How Virtual Reality is Transforming Retail
Raise your hand if you’ve ever wanted to swim with sharks without ever having to leave your home.
OK, so that may not be at the top of everyone’s bucket list, but I think we can all agree that virtual reality (VR) has opened the door to some fascinating possibilities.
And one industry that’s positioned to be a prime beneficiary of those possibilities is retail.
In fact, VR is expected to be a massive revenue generator for retailers over the next four years. According to a recent report from PYMNTS.com, revenue related to VR initiatives will increase by 3,000% over the next four years. That’s not a typo — there really are three zeros.
By 2022, VR could generate as much as $1.8 billion for retail and marketing companies.
While virtual reality isn’t new (the technology’s roots date back to the ‘60s), it has reached a point of becoming mainstream and affordable for a larger segment of the population. In 2018, the number of VR users more than doubled from 85 million to 171 million.
Goldman Sachs has predicted that virtual reality could be an $80 billion industry by 2025. To put that figure in perspective, that’s roughly the same size as the desktop PC market in 2016.
On top of that, as of last year, 78% of Americans reported being familiar with VR, up from 45% just three years prior. If you don’t fall into the category of being familiar with it, check out this article that breaks down everything you need to know about all the different types of reality technology.
If you’re unsure how VR could benefit your business, here’s a look at some of the possibilities the technology offers retail.
Minimizing Returns
Returns are an inevitable part of retail.
While brick-and-mortar return rates are generally around 10%, returns for online purchases are more than double at 20%. And during the holiday period, ecommerce returns can jump to 30% and even upwards of 50% for high-end goods.
There’s no question that having a decent return policy can boost conversion rates. However, the flip side is the mounting cost of returns. It’s a growing concern for many retailers, and the situation has been referred to as a “ticking time bomb.” In 2018, returns accounted for more than $369 billion in lost revenue for US retailers — that’s almost the equivalent of the market cap value of Facebook.
But leveraging technologies like VR can help retailers manage customers’ return expectations while lessening costs to their bottom line from processing returns.
Aside from the numerous marketing advantages that VR offers, it also helps curb the rate of returns by giving consumers a digital “try-it-before-you-buy-it” experience. VR applications let consumers visualize products like clothing and furniture before making a purchase, which can help cut down on the approximate 41% of consumers who buy multiple variations of a product with the intent of returning.
An example is Macy’s, which has started to use VR in stores for furniture shopping. Before launching the initiative, a pilot program found that VR-influenced furniture sales increased by more than 60% compared to non-VR furniture sales. What’s more, returns dropped to less than 2%.
Virtual Stores
The popularity of online shopping has exploded over the last couple of years.
51% of Americans reportedly prefer to shop online. And retail ecommerce revenue in the US is expected to exceed $700 billion by 2022.
VR has the potential to take ecommerce to the next level in the coming years with virtual stores. Consumers can already shop on their phone from the comfort of their couch, but with VR, they could put on a headset and walk through a virtual store without having to leave their house. Ultimately, virtual stores will make ecommerce more immersive, which will help give customers more confidence to make larger purchases
Think of it as a mashup experience of the best of brick-and-mortar stores and the best of ecommerce.
And that’s important because while online shopping has seen a major growth spurt, 94% of all retail purchases in the US still take place in a physical store. That means virtual stores could help boost the competitive edge of online-only retailers.
Customer Experience
When it comes to customer engagement and insight, VR is a dream come true.
To start, VR opens all kinds of new possibilities for showcasing products. Enhanced product placement, suggestions, and even ‘how to’ videos for specific items are examples of how the technology could change the interaction with customers and lead to higher conversion rates.
While a lot of VR elements may sound super futuristic, the pace of technology means they are closer to being widely available than you may think. That means it’s worthwhile to start looking into VR opportunities for your retail business sooner than later.
If you’ve never experienced VR, go out and try it for yourself before making any decision about using the technology with your business. Get a headset and explore some of the available apps to see the capabilities of VR.
If you determine that VR is a good fit for your brand, remember that implementing the technology into your business model isn’t going to happen overnight. Or even in a year. It’s a substantial investment of both time and money. But finding the right VR tools that will enhance the overall shopping experience while supporting your brand’s vision could be the investment that gives your business a game-changing competitive advantage. le a customer is browsing virtually, there’s a plethora of data that can be collected for behavioral insights. VR offers analysis on a customer’s interaction with a brand that goes far beyond any sort of analysis currently available. With VR, it’s possible to measure the degrees viewed in a virtual 360-degree setting, where a person looked, and what items they took in.
While this data can certainly help drive sales, it’s also essential for ensuring that shoppers are getting the best experience out of your VR platform.
When it comes to VR, the entertainment value of the experience is key to consumer engagement.
