Introduction

The massive global success of AR-based game Pokémon Go, which was launched in 2016, served as a significant reminder to global retail about the immense potential of AR. VR, another technology that has roots in the gaming industry, also has significant applicability and potential in retail. AR and VR, also known together as reality technology or immersive technology, are slowly but surely transforming the shopping experience for consumers in both online and offline retail. The furniture retailing sector in particular is seeing more retailers adopt these technologies in order to meet consumer demand and expectations and address pain points in the shopping journey. With furniture typically being a costly and infrequent purchase, customers tend to gather as much information before buying in order to make a considered decision. This includes getting a sense of how a particular product would fit in their homes and whether it would match the décor of the rest of a room. This is where AR and VR can have a significant impact. From the retailer’s perspective, facilitating customers in getting a true picture of what they are purchasing can go a long way in driving down returns rates. The advent of AR and VR has helped to achieve this and so it is no surprise that retailers are investing in technologies to this end. In this report, we discuss how various brick-and-mortar and digital retailers in the furniture sector are leveraging reality technologies to offer enhanced shopping experiences to their customers and boost both top- and bottom-line growth.

Store-Based Retailers Are Investing in AR and VR To Enhance the In-Store Experience

A number of retailers have made significant investments in AR and VR capabilities. IKEA is among the pioneers in adopting reality technology, having first launched an AR app in 2013 alongside its printed catalog. More recently, IKEA launched an AR-powered application called IKEA Place in 2017, which enables users to experience its products through Apple iOS 11’s ARKit technology. It was initially an iPhone-only app, but the retailer subsequently introduced it for Android users in March 2018. Using the app, customers can gauge how various IKEA products would fit within their homes by virtually placing 3D renderings into a space—shoppers can use the app to scan their rooms, browse and select items and reposition the image to ascertain where it would fit best. The technology allows users to visualize the texture of the fabric, as well as the effect of light and shadows on the product. Moreover, users can also use the app to share images on social media. In September 2019, IKEA updated its IKEA Place app with new features that combine AR with artificial intelligence (AI) and allow users to receive curated and personalized home-furnishing tips and recommendations. [caption id="attachment_102228" align="aligncenter" width="700"] IKEA Place app
Source: Ikea.com[/caption]   In addition to its AR app, IKEA integrates VR technology into the shopping journey through its in-store Virtual Home Experience. Developed in partnership with digital agency Demodern as an interactive showroom, it allows customers to explore and configure IKEA products in a virtual space in real time. Operated through a VR headset, the technology has a clean and simple user interface. More recently, Ikea announced in May 2019 that it is testing a new shoppable VR app which the retailer will first launch in France and the Netherlands before subsequently introducing it in other top markets. Macy’s collaborated with AR and VR specialist Marxent from October 2018 to introduce more than 70 VR installations across the US. Operated through VR headsets, the technology helps consumers to visualize furniture selections before buying, so they are able to make more-informed purchasing decisions. Macy’s VR-influenced furniture sales across three pilot stores grew more than 60% compared to their non-VR counterparts and cut returns to less than 2%, according to an October 2018 company press release. The retailer went on to open its 100th VR furniture gallery in February 2019. According to company management in February 2019, returns rates for customers who use the VR offering are 25% lower and basket sizes are 44% higher than for customers who do not use the technology. Macy’s also offers an AR-based feature called “See Your Space IRL,” which enables users to virtually place the retailer’s furniture offerings in their living environment. The feature was initially available only on iOS on iPhone 7 and newer models, but it is now available on Android devices as well. [caption id="attachment_102229" align="aligncenter" width="700"] Macy’s See Your Space IRL
Source: Macys.com[/caption]   Home-improvement retailer Lowe’s added an AR-powered feature called View in Your Space to its app in March 2018, in partnership with Canadian tech-company Finger Food Studios. This functionality showcases how a product will look in the shopper’s home—users first scan their environment through the app using their smartphone camera and then place virtual items from Lowe’s catalog of home-improvement products into this setting. The View in Your Space feature was introduced to address a key pain point identified by the retailer: According to Lowe’s research, an estimated $70 billion in missed revenues are missed on a yearly basis in home-improvement projects as a result of consumers experiencing visualization challenges and a lack of design assistance. However, a limitation of the in-app functionality is it can only be used via mobile devices with ARCore (a software development kit developed by Google that supports AR applications). [caption id="attachment_102230" align="aligncenter" width="700"] Lowe’s View in Your Space in-app feature, depicting how a barbeque would look in a back yard
Source: Lowes.com[/caption]  

Digital-First Retailers Are Leveraging AR and VR to Improve Online Shopping Experience

