Acep France : Why Augmented Reality Will Be the Next Revolution in Retail

The Pokémon Go craze may have faded, but it provides clues to how retailers can use technology to engage consumers.

In the summer of 2016, pedestrians on New York's Fifth Avenue encountered crowds of (mostly young) people, hastily running into Central Park, smartphones in hand, shouting out Pokémon names and cross-street locations. Within days of its release on July 6, 2016, Pokémon Go, an app that brought the 1990s gaming craze to virtual life, became a phenomenon. Its 40 million daily active users (at its peak) surpassed those of Tinder, Snapchat, and Twitter and created a level of in-app engagement that Facebook could only envy. It took complete control of the commutes, lunch breaks, and social gatherings of legions of people around the world. Intent on 'catching' Pokémon in the wild, gamers thronged into museums, streets, even Arlington National Cemetery.

Although the Pokémon Go fad now has predictably faded, it holds important lessons for companies intent on reaching and engaging consumers where they are, especially retailers: The game, the first truly social augmented reality (AR) experience, enthralled the new breed of omniconnected consumers as nothing else had done previously. Players not only shared an insider world where they could fight each other, but they also walked together and gathered at PokeStops in the middle of the night. The people who embraced the augmented reality of Pokémon Go live in a world where the line between real and digital is so blurred that they essentially became one and the same - constantly augmented and improved by invisible technologies. And they are hungry for better, more personalized experiences.

AR, which has been around since the late 1960s, has long lived in the shadow of virtual reality (VR). Major technology companies have been making significant investments in VR - consider Facebook's acquisition of Oculus Rift, or Sony's PlayStation VR launch. On paper, however, AR should be inherently better. Whereas VR wants to transport us to a new virtual world that provides unique immersive experiences, AR brings these experiences to the world we already inhabit. But to date, the early ambitions of AR have not borne much commercial fruit. Lego's AR Digital Box in-store kiosk allows customers to 'see' finished products by holding the product box close to a screen (they can watch on the screen as a digital constructed Lego truck seems to spring out of the box it comes in, for example), and IKEA's app allows shoppers to 'place' digital furniture and other products from the catalog in pictures of their rooms at home. But AR features have generally lived inside retailers' stand-alone apps that consumers didn't want to download. Google Glass, which was perceived as socially awkward, failed miserably. The AR ecosystem has lacked a shared platform with mass acceptance that, like Google's ad network, allows brands to simply plug in and thus removes the consumer friction of downloading individual apps. And there was no 'killer' use case to make AR popular and, more important, social - until Pokémon Go.

The Pokémon Go craze opened consumers' minds to similar experiences and fed their imagination with glimpses of an even more connected future. In addition, it packed the potential to transform consumer experiences in the physical world. Brands, local retail stores, and marketers quickly realized the opportunity inherent in the success of the game. It's not a big leap to imagine people chasing expiring deals and coupons, trading and buying goods in the virtual world with virtual currencies, watching digital billboards, and interacting with brands. In fact, augmented reality may offer physical retailers a competitive advantage against online-only competitors.

The New Table Stakes

E-commerce has been steadily gaining a share of sales at the expense of local stores because online shopping is cheaper, is more convenient, and allows for easy in-depth research and comparison of products. However, physical stores still possess one major advantage: the ability to let customers see, try, smell, or taste the product live. For many digital-native brands, such as eyewear retailer Warby Parker, stores have evolved into 'showrooms.' Augmented reality allows brick-and-mortar retailers to take these showroom experiences to the next level, creating unique experiences that blend digital and physical shopping. The virtual layer can provide a platform that allows improved communication, deeper engagement, and better personalization. As a result, brands deploying AR effectively will be able to provide differentiated interactions with physical products and customer experiences that seem richer than the ones provided by their online competitors.

Today, we're in the first, introductory phase of applying AR to the retail experience. On a range of independent platforms, companies are experimenting, trying to understand their audiences and grasp how their brands fit in this new environment. As the field enters its growth phase in the next two to three years, it will consolidate into a few dominant players, and companies must figure out what distinctive offerings they can produce and how to integrate them into omnichannel strategies. Once the medium matures in four to five years, AR will become table stakes for retailers and brand marketers, and companies will have to figure out how they can curate bespoke content and create unique experiences in this new medium. Over the long term, it is clear companies must use AR to lead customers through four stages: creating awareness; growing engagement; converting customers at key decision and purchase points; and building enduring loyalty. As retailers move through these important steps in the coming years, they must experiment with key tactics and strategies.

Creating awareness. The essential effort of creating consumer awareness about brands and products often devours the majority of a retailer's marketing budget, and much of it is wasted by reaching non-target consumers. AR represents a singular opportunity to adjust what is presented to a shopper based on demographic profiles and past in-store behavior, and allows companies to link typical awareness-raising efforts to a live recommendation engine. For example, for Tom, who typically buys a US$4.99 gel laundry detergent, Target could display an AR ad on his phone of a new, more powerful $5.99 gel, instead of posting a static endcap display in-store for a $9.99 laundry powder. The result is a more refined level of targeting that presents a benefit to retailers, brands, and consumers.

Brands are already partnering with AR platforms to create interactive retail experiences for their customers. As early as 2013, IBM launched an AR shopping app that provided shoppers instant product details and comparison when they pointed their smartphone at the shelf, allowing them to sort the products there by nutritional value, highlight gluten-free or organic options, and display currently available coupons. Retailers can use the same app for shelf stacking. In 2014, Tesco employees tested IBM's AR app to report out-of-stock products and instances when conditions on shelves didn't comply with display plans.

As AR becomes more powerful, we are likely to see a higher degree of personalization of in-store product recommendations. Perhaps pointing your smartphone toward a shelf in a clothing store will not only provide information about the origins of the wool in the cashmere sweater, but reveal special deals that are tailored to your profile - such as a discount in advance of the ski season.

Ultimately, we are likely to see integration between AR, big data, and machine learning. The final result will be an intelligent personal shopper that can provide consumers with information, recommend products, and even look for special bundle deals and coupons, depending on the shopper's preferences and behaviors.

Growing engagement. Retailers keep shoppers engaged - continuously excited about their experience with the brand or product - by creating carefully thought out, memorable interactions at every touch point. Doing so is vital to both retailers' and brands' customer conversion rate and customers' future loyalty. Consumers, driven by their online shopping experiences, already expect a high level of engagement. In years to come, these expectations will only grow, leaving the onus on physical retailers to deliver powerful multidimensional experiences to shoppers.

Source: http://www.strategy-business.com/article/Why-Augmented-Reality-Will-Be-the-Next-Revolution-in-Retail?gko=dbc10