Over the past decade, augmented reality (AR) technology has alleviated this uncertainty. By overlaying virtual objects on a live view of physical environments, augmented reality helps users visualize how products would fit into their world. Across industries, retailers have created apps to help consumers virtually try on products, including furniture, eyewear and makeup, in hopes of attracting customers and ultimately increasing the sales.
Since this technology is relatively new, there is little research on the extent to which it improves sales for different products or customers. In a recent study, Srinivas K. Reddy, Kellogg Visiting Professor of Marketing, and his collaborators Sandeep R. Chandukala of Singapore Management University and Yong-Chin Tan of City University of Hong Kong set out to change that.
Using data from an international cosmetics retailer, the team found that using augmented reality on the retailer’s mobile app changed customer behavior in several ways. In addition to boosting overall sales, this led to increased sales for less popular brands, as well as for expensive products and for less attractive products. The effect was greatest with customers who were new to the application or product category.
“A lot of retailers have implemented this technology because it’s cool, but many haven’t looked into the kind of information it provides,” Reddy says. “What we’re showing is that it engages customers, increases purchase rate, and levels the playing field for lesser-known brands and products.”
The promise of AR in retail
AR technology has been touted for years by tech executives as having the ability to transform our everyday experiences. “At some point, we’re going to look back and think, how did we not have a digital layer over the physical world?” said Greg Jones, then director of virtual reality and augmented reality at Google, in 2017. In fact, research estimates that nearly 100 million consumers regularly use AR technology.
For retail environments specifically, Reddy and his co-authors identify four major uses for AR technology: to entertain, to educate, to help consumers assess product fit, and to improve their post-purchase experience.
For example, when Walmart collaborated with DC Comics and Marvel to bring superhero-themed AR games to their stores, it created entertaining and never-before-seen experiences for customers. Automakers like Toyota and Hyundai have used AR to educate consumers about innovative technologies, while the IKEA Place app uses AR to give customers a preview of how furniture will look in their homes, allowing them to evaluate fit before purchase. And LEGO released several brick sets with a companion AR app that allowed characters to come to life and interact with the physical LEGO sets after they were purchased.
Reddy and his colleagues decided to focus on studying customer behavior when using AR to evaluate a product. They obtained a dataset from an international cosmetics retailer that integrates AR into its mobile app to help customers visualize what they would look like when using different cosmetic products, such as eye shadow and lipstick. lips.
The dataset contained sales records for 2,300 products, as well as browsing and purchase histories for 160,400 customers in a key Asia-Pacific market. The data covered a 19-month period from December 2017 to June 2019. Consumers could use AR for lipstick and lip gloss throughout this period; the AR function for eyeshadow and eyeliner was introduced in March 2018.
The dataset covered over 800,000 shopping sessions, of which around 20% involved AR.
AR increases purchases of less established brands
Researchers found that customers who used AR as part of their mobile app shopping experience spent 20% more time browsing (and browsed almost 30% more products). In addition, the purchase rate of these customers was almost 20% higher than those who did not use AR.
The overall effect is greatest for customers new to the app or product category, showing that augmented reality has the potential to promote online shopping adoption and category expansion. But it was also a hit with the company’s regular and loyal customers.
Since the researchers had access to many browsing and purchase histories of these shoppers, they could also compare the difference between their purchases when they used AR and when they did not. And they found some surprises.
When customers used the AR function, they bought products from less popular brands and also bought more expensive and unusual products. This is likely because the AR system allowed them to try their luck on what would otherwise seem like riskier bets.
Indeed, research has shown that when consumers have access to more product information, as they do with AR interfaces, they place less reliance on the brand as an indicator of quality.
These interfaces also reduce uncertainty by allowing customers to visualize what products would look like on their face, perhaps making them feel more comfortable investing in more expensive or less familiar products.
“It shows that augmented reality is leveling the playing field for brands and products,” Reddy says. “Customers have never bought blue lipstick, and now all of a sudden they are buying it. And if it reduces their uncertainty, they are also willing to spend more.
Deciding if AR is right for a retailer
A big implication for marketers, then, is that AR is most effective when customers feel a lot of risk or uncertainty around the buying process. This means that augmented reality could work better for less established brands and for customers who are new to the channel. It could also help replace expensive “try before you buy” programs or help customers feel comfortable with personalized products that often cannot be returned.
Of course, AR is not suitable for all retail categories. It does not allow consumers to feel the texture or smell the fragrances, for example (although this type of technology is in development). And AR is not a cheap investment. Custom AR apps cost between $10,000 and $300,000.
Yet augmented reality retail experiences are not limited to mobile apps. Reddy and his collaborators are currently examining a dataset from an AR interface placed in the physical stores of this cosmetics retailer. The interface allowed shoppers to virtually try on lipsticks (without physically applying anything to their lips, the normal process for testing products in stores). Early results show that customers who used the AR interface spent more time sampling more lipstick types, suggesting that making the sampling process more convenient encourages shoppers to explore more than they usually would.
Reddy ultimately hopes to explore how the use of augmented reality affects customer purchases over time. Was this blue lipstick a one-time purchase? Or does this new behavior continue?
“We want to understand if AR helps customers keep exploring and experimenting,” Reddy says. “It will help us understand the value of AR over the long term.”