How Will AR/VR Transform the Retail Experience?

While augmented reality (AR) and virtual reality (VR) technologies have had relatively slow adoption in the consumer market in the United States outside of the gaming industry, their applications to retail are far-ranging and valuable today. The total AR/VR market in the U.S. is estimated to be $10.3 billion in 2024, increasing at an annual growth rate of over 10%. This is expected to result in a projected market volume of $15.4 billion in the U.S. by 2028.

The most common applications of AR/VR in retail are providing sales support to consumers, delivering product demonstrations, and enhancing employee training.

For starters, using AR mirrors in dressing rooms or at makeup counters allows shoppers to try on clothes and makeup virtually and experiment with different styles and colors without physically changing their appearance. This streamlines the shopping experience and empowers customers to make informed decisions.

L’Oréal’s ModiFace AR filters, for example, allow customers to virtually try different makeup shades and styles before buying. L’Oréal states, “Our skin diagnostic analyzes your skin condition and produces a customized beauty routine, based on scientific research combined with a ModiFace AI algorithm. With ModiFace Virtual Try-on, you can try on hundreds of looks in a matter of minutes.”

Retailers can also demonstrate products using AR or VR to transport customers to simulated environments where they can interact with products in realistic settings. For example, furniture retailers can showcase how a couch would look in a customer’s living room, while car dealerships can offer virtual test drives. This immersive experience fosters deeper product understanding and emotional connection, potentially leading to higher purchase intent.

For instance, Wayfair’s AR app Decorify enables customers to see how furniture would look in their homes before buying, which may help reduce returns and boost online furniture sales. When announcing the app last July, Shrenik Sadalgi, director of research and development at Wayfair, said, “Leveraging generative AI technologies, Decorify creates a discovery experience that provides endless inspiration and powers the home personalization journey.”

AR and VR don’t just help customers — they can also benefit employees. Companies can use enhanced VR simulation training to provide employees with realistic customer scenarios (such as product confusion or pricing issues), allowing them to practice product knowledge, customer service techniques, and handling challenging situations in a safe and controlled environment. This improves employee confidence and preparedness and fosters a more consistent and engaging customer experience.

An example of AR/VR for training is Walmart, which uses VR to train employees on store procedures and safety protocols. “We are entering a new era of learning, and Walmart continues to lead the way,” said Derek Belch, CEO of STRIVR, the company that helped Walmart launch its VR in Academies program. “The power of VR is real, and when offered as a cornerstone of learning and development, it can truly transform the way an organization trains its people.”

Here are some specific benefits of using AR and VR for retailers:

• Increased conversion rates: Recent studies show that AR product visualization can increase conversion rates by up to 250%. Shopify and Overstock.com also reported conversion rate boosts of up to 200%. Customers can virtually interact with and understand products in virtual fitting rooms before buying, leading to more confident purchases.
• Reduced product returns: Returns have grown over the past several years to be a significant issue for retailers of all kinds, with online retailers suffering the most. The use of AR in the product purchase cycle has a significant role in reducing returns since customers can see how a product will look in their homes or on their bodies before they make the purchase. Shopify reported that return rates reduced by 5% and order conversion rates increased by 40% due to AR.
• Enhanced customer experience: VR experiences can transport customers to different store environments or product demonstrations, creating a more immersive and memorable shopping experience. By replacing physical showrooms with virtual ones, retailers help customers try out and purchase products online, with high-resolution 3D images and video, overlaid product descriptions, zoom-in, fabric close-ups, and multiple experience customization options. In this way, VR showrooms can deliver lifelike experiences efficiently and economically.
• Improved training and efficiency: AR can train store staff about products and procedures, while VR can simulate real-world scenarios for better preparedness. This can lead to reduced training costs and improved employee engagement and performance. 

As the cost of AR/VR continues to decline and the supporting software improves, leveraging these technologies becomes more affordable for the average retailer. Augmented reality is the best place to start since this technology is not limited to the smaller universe engaged in the metaverse. By providing some basic capabilities, such as seeing different colors or patterns of clothing in the changing room, retailers can enhance their customer engagement and determine sales impact.