Virtual Showrooming, VR, AR, and the Future of Retail

Black Friday, digital versus brick-and-mortar retail sales, and what comes next. 

As cliché as it may be to declare that “the future is here,” or that “VR is the future of retail,” it is becoming increasingly tempting to do so.

For starters, we are already bearing witness to the transformation of Black Friday (that simultaneously beloved and dreaded celebration of retail culture and commercialism) from the TV-friendly gladiatorial pre-dawn opening of doors to swarms of figurative early birds who will quite literally battle one another for the proverbial worm (usually a flat screen TV or a gaming console), to an increasingly digital, peaceful, and skirmish-free experience.

I doubt that the social drama of hordes of overcaffeinated shoppers rushing all at once through the doors of their favorite store will ever completely go away, but as the speed and convenience of online and mobile commerce continue to drive retail sales, and Black Friday sales also increasingly making their way into digital retail experiences, expect to see those long lines, wild trampling stampedes, and bare-knuckle brawls begin to slowly disappear from your local news broadcasts.

(Some quick numbers for reference, since we’re on the subject: Since July, department store sales have dropped 10% YoY. Conversely, online sales have grown 14% YoY. That’s how the retail landscape is shaping up this year. On the bright side, Holiday sales are expected to see a 4% increase this year – nearly double last year’s 2.5%, but the shift from foot traffic to clicks isn’t exactly subtle.)

This piece isn’t about Black Friday though, or this year’s retail numbers, or even quantifying the shift from brick-and-mortar sales to digital sales. That would take far too long to get into here (and besides, that is what Futurum premium reports are for). No, what I want to highlight here today is a little peek behind the VR curtain as it specifically pertains to the future of retail, and where the shift that appears to be accelerating a little more each year is likely to lead to.

 

The simple and elegant genius of virtual showrooming: a personal experience.

I was recently invited to attend a one-day event put on by Dassault Systemes (or 3DS for the initiated) in Silicon Valley. Although the focus of the event leaned more towards transitioning from products and services thinking to platform thinking, shifting from product design to experience design, and broadening the scope of the Internet of Things (IoT) to the Internet of Everything (and I will be writing more about that as well very soon), one of the standout experiences I walked away from at the event was a simple VR demonstration, almost hidden away in one of the venue’s wings.

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At first glance, the setup was as basic as it gets: A flat-screen display to give onlookers a glimpse of what the subject was looking at in the selected VR setting, some branded furniture and signage, a VR headset, and a chair. That was all. This wasn’t one of the gorgeous, elaborate trade show experiences one might expect to see at a mega-trend trade show like Mobile World or CES (and that 3DS is known for). The entire thing would have fit in a small crate. It was, for better lack of a term, Spartan, and that is precisely why it was so brilliant. (I will come back to that a little later. See item 6 in the list further down.)

Despite the VR demonstration’s lack of conspicuous flash, the line to play with a VR setup was immediately prohibitively long, so I moved on to some of the less crowded stations, which focused on elegant and cleverly portable 3D product modeling, self-driving car management, vehicle design, and virtualized city management – all very exciting in their own right, and proceeded to drive the on-hand experts crazy with a thousand questions about the software’s capability and many potential uses. (Also expect more on that in a later post.) After about half an hour, I returned to the VR station and found that the crowd had moved on. Here is what happened then: No sooner had my guide adjusted the goggle over my face that I found myself transported to the middle of Paris – Place de la Concorde, to be exact. It was dusk, and the streets were mercifully empty of traffic. Having been born and raised in Paris, I know that particular spot very well, and visually speaking, my photo-realistic surroundings were extremely convincing. I knew that I was standing in a converted banquet room inside Levi’s Stadium, home of the San Francisco 49ers, but my brain was more or less 85% convinced that I was in Paris. There was a car just behind me, a small sporty thing, shiny and bright and painted in an enticing racing red. My guide told me to walk towards it, so I did.  It didn’t look like a video game car. It looked like a real car, in full 3D glory, sitting there in a real Paris square. The details, the textures, even the way that the trailing purple and pink hues of the windswept evening sky above it all played off the paint and the glass but struggled a bit against the matte plastic accents seemed absolutely real.

