Although the hype surrounding Pokémon Go may be over, the game has highlighted the possibilities of augmented reality. For producers, wholesalers and retailers, this goes much further than simply capturing virtual monsters in a park.
Although online shopping continues to grow in popularity, it has two downsides: the conversion rate is just 2-4 per cent, compared to 20-40 per cent in physical shops. Also, many goods are returned because they don’t fit or because they look different than people expected. On the other hand, retailers in physical shops have trouble attracting customers. One reason for which is that they do not have the space to offer as wide a product range as their web shop counterparts. For many retailers, augmented reality could offer a solution.
Of course, virtual reality also provides opportunities for businesses, particularly at the retail location. Imagine, for example, if a travel agency were to use VR glasses to allow its customers to experience what it’s like to take a surfing lesson on the island of Tahiti. It would be very interesting to retailers, for example, if customers could simulate taking part in certain experiences while still in their own homes. But the reality is that the infrastructure needed for this, the so-called installed base, is still too limited. How many people currently have an Oculus Rift or an HTC Vive at home? Playstation is planning to launch a virtual reality version later this year. Pre-order sales are promising not just for Sony, but for other devices as well. It appears that VR is gradually taking over consumers’ living rooms.
Until we get there, we recommend focusing on VR at retail locations and on AR if you want to reach customers at home. After all, you don’t need any extra equipment for AR, just a smartphone, so its potential reach is enormous. There are plenty of examples of applications to which AR would offer significant added value. The remodelling of a bathroom, for example. It is too expensive to create a new VR simulation of their bathroom for each customer, because all houses are different. It is much simpler (and cheaper) to use the existing room as a starting point and display the chosen tiles and bathtub there.
AR removes uncertainty from consumers whilst increasing the conversion rate. Which colour paint looks best on the living room wall? Does that bed fit nicely in the bedroom? How will that kitchen look in real life? And these are just examples from the homes and interiors sector.
In the fashion and beauty world, various companies have been experimenting with AR for a number of years. Footwear brand Converse has an app that allows customers to see whether a certain pair of shoes suits them. AR allows customers to see which colour suits them best at Uniqlo and American Apparel clothes shops, without having to try on the clothes. These are just initial applications of AR, of course, because nothing has yet been done in terms of fitting the customer. The next step will be for someone’s body type and sizes to be measured and loaded (perhaps via their mobile phone) and the item of clothing or shoes will be displayed as if the customer is actually wearing them.
The advantage to web shops of this technology is that fewer items of clothing and shoes will be returned. For physical shops, it means that they don’t have to stock as many items in order to display a complete product range to customers. If you take into account that each square metre of shop space costs hundreds of euros of investment in inventory and products, it becomes clear that AR offers exciting opportunities.
Augmented reality will be the new front end. This means that the underlying (back end) systems must be adapted appropriately. In order to show a customer a bathroom in AR, content is needed. Producers need to get busy making the correct product data available. It is quite a challenge to make this happen in companies that are used to working with photos and (online) catalogues. But AR offers such an enhancement of the customer experience that producers will soon be forced to embrace the innovation.
In the current generation of smartphones, reality is enhanced by using the camera in combination with an app. This could be done much more accurately. This is why Google initiated Project Tango. The smartphone is equipped with extra sensors, allowing consumers to measure the rooms in their house without having to pull out the tape measure, for example.
A normal phone can’t tell the difference between a vertical surface and a horizontal one; Tango can. If a customer wants to see how a wardrobe will look in their house, this technology enables the item of furniture to be projected in its actual size. Tango already ‘knows’, so to speak, that the ceiling is 2.80 metres high and that the wardrobe, therefore, has 60 cm of room to spare.
So far, only the Lenovo Phab 2 Pro smartphone has been fitted with Tango sensors. But other smartphone manufacturers are expected to follow, not only with Tango but with other additions that will enhance AR.
Many developments are also taking place at the high end of the market, such as the HoloLens from Microsoft and Magic Leap. Both are concerned with the projection of holograms in the real world. With Microsoft’s version, you need a special pair of glasses in order to see the hologram. Which technology Magic Leap will use for projection is not (yet) clear. The three-dimensional projections made by these companies could have very good commercial applications, in making products almost tangible to consumers and, therefore, prompting them to make a purchase sooner. It is no coincidence that the Chinese e-commerce giant Alibaba invested hundreds of millions of euros in Magic Leap at the beginning of this year.
The moral of the story is this: augmented reality is not only interesting to game developers and the entertainment industry. Anyone who offers good content can more easily persuade consumers to take the plunge and increase their conversion rate. The costs associated with returned goods will decrease and cross-channel retailers will need less space to offer and display a full product range. It will become second nature quicker than you might think, so now is the time to get started with AR.