How will retailers use augmented reality?

Innovation trends have always played a key role in a brand’s marketing strategy. Retailers have been using mobile devices and AI as a fundamental way of understanding their customers and providing an improved customer experience. Big brands like H&M have been encouraging the use of their app by giving discounts to members, using data insights for more targeted advertising and reducing the risk of bad product cycles – which can be particularly damaging for fast fashion retailers.

Augmented reality (AR) is set to be the next innovative tool that will create a new digital experience for customers, increasing the number of touchpoints a brand can have with its customers, whether that is through a kiosk in store, mobile device on the go or through a PC at home.

Until now retailers thought about AR as a nice-to have, quirky feature that big houses like Burberry used as an experiment for new ways of engaging with their customers. However, as Google and Apple continue to build their AR capabilities (ARKit and ARCore), customers have started to have the expectation that retailers will offer an improved digital experience.

The introduction of AR in the shopping experience will have an impact across a few different areas:

• It will add value to the customer experience which can increase sales and customer loyalty.
• With almost 30% of online sales ending up being returned, AR will help customers make more informed decisions and therefore result in fewer returns, increasing the retailer’s profitability.
• AR can help gather deeper insights into issues customers face when purchasing a product – questions that a customer asks a member of staff will now be collated by the AR software.

Here are the key 5 ways in which I think AR will benefit the retail industry:

1. Virtual changing rooms, virtual mirrors and 3D items in your home

Mobile AR can be used by customers at home through recreating the ‘try-on’ experience. Amazon has already patented a mirror that dresses you in virtual clothes. This is a first step for tech and retail partnerships that could blend the in-store and online experience for customers. Moreover, furniture retailers like Argos and Home Depot have already created AR apps that help customers see how a specific item would look like in their house.

2. Reducing the growing cost of returns on online sales

Today’s modern shoppers are trying to get the most out of their online shopping experience, at the cost of the retailers. Online customers return 1 in 3 items per month, calculating that in the UK only the cost of returns for retailers will be £60bn a year, which led to solutions such as try-now-pay-later options, as retailers were squeezed by growing pressures for free returns. AR could help solve some of these problems by allowing customers to make more informed decisions and reducing the incentive to buy items only to return them after being tried on.

3. Gathering in-store and online data from customers

Almost 60% of customers look up product information while in the store. Customers want to know more about what they shop or whether they are buying a reliable product and they find out all this by researching online; reviews, comments, and by asking the staff members in store. American Apparel is one of the first brands that have already created an app where customers can scan a product in store and it will show them reviews from other customers, other colour/size options and pricing from other shops.

4. Enriching the relationship between the consumer and the brand

As some brands have crumbled under the pressure to be innovative and forward thinking, retailers are now trying to respond to customers’ expectations and provide a fun and engaging shopping experience. One good example is Lego, who created a gaming app that seamlessly integrates the physical Lego constructions with AR to reveal a hidden world of interactive play.

5. Building brand awareness

Brands can incorporate AR into advertising to enhance the customer experience. Brands like AirWalk, who have specifically targeted younger demographics, used geolocation and AR to create an invisible pop-up shop. Customers would have to go to a specific location, download the app and using the phone camera they see a shoe in front of them. This will then allow them to purchase the limited edition item. Other brands like Volkswagen have created an AR app that you can use with one of their print ads, which helps you interact with the car and directs you to some additional online content.

While AR can provide some clear benefits, before implementing their mobile AR strategies retailers should consider whether it really is a feasible option for them. As with all emerging technologies, it’s not cheap to build AR tools and they would require continuous maintenance to ensure the best and most up to date experiences. Companies would have to consider how this would be seamlessly integrated into the customer journey for sustained, long term benefits, rather than just for temporary buzz.

Author

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Sophia Ambrono

Associate Consultant, Innovation and Strategy