In September 2016 Harvard Business Review reported that augmented reality (AR) and virtual reality (VR) startups have raised $658 million in equity financing in the past year.
This signals an uptick in AR and VR across all industries—and retailers seem to be excited at the possibilities it can have for consumer experiences. Brands ranging from IKEA to Jack Daniels to Lowe's have all implemented in-store branded VR experiences within the past year. And just how are retailers using this technology?
"You can see what the outfit looks like on you before you buy or what the sofa looks like in your living room before it ships," says Lisa Woodley, vice president, customer experience for financial services and insurance with NTT DATA, a global business and IT services provider. "The ability to customize to your particular scenario and see the results before buying will be very powerful."
That level of personalization can make both AR and VR technologies alluring to retail brands. According to a study published by Big Commerce in 2017 on Omni-Channel Retail, 51 percent of the a little over 1,000 Americans 18 and over surveyed think that online is the best way to shop. With all the features that mobile and online shopping offer consumers—including comparison tools, discount codes, geolocation, in-app discounts and push notifications—there's an emerging gap between the in-store and online experience.
AR and VR technology, however, may have the potential to fill that gap.
Trying on clothes and seeing a sofa in your living room are only some of the possible uses. Imagine being able to "handle" a product and examine it as closely as you'd be able to in a store—or even closer with the ability to zoom in or look inside with the help of AR and VR technology.
Experian reported in early 2017 that e-commerce fraud rates increased to 33 percent in 2016. (The report looked at "millions of e-commerce transactions" from its 2016 client data.)
When you put that fact together with the increase in consumers using online shopping, consumer security is a major concern for online retailers. While AR and VR technologies alone won't necessarily increase consumer security, they can be paired with other emerging security-related technologies to help enhance the consumer retail experience.
—James Cha, developer advocate, Clover
"Using AR/VR in a multi-factor authentication process can make online payments less tedious for the end customer," says Woodley.
This means coupling AR/VR technologies with biometric payment authentication—like fingerprint recognition—made possible by AR and VR interfaces, as well as using tokenized payment information in conjunction with AR and VR experiences. (Tokenization is currently already used in applications like Android Pay and Apple Pay, where the actual payment card information is masked and a "token" is instead transmitted. This keeps the customer's card data more secure than through traditional swipe or EMV chip transactions.)
A simple fingerprint—or in the future, retina scan—may be more difficult to clone, making payment fraud more difficult for those on the wrong side of the law.
A Refocus for Retail Brands
Along with the potential of more personalized out-of-store shopping experiences and increases in customer payment security, some brands are using AR and VR to rethink where they focus their growth efforts.
With the uptick in preference for online shopping, a number of major retailers are closing locations and shrinking their footprints in 2017. One area they may want to refocus their efforts? In meeting the demands of the online consumer in an age where people do more from their mobile devices than they ever have before.
This could mean brands may choose to invest in more robust online shopping experiences, creating virtual dressing rooms where customers can upload photos and "try on" everything from clothing to eyeglasses.
It could mean that fewer people will make the drive to their local furniture store and plan their entire kitchen remodel from home instead. Your home might become your local home improvement store, allowing everything from supplies and how-tos to be delivered physically and virtually.
What this could mean for the real estate industry is interesting. We might see less retail popping up and more experiential destinations take their place, like food and beverage purveyors, because of this trend.
For retail brands curious about diving into the AR and VR space, James Cha, developer advocate with credit card processing solution company Clover, offers some advice.
First, he recommends that brands think about the AR/VR environment first.
"Providing a safe environment for consumers to go through an experience is important not just on a physical level. When consumers are interacting in a world, brands should make sure the consumer isn't accidentally doing something they shouldn't," says Cha. "Don't let them buy something without making sure it is what they want. Learn from the several battles that microtransactions in apps have caused."
Secondly, Cha suggests brands explore existing AR and VR technologies. "Find a platform that you can integrate into and give your customers a secure experience," he says. By exploring existing technologies and platforms, brands anxious to harness the potential of AR and VR technology may be able to succeed by not reinventing the virtual wheel. Instead, they can build on existing technologies with proven security features and build from there.
The future is hard to predict, but it appears as though technology and experiences will be major players in retail. Retailers who become students of the potential that both AR and VR have to offer may find themselves ahead of the curve in the years ahead.
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