seemed like a far-fetched concept opens up new opportunities for businesses every day.
Amazon Web Services (AWS) works with leading retail brands to identify the immersive solutions that best fit the needs of each business. You can find more information about AWS Immersive Commerce initiatives here.

About the authors

IMG 2364 Vince Koh

Vince Koh leads the global digital commerce strategy at Amazon Web Services. Together with AWS’s retail and consumer packaged goods (CPG) leadership teams, he accompanies customers as they transform online, social, and mobile commerce. Previously, Koh was Senior Vice President of Commerce and Conversion at Weber Shandwick, Vice President of E-Commerce at Iconix Brand Group, and led projects at Accenture. Koh has an MBA from Cornell University’s SC Johnson Graduate School of Management.

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