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In addition to the headset, I had been given two handheld controllers. My guide instructed me to point them at different parts of the car to pull up hidden menus, and to squeeze a small trigger to interact with them, so I did. As I came close to the car, I was able to change its color, scroll through a selection of custom race wheels and other customizations and accessories, and command the car to drive itself into different positions relative to where I was standing, so that I might see if from various angles. (I could have simply walked around it, but as the space allocated to the demonstration was a little limited, it made more sense to make the car move for me.)

Once I had selected the color and options I liked the best, my guide invited me to open the driver-side door and get in. With a little assistance, I managed to sit down behind the wheel without ending up on the floor. (Yes, the borrowed chair had been placed exactly where the driver’s seat was in relation to the car’s placement in the virtual environment.) Oddly enough, even though I was sitting on a standard banquet hall chair, and I knew that, my brain was absolutely convinced that I was sitting in the race-inspired seat of the car’s interior. Once inside, the process was the same as before: I used my handheld controllers to access hidden menus and customize the interior of the car. After a few minutes of this, I got out of the car, took a last look around, and came back to the real world… but I would have gladly spent another twenty minutes playing around in this virtual environment with this absolutely real virtual car.

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The short of it: I had just gone car shopping in an almost entirely virtual environment, and except for the lack of that super special new car smell and an actual test drive, the experience was as real as if I had driven twenty minutes to a dealership, endured the vacuous chatter of a random salesperson, and checked out one of their available models.

No. Scratch that. It was better than real: I experienced the fun of car shopping without any of the pernicious little stresses and annoying distractions that usually get in the way of a perfect shopping experience. They had been removed from the equation altogether. Selecting options for the car was faster and smoother, and almost magically so. Moreover, this was something I could have done in my own living room or office, without having to waste an hour (or more) of my day getting to a dealership and back, and without having to endure the usual song and dance of a zealous or otherwise annoying salesperson. The experience hadn’t replicated shopping, it had improved it by making shopping faster, smoother, cooler, and more fun.

(Note that although this particular demonstration used a tethered HTC Vive VR headset, the experience could already be replicated with a wireless VR headset. Additionally, as the VR capabilities of mobile devices begin to catch up to current dedicated VR headsets in the next 12 to 36 months, the awkward cable seen in these photos will become a thing of the past. Things are going to start moving fast, but we are still in the early stages of the mainstreaming of VR adoption.)

 

How virtual showrooming could completely reinvent the car buying experience.

As a car buyer, that kind of virtual showrooming immediately struck me as pure genius. It was proof of concept. The experience had exceeded all my expectations and improved on the original idea. When I then thought about what virtual showrooming of that sort would mean to a car dealership, I wondered if it might potentially hurt the business, but no. My conclusion is that it wouldn’t. Quite the contrary. Virtual showrooming could instead be leveraged as a tremendous strategic asset, and for six key reasons:

