One of the areas that greatly benefited from the pandemic was online shopping. According to IBM’s (IBM) 2020 US Retail Index report, the pandemic likely accelerated the shift towards online shopping by about five years. As the world returns to normal, we can expect to see some pullback, but the shift towards online will continue. Last week, we talked about reducing the environmental impact of all those deliveries by converting delivery fleets to zero-emission vehicles. This week we are going to investigate another dirty little secret of shopping both online and brick-and-mortar:
It turns out we return a lot of items.
According to the National Retail Federation, consumers collectively returned products worth $428 billion in 2020, which amounts to 10.6% of total retail sales. If we look at just online sales, in 2020, eCommerce accounted for $565 billion or 14% of total U.S. retail sales, and approximately $102 billion (18.1%) of that merchandise purchased online was returned compared to around 9% returns for brick-and-mortar purchases.
One of the ways that retailers, both online and brick-and-mortar, are looking to reduce those returns, and the costs associated with them, is through augmented reality. Augmented Reality (AR) applications have been on the rise with virtual try-on or try-in experiences across a broad range of retailers:
- Preview furniture and products in your home with brands such as IKEA, Crate & Barrel, and Home Depot (HD).
- Trying on makeup without leaving own couch using the LVMH Moet Hennessy Louis Vuitton (LVMHF) owned Sephora shopping app or Ulta’s (ULTA) Glamlab.
- Virtually try on luxury fashion such as Louis Vuitton or the Kering (PPRFUF) owned Gucci.
- Pick a pair (or more) of glasses that you know will flatter your face using Warby Parker’s (WRBY) smartphone app.
What was once a fun gimmick is quickly becoming a required technology for retailers.
Even man’s best friend is getting in on it. Gunner Kennels, which produces heavy-duty kennels that keep pets safe during transportation, sells directly to consumers. The company found it challenging to get the right information to customers so that they could purchase the correct sized crate for their furry family members without ever seeing the product in person. In stepped Shopify’s (SHOP) 3D/AR experts to help the Gunner team develop 3D models of its crates. Now, rather than looking at multiple images of the products from different angles, prospective customers can interact with 3D models and, if shopping via their mobile device, can take advantage of the AR feature to virtually place the crate beside their pet.
The AR experience can also go well beyond a retailer’s own app. For example, last year, Kohl’s (KSS) partnered with Snapchat (SNAP) to create the Kohl’s AR Virtual Closet. With it, consumers can use a smartphone and the Snapchat app the step inside an augmented reality dressing room where Kohl’s top styles are features. Users can mix and match items, virtually try them on, and purchase what they like. Even high-end fashion is getting in on the Snapchat AR opportunity. Last year Burberry (BURBY) partnered with Snapchat to “showcase an in-store gamification experience,” and these two examples are alone. According to Snap, that there are already over 100 million consumers shopping with AR online and in stores.
Over the summer, Gap (GPS) acquired Drapr, “an eCommerce startup and online application based on technology that enables customers to quickly create 3D avatars and virtually try on clothing. Drapr is designed to help customers find the best clothing size and fit for their personal style and body type while helping retailers reduce unnecessary returns.” They aren’t the only ones looking to give customers virtual fit technology. Others getting into or already in this game include Walmart (WMT), Adidas (ADDDF), Macy’s (M), and Nike (NKE).
That all sounds pretty exciting, right? Finding a pair of jeans that will fit perfectly and be delivered to your doorstep without having to get up off the couch, who doesn’t want that?
As always, there is a bit more to it.
Consumers who want to use these AR tools will need a smartphone that can handle them. There are around 6.4 billion smartphone users as of 2021, according to Statista, and nearly any of the smartphones currently in use are able to manage a marker-based AR experience. The system requirements for such are iOS 8.0+ or Android 4.0.3+, and the most recent estimates we found put that number at well over 99% of smartphones. To provide an AR experience does require a good bit of data to flow over the digital infrastructure, which means more demand for the technologies that expand that capacity.
Consumers who want to avail themselves of virtual dressing rooms will need to get over the potential discomfort of “scanning” themselves. That also brings up a whole lot of privacy issues but combine this with the rapid proliferation of 3D printing, and we just might end up in a situation where it is less about the label you are wearing and more about the unique threads you yourself designed just for you. Talk about an exclusive label!
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.