When gaming app Pokémon GO took over this summer, augmented reality (AR) was really thrust into the mainstream. After becoming the most successful U.S. mobile game ever, the app’s popularity inevitably declined. However, according to Newzoo, the game is still making $2 million per day, and is the fastest game ever to reach $600 million in revenue, which it did in just three months. The app’s success not only shows the potential for AR, but demonstrates strong consumer adoption rates for the new technology.
While the hype around Pokémon GO may have fizzled, augmented and virtual reality (VR) remains a market for substantial growth opportunities. Goldman Sachs predicts it will be an $80 billion market in 2025, with $45 billion coming from hardware and $35 billion from software. Others are predicting the market will be even greater. Tim Merel, Managing Director at Digi Capital, forecasts that the AR and VR market will hit $150 billion in revenue by 2020, bringing in about $120 billion and $30 billion, respectively. Survey data from Statista shows that of 1,013 individuals aged 19-49, 44% were “very interested” in VR, while 26% were “quite interested.” Right now, gaming seems to be the big winner with VR and AR. Further data from Statista shows that revenues generated from VR gaming sales will reach an estimated $22.9 billion by 2020, up from the $660 million generated in 2015.
However, because this type of content is more experiential, it has widened to also include virtual travel, shopping and sporting events. AR and VR are already impacting retail. Tommy Hilfiger has incorporated a VR experience into its New York flagship store to bring a unique shopping experience to the brick-and-mortar space. And IKEA has introduced an AR feature with its print catalog. Customers place the catalog where they want to visualize a piece of IKEA furniture then use the accompanying app to virtually place the couch or table in their physical space.
There are several startups exploring the role of AR and VR in retail as well, including FaceCake and Trivver. FaceCake, a marketing technology company focused on AR and personalization, recently launched a new product called GlamScout—a mobile app that allows users to visually search any beauty look, try it on using AR and shop for the products used in the image. We had the opportunity to interview FaceCake CEO Linda Smith. “We were inspired and motivated by the idea that shopping could be easier with technology, but that you had to marry the two—it could not be just tech for tech’s sake or something cool that did not fit into or extend the way you would naturally shop,” explained Smith. And thus, FaceCake’s suite of AR products and platforms was born. The comprehensive offering includes visual search and AR mobile apps, an AR mirror, browser-based AR try-on tools and digital signage. “AR is necessary to really emulate or extend the shopping experience,” said Smith. AR will become an important tool in beauty retail. As we have discussed previously, Euromonitor International data shows that e-commerce and m-commerce are the fastest-growing retail platforms globally, totaling 6.4% of sales in the beauty space in 2015.
Smart object placed in virtual reality (left); smart tab displays on products (right). Source: Trivver.
All in all, while there will be some friction as consumers adopt the hardware, we see AR and VR playing a larger role in many industries and categories. We expect to continue to see adoption of VR technology in several sectors this year. Retailers and brands that sell goods and services with high average sales prices (such as cars and holiday packages) will lead the charge in VR adoption. For these categories, options for adapting the purchase abound, and firsthand virtual experiences can help drive up conversion rates by giving shoppers greater confidence in their customization choices. In apparel, luxury will likely lead the initial push into VR and AR—as we have already seen with Dior, Rebecca Minkoff and Tommy Hilfiger—and large box-store retailers will follow—like IKEA and Alibaba. As VR continues to become more democratized—with help from low-cost options like Google Cardboard—content will drive adoption, and companies and organizations will find additional educational, real estate, retail and industrial applications.
This article was written by Deborah Weinswig from Forbes and was legally licensed through the NewsCred publisher network.
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