  1. It eliminates typical obstacles to sales: Too busy to get to the dealership that week? Bad traffic three days in a row? Lousy weather? Not in the mood? No problem. If car shoppers can experience a virtual showroom on their own terms, in their own time, from wherever they want, the experience suddenly becomes far more convenient for them, and they are that more likely to go ahead and shop instead of putting it off. (In regards to VR headset sales, scroll down to the end of the post for some numbers.)
  2. It immediately adds scale to the business model: How many car shoppers can a dealership realistically accommodate at any given time? Virtual showrooming allows for an unlimited number of potential buyers to get their first look at a vehicle without ever setting foot on a lot. That means that physical foot traffic can be multiplied by virtual foot traffic, and this without having to assign a single additional resource to drive a sale, or move the dealership to a location with more acreage.
  3. It brings clarity to the sales process: Because adding virtual showrooming to the sales process helps bring clarity to the path connecting initial discovery to an eventual purchase, auto makers and their dealers can fine-tune customer experiences from start to finish by fully integrating digital and VR experiences into the design of their new omnichannel sales funnel. Additionally, onsite virtual showrooming (done at the dealership) can also help bridge the gap between the kind of on-demand virtual showrooming they would normally enjoy at home and a fully immersive brick-and-mortar showroom experience to build new excitement to the dealership visit experience.
  4. It creates an advantageous new logistics paradigm: Because vehicle customization can be taken care of virtually, the potential exists for dealership inventories to be reduced in favor of a greater volume of custom orders. Automakers willing to shift to a more customer-centric production model could leverage this as a value proposition for Millennial and Generation Z scar buyers. (Yes, they will still be buying cars for a while.) See number five for more insight into how to use data and predictive analytics to optimize planning, and especially production velocity, for this model.
  5. It brings invaluable data and analytics into the business ecosystem. Two observations here: One, by shifting a significant portion of the shopping process from the analog world to the digital world, the ability to capture customer data and contextual browsing history (tracking an individual’s vehicle interests and preferences, as well as the number and frequency of virtual showroom visits for that particular shopper) could provide dealers and automakers with invaluable opportunity to target likely car buyers with customized offers inside of critical decision-making windows. This could potentially help automakers and dealers sweeten the pot for on-the-fence or stalled shoppers, and either close sales that might have otherwise gone to a competitor, or accelerate the sale altogether. Second, by capturing trends in virtual showrooming preferences and combining them with sales data, automakers and dealers should be able to more accurately predict the popularity of certain models and options, and adjust production and inventories accordingly.
  6. Cost efficiency: Once automakers have invested in the tools and process of creating virtual content for car buyers, it should hardly cost dealerships anything to connect shoppers to virtual showrooming experiences: Anyone with a VR headset at home or at work (like a mobile phone and a compatible headset) would have access to this type of experience, and bringing virtual showrooming experiences to an in-store location would only require a modest investment in VR hardware, a little signage, and a few custom seats.

 

VR, AR, and the future of retail.

As eye-opening and impressive as the simple example of virtual showrooming I experienced at the 3DS event was, it provided only a tiny little sliver of insight into the future of retail. On a much bigger scale, the same virtualization technologies and principles I outlined here can be used by manufacturers and retailers to help consumers shop for appliances, home furnishings, clothes, real estate, vacations, shrubbery, landscaping services, restaurants, theater tickets, event venues, and even food. Circling back to Black Friday and the seasonal frenzy of brick-and-mortar shopping experiences, and to the inconvenience of traffic jams and busy streets, long checkout lines, the limited opportunity to play with products and/or experience them in the context of their intended setting, it isn’t difficult to see the tremendous potential for VR and virtual showrooming.

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In addition to VR, AR (Augmented Reality) also opens a world of new and exciting possibilities for virtualization to find its way into retail. Giving consumers the ability to project virtual photo-realistic three-dimensional products onto real, live, familiar environments (like their home or office or garden) can accelerate sales and give certain retailers and manufacturers a market advantage against less digitally savvy competitors. Retailers like Rooms to Go, Ikea, Home Depot and Target can easily leverage AR and VR to help customers shop for furniture, appliances, flooring, and wall coverings right from their home. Likewise, by flipping the script and offering in-store AR experiences for their customers, fashion retailers like Nike, Old Navy and Guess can create an entirely new universe of in-store experiences for shoppers. Being familiar with the range of powerful 3DS digital tools already used by designers and retailers to reinvent retail for the age of digital and omnichannel experience design, the evolution from flat screens (mobile devices and displays) to goggles feels entirely natural. And with mass market tech giants Samsung, Microsoft, Google, Facebook/Oculus, and now Apple jumping into mobile VR and AR, it isn’t difficult to see how virtual content (ads, products, environments, and even shopping cart management) and retail will soon intersect at scale to create a range of hybrid virtual experiences.

(We touch on some of this and more in our latest report on Emerging Opportunities in Virtualization, if you are interested in a deeper dive into this topic.)

Here is some data on VR headset sales, by the way, courtesy of Statista. (Click on the image for an interactive, real-time view of the data. Access may require an account.) Notice anything about mobile?

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As new products, capabilities and case studies come across my desk, I will add to this discussion, but for now, just be aware that the intersection of VR, AR and retail is on my Top Ten list of macro Digital Transformation trends for 2017, and that I intend to dive a lot deeper into it in the coming months. We are already off to a very good start.

Cheers,

Olivier

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PS: Photos of my adventures courtesy of Jeremiah Owyang.