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Augmented Reality In The Retail Industry: A Business Perspective

The use of AR in the retail sector is growing rapidly, with estimates predicting that over 4 billion people will use AR on a daily or weekly basis by the year 2025. The sector is adopting augmented reality extensively online and with applications that contribute to a holistic in-store experience. 

In-store shopping is still the preferred shopping experience despite the rise in popularity of e-commerce and the industry transitioning to omnichannel retail. Consumers want to see, experience, and try out products in person.

The rise in augmented reality for in-store retail has been driven by the changes in customer perceptions over the past few years. Post-pandemic customers have expressed a wariness of coming into contact with products and people, with many retailers opting to stop offering samples or try-ons.

A Deloitte report shows that there are 100 million consumers who have already shopped online or in-store using augmented reality and that shoppers are around 40% more likely to consider companies with branded AR experiences. As a result, AR tools have made substantial inroads into the retail sector and look set to continue growing significantly.

The Impact On Sales

One of the barriers to consumers buying online is the uncertainty associated with how products would look or fit when they arrive. Over 40% of global consumers cited their three top reasons for not shopping online as:-

  • I’m not able to see products in-person
  • I’m not able to try out or try on the things I like before I purchase them
  • I’m not able to touch the products

Augmented reality and virtual reality have the power to change these perceptions and remove the barriers to making a decision on whether to buy a product. These technologies allow shoppers to visualize the appearance of a product in its actual consumption context. AR can reduce fit uncertainty, and therefore, it has the power to increase purchase confidence. Over 60% of consumers say that augmented reality has influenced where they shop, and 40% would be willing to pay more if they could experience a product using AR. 16% of global shoppers have already used AR in their shopping process, with over half of them indicating that AR had helped them make a purchase.

Shopify introduced a 3D feature in its online marketplace in 2018, with product pages using 3D models in AR having delivered up to a 250% increase in conversion rates. Rebecca Minkoff, a fashion retailer, found that customers who interacted with 3D models were 44% more likely to add those products to their carts and 65% more likely to make purchases. AR is also powering virtual makeup applications where consumers can view the chosen colors of lipstick and other products against their particular skin tone.

The COVID pandemic caused a change in consumer behavior in-store as well. Shoppers have become more health conscious and wary of interacting with products that have been touched by other shoppers. This has opened the door for an increase in AR technology to support in-store shopping experiences. Some beauty retailers prohibit customers from testing makeup products on their skin, opting for AR experiences for in-store shoppers, using the technology in similar ways to that of online retail channels.

One Harvard Business Review article highlighted that when offering physical lipstick testers and an augmented reality experience, shoppers engaged far more using AR experiences. They spent 50% longer and tried seven times more products. With AR, shoppers were able to choose any sample compared to the mere 16 available at the physical tester. They could narrow down their search to a specific product, which gave them greater confidence in their purchase.

Some in-store navigation apps are proving to be a valuable application of augmented reality technology. Shoppers can take the shortest path to part of a store or be taken past products that might be of interest to them based on their product selection. AR screens can provide extra information, including comparisons or product reviews, and can notify shoppers of special promotions.

The Impact On Cost

Up to 30% of clothing bought online is returned, adding a significant cost to retailers. 38% of items returned are due to a poor fit. Shoppers will even buy multiple items online with the aim of returning some. This ongoing challenge is what AR technology seeks to overcome in the fashion industry in particular. The cost of clothing returns is high, with studies estimating that around $7.5 billion could be saved globally if AR technology is used for a try-on experience.

This problem is even more severe with larger products. Items such as furniture bought online have far higher shipping costs than clothing. IKEA responded to this by implementing the AR app IKEA Place which lets users visualize how IKEA products would fit in their homes.

Also, shipping costs have escalated dramatically over the past few years with no sign of reprieve on the horizon. As such, retailers will need to use all possible means to reduce the cost of shipping returns, including augmented reality, to provide shoppers with greater confidence in their purchases.

AR Positions Retailers For Future Growth

State-of-the-art AR tools such as BytePlus AR Try-On offer hyper-realistic representations to shoppers. The tech is compatible with products like jewelry, watches, and footwear, using existing product models. It also allows retailers to create their own realistic 3D models.

Retailers that use AR for e-commerce and in-store consumer experiences have already begun to reap the benefits of increased sales and reduced costs. That being said, the rollout of 5G tech is often seen as a significant enabler in achieving the full benefits of AR and VR. Retailers that offer AR/VR experiences in advance of this rollout give themselves a competitive edge in a market expected to reach $12 billion by 2025.