Despite all the excitement around augmented reality, it's still struggling to find its place in retail. Columnist Evan Magliocca discusses the hurdles that AR will need to overcome to gain ground in 2018.
Augmented reality (AR) has received immense attention across the retail industry in 2017. As the technology became more refined, marketers saw the limitless strategic and creative possibilities. Everyone in retail was enticed by the potential for customer engagement and data collection.
AR is the next big thing. It’s exciting; it’s the new frontier. And yet, it’s still struggling to gain a foothold in retail.
That’s not to say AR doesn’t have value; it can clearly have long-term value if retailers and technologists can create profitable strategies and utility for customers. So, here are a few challenges that AR will need to overcome to gain traction.
Return on investment
By far, the biggest barrier to AR adoption is proving return on the heavy initial investment. As more brands test into AR, they’re finding it challenging to scale because there’s very little data to prove AR will bring additional sales, store trips, higher order value or any other core KPI that brands find important.
Without provable KPIs, there aren’t going to be many brands willing to take the risk on AR — especially when cash flows are extremely tight across the industry. Retail is in a state of transition, not decline, but transitions are painful.
Many retailers are being washed away by the changing customer climate, while others are holding on tight until the storm passes. Most are just trying to make it through the holidays with profitability. With tighter cash flows and no war chest for development, that leaves much less room for capital expenditure projects.
Furthermore, AR is going to be at the bottom of that list for most brands. They’re going to focus on provable projects: online ordering, pickup in-store, loyalty programs or the massive upgrades needed to most mobile sites. They’re slam-dunk projects; every retailer that has implemented them correctly has seen incontestable benefits. Those areas are ones where it’s much easier to prove success, and they will remain the focus until retail transitions to a new equilibrium.
Novelty and utility
Another challenge facing AR is the strategic execution of programs. Early adopters of AR have tried a couple of different tactics with differing levels of success. As with any technology or strategy, it really comes down to novelty or utility. And utility will win out almost every time.
A great example of utility is Sephora’s Virtual Artist application, which lets customers try on different makeups and colors prior to buying them. While it’s a novel idea that has built excitement as a new experience, it also provides actual value to customers who can pick and choose based on broader product knowledge. It also saves Sephora associates time: Customers will have fewer questions about products, since they can find what they’re looking for more easily on their own.
On the other end of the spectrum are smart fitting rooms. Everyone from Uniqlo to Gap has tried those. The idea sounds great on the surface, but when the utility comes into view, it simply doesn’t show any return.
Smart fitting rooms are augmented LCD (liquid-crystal display) mirrors that allow customers to see products layered on top of their mirror image without actually trying on the clothes. It sounds exciting, but what’s the benefit to the customer or the company? The customer is already in the store.
While the novelty of trying the mirror will lead to utilization early on, customers would rather try on the actual product if they’re already there. We know from numerous studies that being able to touch a product is important. Seeing how it fits is nice, but being able to feel how it fits is paramount. Customers can’t do that through smart mirrors.
Gaining ground in 2018
AR’s struggle to find its place in retail is reminiscent of other technologies that struggled in the past. Beacon technology had momentum but struggled to find its place until loyalty and CRM (customer relationship management) adoption proved its benefits. Even today, beacon adoption is probably lower than many would have thought at its inception.
Social media is another area that struggled to find a home in retail early on. Every retailer jumped into the fray as customers quickly adopted new forms of communication, yet they couldn’t find strategies that made sense for brands.
Now, with social becoming more of a fundamental component of most retail marketing strategies, Facebook, Instagram and other social networks have finally helped profits soar for brands utilizing them to connect with customers.
In the end, no matter what technology comes along, as many others will in the near future, brands need to identify objectives before moving forward. That’s true for any program, but with new technologies, the frenzy to be first often overcomes more rational thoughts.
AR will gain ground in 2018; it’s just going to take smart, objective-based marketers to prove that the risk will pay off.