About Augmented Reality-Whether they are shopping for spectacles or a sofa, consumers have no shortage of augmented reality apps to assist them these days. Following the viral success of Pokémon Go in 2016, hordes of retailers have embraced the technology.
Nintendo’s cellphone-enabled treasure hunt was the first big showcase for AR’s innovative blend of real-world and computer-generated images. Now the retail sector is using AR to sell items as diverse as furniture, cosmetics, home improvement products, and fashion.
Executives like the way that AR could help make online shopping feel as good as — or better than — shopping in person. Sephora’s app does this brilliantly, for instance, by allowing consumers to use their phone cameras to “try on” makeup virtually. Retail leaders also reckon AR will make their physical stores more engaging — and their salespeople more productive.
But AR’s promise doesn’t make it a great investment for every retailer. Executives must make painful trade-offs among myriad investment options, and they have reason to be suspicious of tempting gadgets. Bets on the likes of 3-D TVs, scan-and-go checkouts, and facial-recognition software have tested their patience. Such innovations may not prove worthless, but they are certainly worth less than tech dreamers imagined.
The recent collapse and relaunch of Blippar, a prominent European AR start-up that created AR apps for consumer goods and retail customers such as Covent Garden, Net-a-Porter, and McDonald’s have added to worries that, for all its promise, AR might struggle to reach the mainstream. Forrester recently reported that new venture capital funding for AR in 2018 was $1.69 billion, less than half the $3.58 billion raised in 2017. “We believe such a dramatic pullback is in direct response to expensive and underwhelming results from early adopters of XR,” Forrester said, advising companies considering AR to “proceed with an abundance of caution.”
So, how should retailers determine the appropriate role for AR in their businesses? By answering four questions that could apply to almost any technology decision.
Will our customers value this (more than a price cut)? Customers have a hard time telling us what they will want. We haven’t met any customers who were asking for Pokémon Go. Conventional wisdom says that clothing shoppers want fashion advice, top-notch service, and experiential ambience, yet we watch Amazon and discounters such as T.J.Maxx gain market share with lower prices (and a “root through the piles” treasure hunt at the latter’s stores).
Whether retailers make or buy them, AR apps cost real money — anywhere from $300,000 to $30 million for development costs alone. Are customers willing to pay for that or would they rather have lower prices? The answer depends on whether your targets are aggressive adopters of technology, the app enhances your brand, and the purchase and usage of your product is sufficiently complex to justify the use of AR.
Furniture apps such as Ikea Place use AR to ease a notorious source of pain for shoppers — namely, the difficulty of predicting what a couch, bed, or table will look like when brought home. Will it fit into the available space? Will it go with the existing furniture, carpets, and walls? That’s a perfect problem for AR to solve. Consumers really suffer when they buy the wrong furniture online: They might lose eight weeks waiting for delivery only then to be forced into the nightmare that engulfs those trying to return these bulky items. The value to the consumer is high relative to the cost of the innovation.
Does the technology have value to a wide range of customers? When you’re thinking about AR’s value to customers, don’t stop with consumers. It turns out that AR can be useful in education and training simulations, helping field representatives perform maintenance and repairs, and testing complex store designs and tricky user experiences.