Over the past decade, augmented reality (AR) technology has reduced this uncertainty. By superimposing virtual objects onto a live view of physical environments, AR helps users visualize how products will fit into their world. Across industries, retailers have built apps to help consumers actually try on products—like furniture, eyewear, and makeup—in hopes of attracting customers and ultimately driving sales.
Because this technology is relatively new, there is little research on how much it improves sales for different products or customers. In a recent study, Srinivas K. Reddyvisiting professor of marketing at Kellogg, et al Sandeep R. Chandukala of Singapore Management University and Yong-Chin Tan of the City University of Hong Kong set out to change that.
Using data from an international cosmetics retailer, the team found that using AR in the retailer’s mobile app changed customer behavior in several ways. In addition to boosting overall sales, it led to higher sales for less popular brands, as well as expensive products and products with less appeal. The effect was greatest with customers who were new to the app or product category.
“A lot of retailers have implemented this technology because it’s cool, but many haven’t considered the kind of information it provides,” says Reddy. “What we’re showing is that it attracts customers, increases purchase rate and is on par with 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 come we didn’t have a digital layer in the physical world?” said Greg Jones, then director of virtual reality and augmented reality at Google, in 2017. In fact, The survey estimates that nearly 100 million consumers regularly use AR technology.
Specifically for retail settings, Reddy and colleagues identify four broad uses for AR technology: entertainment, education, helping consumers evaluate product fit, and improving their post-purchase experience.
For example, when Walmart partnered with DC Comics and Marvel to bring superhero-themed AR games to their stores, it created fun, original experiences for customers. Automakers such as Toyota and Hyundai have used AR to educate consumers about innovative technologies, while IKEA’s Place app uses AR to give customers a preview of how furniture will look in their homes, allowing them to rate application before purchase. And LEGO released several brick sets with an accompanying AR app that allowed characters to come to life and interact with physical LEGO sets after purchase.
Reddy and his colleagues decided to focus on studying customer behavior when using AR to evaluate a product. They received a dataset from an international cosmetics retailer that integrates AR into its mobile app to help customers visualize how they would look if they used different cosmetic products, such as eyeshadows and lipsticks.
The dataset contained sales records for 2,300 products and browsing and purchase histories for 160,400 customers in a key market in Asia Pacific. The data covered a 19-month period from December 2017 to June 2019. Consumers were able to use the AR feature for lipsticks and lip glosses throughout this period. AR mode for eyeshadow and eyeliner was introduced in March 2018.
The dataset covered more than 800,000 shopping sessions, about 20% of which involved AR.
AR increases purchases from less established brands
The researchers found that customers who used AR as part of their mobile app shopping experience spent 20 percent more time browsing (and browsed nearly 30 percent more products). In addition, the purchase rate of these customers was almost 20 percent higher than that of those who did not use AR.
The overall effect is greater for customers who are new to the app or product category—showing that AR has an opportunity to drive online shopping adoption and category expansion. But it was also successful with the company’s regular, loyal customers.
Because the researchers had access to many of these shoppers’ browsing and purchase histories, they were also able to compare how their purchases differed when they used AR compared to when they didn’t. And they found a few surprises.
When customers used the AR feature, 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 take risks on what would otherwise appear to be riskier bets.
Actually, research has shown that when consumers have access to more product information, as they do with AR interfaces, they rely less on the brand as an indicator of quality.
These interfaces also reduce uncertainty by letting customers visualize how products will look in person, perhaps making them more comfortable investing in more expensive or lesser-known products.
“This shows that augmented reality is leveling the playing field for brands and products,” says Reddy. “Customers never bought blue lip shade and now all of a sudden they’re buying it. And if that reduces their uncertainty, they’re 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 high risk or uncertainty about the purchase process. This means that AR can 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 customized products that often cannot be returned.
Of course, AR isn’t right for every retail category. It doesn’t allow consumers to feel texture or smell fragrances, for example (although this kind of technology is in development). And AR is not a cheap investment. Custom AR apps it costs from $10,000 to $300,000.
But AR retail experiences aren’t just limited to mobile apps. Reddy and his colleagues are currently examining a dataset from an AR interface placed in the cosmetics retailer’s physical stores. The interface allowed shoppers to actually try on lipsticks (without applying anything to their lips, the normal in-store product testing process). Initial results show that customers using the AR interface spent more time sampling more types of lipstick, suggesting that by making the sampling process more convenient, it encourages shoppers to explore more than usual.
Reddy ultimately hopes to explore how AR use 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 continue to explore and experiment,” says Reddy. “This will help us understand the value of AR in the long run.”
