The Coming VR Revolution In Retail
An Epiphany is a meaningful insight — brought on by a simple experience. In spotting trends, there have been three epiphanies that I recall, over all other observations.
- The first time my mother paid $100 for a pair of Nike sneakers.
- When I discovered the iPod — filled with digital music.
- When I purchased my first book online at Amazon.com.
In each case, I knew that those brands and innovations would change our world forever.
This year I had a new epiphany. It came in April, when Travis Scott held a live event in the online game Fortnite. Billed as the first ever live in-game concert, Scott drew 12.3 million viewers, from countries all over the globe. The next day, The Washington Post called it an “online experience for the ages”. Social media exploded with posts, comments, and streams of Travis Scott content. For me it was the event that ushered mankind into a new digital realm. With that many people, together at once, and the emotional responses that followed, I knew that the 2D internet would soon morph into something more extraordinary.
Here’s a fun statistic:
With 125 million users, Fortnite’s population is 25% greater than Mexico’s (the 10th most populated country in the world).
On that day in April, Travis Scott drew 10% of Fortnite’s population.
Let’s put this into perspective. The world’s largest concert venue in West Bengal, India, holds 120,000 people. To reach 12.3 million people there, Travis Scott would have to perform 100 live, sold-out events. By going virtual, the savings in capital, time, and energy are beyond my calculation. For those with a physical real estate footprint, this trend should be ringing a bell.
Over the next few years, we will see an eruption in 3D virtual spaces. These will be offices, schools, universities, nightclubs, theatres, and conference centers. It may sound far fetched, but legacy spaces will soon exist in a medley of digital realms.
- Professionals will work in virtual offices and meet in 3D boardrooms.
- Virtual classrooms will fill up with students from every country on Earth.
- Doctors will connect via WiFi headsets to collaborate in VR labs.
Without a doubt, consumers will do their shopping in dynamic VR malls. Retail will be a behemoth in these modern digital realms.
These realms exist today, though you are probably not aware of them.
- The company Spatial is building persistent VR and AR workspaces for team collaboration.
- DataView VR is used by investment analysts to visually sift through data using multi-dimensional tools.
- Facebook anticipated all of this in 2014 with its $2.3 billion acquisition of Oculus, a leading headset maker and VR software developer.
Now, with the advent of blockchain technology, we are seeing an explosion in new, community-based, user-created metaverses, where anyone can own their own space, build their own business, interact and transact, and enjoy a sensual, compelling, global market of goods and services.
I recently visited one of these metaverses, suitably named Decentraland. Decentraland defines itself as a virtual reality platform that allows users to create, experience, and monetize their own content and applications. I dove deep into the platform, exploring its myriad of ‘districts’, where developers have set plans in motion for universities, event spaces, casinos, museums, and an adult entertainment district.
I chatted with Decentraland users from the USA, Australia, China, and Argentina — who were all looking to build 3D VR businesses. Some were graphic artists, some were writing code, and some were integrating blockchain-based, digital payment systems. Payments are an integral part of the internet’s evolution, and 5G will bring the speed we need for a world of digital monies. According to Goldman Sachs,
within five years the VR economy can reach $85 Billion annually. Yet in 2019, Amazon had $141 Billion in online store revenue.
Global e-commerce sales were nearly $3.5 Trillion. With the buildout of 5G infrastructure, secure digital payments, and the penetration of VR headsets, we may see a VR economy well into the trillions of dollars.
The Covid-19 pandemic of 2020 has caused a seismic shift. People are much less comfortable meeting or sharing public spaces. With everyone at home, online commerce has exploded, while foot traffic in physical stores has been disastrous. Retailers with physical footprints are suddenly collapsing. In the first half of 2020, we have seen the bankruptcies of J.C. Penny, Neiman Marcus, J. Crew, Brooks Brothers, Lucky Brand, G Star, True Religion, Pier 1 Imports and more. At the same time, Q1 online sales have increased 26% for Amazon, 74% for Walmart, and 21% for Wayfair. In April alone, online sales increased 79% for Etsy, 275% for Target, and 120% for Overstock.com. When it comes to sales of goods, in this new world of social distance, physical stores cannot compete with the reach of virtual spaces.
Walmart, for example, with more than 11,000 stores, has enormous operating costs. The retailer’s largest expense is by far its cost of labor. In fact, Walmart is said to be the third-largest employer in the world…after the US and Chinese armies. Those are valuable jobs to working people, but people will have to adapt to a rapidly changing jobs sector. With automation and digitization, reducing and repurposing the workforce would be a boost to Walmart’s profitability.
Now under pressure to increase wages, Walmart is standing at a crossroads. The most likely outcome is for the retailer to shift to a digital-first model. Not only can traditional labor costs be reallocated, but Walmart can also optimize costs associated with a massive real estate footprint — property financing, taxes, depreciation, store maintenance, utilities, and legal liabilities. With regional distribution centers, an upgraded supply chain, and a mostly robotic labor force, Walmart may become a much slimmer, more efficient, and more profitable global retailer.
With the current trajectories of software, robotics, and artificial intelligence, we may see a world of VR retail sometime within this decade.
Developers are experimenting with retail in Decentraland and a dev has even built a 3D Walmart — where a virtual box of Pop Tarts links to Walmart’s online store:
Meanwhile, Walmart is already using VR versions of its stores. In an experiment with Oculus Go headsets, employees are trained in virtual spaces where:
Inside the simulated environment, candidates might find themselves standing in a busy aisle facing multiple problems, such as spills, misplaced items and trash, and being given 30 seconds to figure out which to resolve first.
This is an interesting use case for VR technology. As digital tools evolve and we get used to digital spaces, we’ll venture deeper into the untold reaches of digital realms. And we will likely find them convenient, efficient, cost-effective, and incredibly entertaining.
This means that we may soon see an investment boom in corporate VR strategies. Especially now that we need to anticipate a post-Covid world — where consumers prefer to shop at a safe social distance. In forward-thinking strategies, redirected funds will flow to developers who will push code and innovate useful applications. Thus begins an ecosystem. The foundation has been laid. As the rise of VR coincides with a technological revolution — IoT, 5G, AI, the data economy, robotics, and smart sensors galore, a paradigm shift toward digital worlds becomes all the more probable.
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