How AR and E-commerce Are Reshaping the Retail Market
How AR and E-commerce Are Reshaping the Retail Market
The explosion of mobility solutions in all parts of life means big changes for retail. See how AR and e-commerce in particular are making an impact.
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The advent of smartphones has revolutionized the commerce sector. Its impact has been indelible in almost every field of business. It has even birthed an entirely new market termed "e-commerce."
Since its inception, e-commerce has made rapid inroads into the retail sector market. The situation has come a to point where some market analysts are of the opinion that e-commerce is the death knell for retail, while some still throw their weight behind retail holding its ground. Certain stats do support the latter section's claims; for instance, a report by Fung Global Retail and Technology states that Amazon.com's share in US apparel market is a mere 3.7%, including third-party sales, for the year 2016. The same study also states that no e-commerce stores made it to the top 10 preferred outlets. At the same time, the fact that e-commerce has disrupted retail cannot be denied.
Impact on the Grocery Industry
The CnC approach (CBC.ca).
Let's take, for instance, the grocery industry. E-commerce is reshaping the grocery market in innovative ways. Advancing technology has opened up ways in which your grocery shopping experience will be as good, if not better, than shopping physically in the store, all within the confines of your smartphone and without taking a step outside your house. Two intriguing features provided by e-commerce grocery stores are Home Delivery (HD) and Click and Collect (CnC).
HD is purely an e-commerce product that involves the consumer visiting the grocery seller's app or website, adding items to a virtual cart, and finally paying and checking out. The purchased groceries are delivered to the consumer by the seller. CnC, in turn, involves the customer selecting and adding items in the grocery app and then driving to the nearest physical store of that online grocery store and collecting their products. Thus, CnC is a hybrid between a traditional store and an online store.
AR Is Making a Comeback
Ferrari's AR app (Augmented Reality Trends).
Augmented Reality (AR), initially considered a gimmick, is now seen as a feature with tremendous potential for application in the e-commerce sector. The recent patent application filed by Amazon for AR-related features has put it in the spotlight. Basically, AR helps bring the store to your home, quite literally. Features like virtual changing rooms and customization help consumers make a more informed decision while making a purchase. Here are a few AR apps:
- With L’Oreal’s Makeup Genius app, you can make your smartphone a mirror and try new looks, check out different makeup shades, and share them on social media.
- In the automobile sector, BMW aims to provide a personalized experience to its shoppers with AR's help. It utilizes Google's Tango app to let the consumer experience their choices- for instance, how their car would look with customizations such as plush seat covers, steering wheels with fur trim, or parked in their own garage.
- Gap, a leading fashion retailer, has developed the "Dressing Room" app that enables shoppers to create a virtual avatar of themselves. This avatar is programmed based on the data provided by you, like height, weight, and measurements, and can model clothes chosen virtually by you to show you how you'd look with your chosen apparel on without actually having to wear it.
What Statistics Say
Despite all this, just how much of an impact has AR and e-commerce actually had in retail?
Some studies paint a picture in favor of retail. For instance, a recent Food and Beverage Report released by Forbes states that the e-commerce share in the grocery industry barely registers- it struggles to pip the 2% share mark. A minimum of 6 online purchases annually is made by no more than 5% of adults. Contrastingly, traditional grocery stores see 78% of adults make purchases regularly, and Walmart has 56% of the shopping. Interestingly, the survey also showed the growth of online shopping by 14% as compared to a mere 2% increase for physical stores. But hold on, do those growth figures really tell the whole story? When scrubbing through data from the Food and Beverage Report, it was found that the online grocery's growth from 1.4% to 1.6% of the market share totals up to an increase of $1.6 billion dollars. The 2% increase shown by physical stores totals up to $16 billion, 10 times the growth shown by online grocery stores.
There are also reports that tell a starkly different tale. According to a study conducted by retail advisory firm HRC Advisory, operating earnings fell by 25% due to a shift to online sales from physical stores. Additionally, omnichannel and e-commerce investments, along with expensive fulfillment of e-commerce transactions, contributed to the decline.
Variable logistics cost, IT, supply chain upgrades, and simultaneous maintenance of the high level of returns on online operations together are producing increasing SG&A costs (at approximately 2-3 percentage points of the net sales made). This, combined with wage inflation, falling physical store sales, and real estate has resulted in a decrease of 1-2 percentage points in the profit contribution by physical stores, concluded the study.
Whatever its impact, e-commerce is here to stay. It would be interesting to see how this competition unfolds, or whether e-commerce actually spells doom for retail. Although statistics are divisive and inconclusive, this is for certain: the arrival of e-commerce, supplanted with features like AR, has disrupted their unchecked reign over the market, and if retail doesn't adapt to the changing needs in these changing times, the divisive studies might soon send it out for the count in unison.
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