E-commerce is a huge and fast-growing industry, even before COVID-19 shook the world. In
2019, this industry generated $365 billion in revenues in the US and was expected to grow by
15% in 2020. The media continues to report the onslaught of e-commerce and the death of
With all this revenue and success, e-commerce in the US is still outdone by brick-and-mortar stores by the factor of five to one. Most people still preferred to go into physical stores, try out, touch and feel the item before they bought it.
Why is that? A study reports that 30.8% of consumers buy in physical stores because they want to see or feel the product in person, and 29.9% want to buy a product right away. Moving some of the physical sales online is a huge opportunity for e-commerce, and many solutions have tried to achieve that, including free returns, 30-minute deliveries, physical showrooms and others.
At the beginning of 2020, lockdowns started all over the world, causing a disturbance in many retail sectors, virtually eliminating the possibility of customers trying things out before they bought them. With gaps in supply chains appearing due to effective quarantines and the declared state of emergency, online purchases of essential goods spiked by 108%. In comparison, those of non-essential goods dropped between 40% to 60% on Amazon. As much as 60% of small-scale retailers cite concerns over the impact of the pandemic on consumer confidence and project non-essential goods sales going down.
However, this only lasted until May 2020. When lockdowns have been eased in parts of the US and Europe, the demand for non-essential goods shot up again. E-commerce retailers cite needs for basic home appliances, as well as electronics for remote work.
This roller coaster change in the non-essential e-commerce industry has made ways for digital advertising and new sales techniques. As retailers scramble to find ways for their business to stand out, one type of investment can potentially solve a lot of retailers’ issues when they are unable to reach their clients by regular means: augmented reality for e-commerce.
Main Augmented Reality uses in eCommerce
In e-commerce, Augmented Reality (AR) allows the consumer to place a 3D model of the product onto the user’s physical environment. This action effectively solves the biggest challenges of buying online in 2020, which is buying non-essential goods with confidence and “trying” before buying.
As Augmented Reality often refers to futuristic Magic Leap or Hololens glasses, it may be hard to believe that AR technology is already in the hands of hundreds of millions of consumers globally – namely, everyone with an iPhone.
Apple’s ARKit 4 makes AR and 3D models available to every iPhone user via its native internet browser. As a result, Apple customers can explore any website that offers AR and see its products projected onto their physical environment without downloading any additional apps.
AR can be used in different ways, depending on the retail sector. Right now, the biggest strides are being made in home furniture and appliances and fashion sides of the business. With any AR kit on mobile, the customer can place the item they are looking to buy inside their home, which gives them a much better idea of how their place is going to look like than trying to visualise it themselves.
The same goes for fashion. The AR-powered digital fitting rooms are already successfully used by brands like GAP, Adidas and Burberry, not just to see how the item will look on the foot or the body, but also to enhance the overall customer shopping experience.
Five main reasons why AR is becoming popular
It’s also no surprise that these are the retail sectors that benefit the most from the AR technology, as interior design and personal style are largely dependent on the five main psychological reasons why AR is becoming popular in the first place:
A higher sense of ownership
Once the customer sees the object in their homes or on themselves, they form a connection of ownership to it that often leads to a purchase.
Part of the story
People like to be part of the events on the news and social media. With AR, it’s incredibly easy to connect to your audience, even to show off a pair of sneakers you’re thinking of buying.
Sense of wonder
As part of the AR experience, the customer is allowed to revel in the wonder of this technology, as well as products of the brand. It creates a happy feeling that customers then associate with purchasing the item they wondered about.
The worries of customers that they can’t purchase something they haven’t tried before are negated with AR. Since it creates that sense of ownership and lays doubts to rest, the customer then feels like they have already virtually “tried out” the item.
People are inherently dependent on society and often ask for opinions of others before deciding. That is made easier with AR as they can try out and share items without ever leaving their house.
What competitive advantages does AR bring for online retailers?
While the technology looks amazing and there is consumer interest in using the technology, the question remains, does it replace the physical experience and increase sales? We looked at the data from several industry pioneers, who started investing in AR years ago when technological infrastructure was at a much earlier stage. In 2017, IKEA, Houzz and Wayfair launched their specialised apps enabling users to preview their products in AR.
These apps are still among the most popular AR apps even after a year of their release. Houzz reports that the users who engaged with the AR app were 11 times more likely to purchase the product. Ikea is betting on augmented reality to drive its online sales from 1.6B USD in 2016 to 5.9B USD in 2020, and a study finds that Ikea’s AR app has an impact on both purchase intent and product knowledge. Wayfair claims that people, who engage with their 3D app, are more likely to add an item to their cart. AR previews seem to make customers more confident about the actual purchases. Following that, in 2018, Amazon launched their own AR app for iPhone to allow customers the possibility of virtually placing items from their e-store inside their homes. So, while the data is limited, the early results are very promising.
More importantly, consumers are looking forward to using AR as part of their shopping process. 63% of US consumers claim their shopping experience would improve if AR functionality would be present. In comparison, 35% say they would consider shopping online more if they could try items out online before buying them. This alone negates the issue of wanting to “feel” the item before buying it.
Additionally, 22% of US customers proclaim they would frequent brick-and-mortar shops less if AR were available on the e-commerce platform. So, we have a situation where customers want to try the goods out without going into the physical store and buy them without leaving their houses. Add that to the already present AR technology on the smartphone and the fact that more than half of e-commerce sales are done on mobile, and you have a perfect setup for AR to grow exponentially in online retail.
Adopting AR for 2021 e-commerce market
Decision-makers, willing to take the first step towards AR adoption in their e-commerce business, should consider two practical things.
Firstly, their e-commerce platform should be compatible with AR technology. Major platform and service providers have already secured this by developing their solutions as well as allowing third-party module integration. Even those websites that are not based on any platform can be made AR-compatible fairly easily as well.
Secondly, businesses should secure the 3D models of their products to be previewed in AR. Typically, this is the largest part of the cost, because 3D design is time-consuming, and 3D designers are expensive and difficult to find. It is possible to hire an in-house 3D designer if demand for 3D models is constant or engage an external partner if scaling is essential, and the number of models is large or often changing. At CGTrader, we accomplish that by engaging our proprietary technology and community of 1.7M 3D designers, allowing global e-commerce leaders to convert their products into 3D models at scale. The models have to be delivered in the .usdz format, which is Apple’s default format for augmented reality applications and can be converted from standard 3D formats. Once both steps are done, the AR experience is ready to launch.
There are options already. As mentioned before, Apple’s ARKit 4 is accessible to most businesses with relatively small investments. Alibaba – a major online Chinese retailer – has announced its investments into AR and VR services for e-commerce specifically. In contrast, all other major players like Microsoft, Sony, Samsung and HTC/Valve have their projects in this sphere. Each one can offer something worth investing in for small and large retailers.
Given the simplicity and accessibility of the technology for businesses, we believe that after the lockdown is done, 2021 will be the year when most e-commerce stores will start to take using AR seriously. It is not a unique point of view: industry analysts believe that by 2025, AR will contribute $1.6 billion into the retail sector alone. It is going to be very interesting to see which brands will become the frontrunners to capture the opportunity of AR in e-commerce in 2021.
Ready to bring your products to Augmented Reality? Get in touch now