U.S.-Asia Business

Retail 3.0: the New Reality of Online Shopping

How augmented and virtual reality will help save retail in the U.S. and China.

Changes in the way we shop are happening all around us. Algorithms and data collected from websites and social media platforms are now the most significant and informative tools for retailers to market to consumers. Apps like WeChat and Facebook allow users to purchase items directly from their platforms, making it more convenient to simply buy things at a tap of a button. Voice-ordering and process automation technologies like Alexa and the Samsung Family Hub 2.0 refrigerator that help restock products leverage convenience to ensure that products are repeatedly replenished. And today, technologies like augmented and virtual reality play a bigger part in convincing mainstream consumers to venture down the purchase funnel.

Experimenting with AR and VR

Shopping today for consumers is a much more convenient experience with everything available at finger’s length. In contrast, retailers have a much more complex set of algorithms, fiercer competition, and a growing checklist in order to reach prospective customers. While almost 43 percent of customers worldwide shopped online in 2014, that number is now at 47.3 percent, accounting for almost half of all retail sales today. Of that percentage, nearly one-in-four online shoppers shop online at least once a week. How have retailers prepared to capture the market of online shoppers? And what is the business environment in the new retail space?

Strategies include targeted efforts toward personalizing the shopping experience, making the logistics easier with incentives such as free shipping, omnichannel touch points, and easier payment options. Throughout all of these changes, though, the one fact that will most likely remain constant is the importance of building a relationship with the consumer.

“Each customer who walks into our store is different, so we always want to give them their own unique experience,” says Annie Hsu, marketing manager at outdoor clothing and equipment company Arc’teryx. “People want to try our products before committing to buying things, even if they haven’t figured out yet what they need. What works well is knowing their ‘story’—whether they’re on a travel assignment, climbing trip or simply going on a hike—they love it when you ask them for their story behind the purchase.”

As shopping becomes increasingly streamlined, retailers are looking for more creative and convenient avenues to engage their customers. Currently, social media marketing and digital brand awareness have proven vital in enticing people to explore and shop for new brands. As Hsu mentioned, however, there is still a reluctance to buy things online, since many first-time customers are unwilling to commit to a product or a service that they have never interacted with.

Enter augmented reality (AR) and virtual reality (VR). These technologies have been gaining traction in various industries and are being applied across a number of retail stores. Virtual reality is a computer-generated environment accessed through a headset. Augmented reality, unlike virtual reality, does not obstruct or replace the view of our existing surroundings, but “augments” the real world with texts, images, graphics, videos, etc. When Pokémon Go took the world by storm, companies—especially those in retail—understood that this immersive technology would change the way we shop forever.

China embracing virtual stores

While a handful of companies in the U.S. have started to experiment with the concept of integrating AR and VR, China is fully embracing these forms of reality on both the retail and consumer sides. According to new research from Worldpay, 95 percent of survey respondents in China have experience using VR or AR technology in the past three months, with 84 percent of respondents saying they believe that this technology marks the future of shopping.

“We’ve noticed that many of our Chinese customers are adventurous millennials who know what they want and are willing to spend the money to get it,” says Hsu. Given their generous spending habits, Chinese millennials are exactly the demographic who show interest in purchasing goods via AR and VR technologies.

An example of an early adopter to incorporate AR was China’s largest online grocery store, Yihaodian. In 2012, Yihaodian announced that it opened 1,000 new virtual stores where customers could shop for groceries at some of China’s most iconic landmarks. All you had to do was download and use the Yihaodian virtual store app in order to shop while visiting the locations. Packed with promotional discount coupons, free gift vouchers, and easy access to goods, the company’s AR campaign was a hit. “The most distinguishing feature of our augmented reality 3D virtual stores is its bringing online shopping to the offline store,” said Yihaodian Chairman Yu Gang in a press release. “Using AR combines the advantages of online and traditional retail through constant innovation.” With a free, direct home delivery service once you order from the app, customers can kick back and relax until their groceries arrive at their doorstep. “Consumers can enjoy the convenience of online shopping while still having fun purchasing from these virtual stores that are set up in residential communities, offices, parks, and even on the Great Wall,” he stated.

More recently, Singles Day in China this year hit new records, reaching more than $25 billion in sales in just 24 hours, which is a 40 percent increase from 2016. This e-commerce extravaganza happens every year on November 11, and is a bigger event than both Black Friday and Cyber Monday in the U.S., combined. To give context, 140,000 brands participate in Singles Day, listing more than 15 million products and generating more than 812 million orders online. Since launching eight years ago, China’s biggest e-commerce retail giant, Alibaba, has continued to incorporate innovative shopping solutions and generate revenue with consistent growth. The company first launched its virtual reality shopping platform for Singles Day in 2016, and 2017 was a testing ground for AR shopping. Augmented reality games, shopping tours, and virtual fitting rooms flooded the phones of millions of shoppers.

This new digital era of shopping has allowed foreign companies with no physical stores in China to benefit, as well. For example, Chinese customers shopped Macy’s in New York on Singles Day through virtual reality. While the experiences are virtual, the purchases are real, and with China slated to account for about 60 percent of global e-commerce by 2020, businesses are looking at ways to cash in on Chinese consumers. New retail, which uses big data to integrate online and offline shopping activities, has become the biggest trend in the industry, and VR and AR are poised to become vital platforms for shopping, especially on this holiday.

Know your consumer, more than they know themselves

“At the end of the day, you have to know what your customers want,” says Hsu. “Be an expert in your industry and the things that you sell, but, most importantly, listen to what your customers’ needs are.”

While finding and advertising to the target demographic has gotten easier thanks to big data, the key is to not bombard potential consumers with relentless marketing. The bottom line is building a relationship with the consumer to ensure that they feel comfortable, and return many times after their first purchase. AR and VR can aid in that process by using immersive technology to create positive experiences. Whether through an interactive game, augmented product catalogue, virtual fitting rooms, or a treasure hunt for coupons, retailers can use AR and VR to personalize the shopping experience for customers.