As digital-first retailers bid for a greater share of the furniture market, one of the significant challenges they face is the absence of the “touch and feel” aspect in online shopping, which is traditionally a significant factor among furniture buyers. The introduction of AR and VR is helping to address this, by enabling customers to get a better understanding of what they are buying through various virtual tools: The “try before you buy” experience gives potential customers more confidence in the product and so helps convert browsers to buyers. Wayfair began investing in AR in 2016. Its mobile app has an AR-powered feature called “View in Room,” which runs on Apple’s ARKit AR platform. Shoppers can point their smartphone camera toward a particular space in their home and then virtually place a selected product from the company’s online catalog. The furniture item can then be moved around and viewed from different angles, giving users a sense of what it would look like in their home. Wayfair expanded the app to android devices in 2018. Through its partnership with wearable-technology startup Magic Leap, Wayfair launched another AR-based interior-design app called Wayfair Spaces in October 2018. Using the concept of spatial computing, the app offers shoppers an immersive experience into the room-design process by blending AR with VR. Through a Magic Leap VR headset, users can see a range of 3D digital rooms curated by Wayfair stylists, and can furnish and decorate a computer-generated home environment with Wayfair furnishings. However, the high-tech glasses that are needed to use the app are expensive, and as a result, its use case is mostly limited to interior decorators and professionals—the app does not seem to resonate with the average consumer. [caption id="attachment_102231" align="aligncenter" width="700"] Wayfair Spaces: Innovation in Mixed Reality
Source: Wayfair tech blog[/caption]   Amazon’s app offers a feature called “AR View,” which enables users to visualize various products—including furniture—in their own home through a smartphone camera. After initially launching the feature for iPhones, the company subsequently expanded it to include ARCore-enabled Android phones. In 2019, Amazon introduced a VR shopping experience called Showroom on its website and app. The feature allows users to place furniture and home furnishings into a customizable virtual living room. Williams-Sonoma’s AR app includes 3D room design and product-visualization tools for its subsidiary brand Pottery Barn. When it was launched in March 2017, this feature was initially only available on Android mobile devices that supported Google’s Tango AR technology, but Williams-Sonoma released an iOS version of the 3D Room View app in November that year. [caption id="attachment_102232" align="aligncenter" width="700"] Pottery Barn’s 3D Room View app
Source: Potterybarn.com[/caption]   Other digital-first furniture retailers such as Overstock have also introduced AR-based shopping apps, and the technology is slowly establishing itself as a norm in the industry.

Investing in AR and VR Has Its Challenges

Retailers need to consider multiple factors before pursuing significant investments in AR and VR. For one, a retailer needs to first build a strong mobile presence and a follower base on social platforms. Once these are established, they will be better positioned to experiment with, and benefit from, reality technologies. Given that the investment and expertise required to introduce and develop AR and VR technologies into retail operations can be substantial, retailers must make the decision of whether to outsource the work to a vendor or develop capabilities in house. Although retailers are increasingly investing in AR and VR, the decision to adopt these technologies is not straightforward due to the various challenges involved. We discuss some of these challenges below. Lack of Consumer-Friendly AR and VR Hardware One of the key challenges in the adoption of reality technologies is that consumer-friendly AR and VR headsets are not widely available. Those on the market have hefty price tags—for example, Microsoft’s Hololens retails at around $3,500. Moreover, device interoperability and platform-specific authoring limitations represent additional barriers. While the market still awaits smart AR headsets that are suitable for mass consumption, mobile devices remain the best channel to stimulate AR adoption. Unfortunately, most do not have the capabilities required to make effective use of reality technologies, such as room mapping and depth sensing. Limited Consumer Awareness and Adoption With only one-third of US shoppers saying that they have experienced mobile AR and just 11% owing a VR system at home (according to a 2018 survey by research firm ARtillery Intelligence), consumer awareness and adoption of reality technology has a long way to go. Retailers that want customers to experience their AR offerings need to jolt consumers from their usual shopping habits and entice them into investing their time in the new experience. The other aspect of adoption is ergonomics. If the AR experience turns out to be unwieldy and involves too much friction, users will be quick to abandon the concept and be deterred from experimenting with it in future. Therefore, it is essential that retailers run effective tests for user friendliness before launching a reality-technology service. Ensuring a Realistic Representation It is crucial that digital renderings of retailers’ products closely represent the actual products in order to achieve realism for the user. Retailers must also ensure a high-quality user interface. Part of this challenge is the effect of lighting and shadows: It is difficult to accurately capture the lighting in a real-world setting through an AR or VR experience. However, some retailers are making efforts to factor this into their apps, with good examples being IKEA Place and Anthropologie’s AR app.

What Has Been the Impact of AR and VR in Retail So Far?

By giving customers a better perspective of what they are purchasing, AR- and VR-based apps and services are minimizing uncertainty for shoppers and thereby enhancing sales conversion rates. At the same time, the use of these technologies appears to be lowering the rate of returns for both physical stores and digital retailers. According to a 2018 survey by digital marketing agency Adtaxi, around 10% of US Internet users have engaged with an AR app or feature that enables them to try out apparel or view furniture virtually from home. Another 45% expressed interest in experiencing the technology. Although the penetration rate for AR and VR adoption has plenty of scope for improvement, these numbers are encouraging enough to suggest that if use cases are adequately established, consumers could well be demanding such experiences from retailers to an extent where an inability to offer these would become a notable disadvantage. Despite all its advantages and impact so far, there is limited data overall in the public domain that provides a fair assessment of the return on investment in AR. However, in March 2018, digital home-design retailer Houzz reported that consumers who engaged with its AR tool were 11 times more likely to purchase a product than those who did not. As previously highlighted, Macy’s reported in 2018 that furniture sales driven by VR grew by over 60% as compared to non-VR-driven sales. The retailer also stated that it drove down the merchandise returns rate to less than 2%. These examples suggest that there is value for retailers to integrate AR- and VR-based services to better serve customers and reap benefits.

Can AR and VR Be Game Changers for Furniture Retail?

Integrating AR and VR into operations appears to be helping retailers to enhance sales and drive down returns, although only a few have disclosed data to corroborate this. The “try before you buy” experience that reality technology facilitates helps personalize the shopping journey for consumers, as they can engage with products. It also enables brands and retailers to forge a strong impression in the minds of consumers, giving them an edge over competitors. There are challenges involved in the implementation of reality technologies, including hardware limitations, low levels of consumer awareness and adoption, and accuracy in product representation. Moreover, although the positive impacts of AR and VR are claimed by many furniture retailers, there is insufficient data in the public domain to ascertain whether the return on investment warrants significant investment in this area. However, given that furniture is typically a considered purchase and there is an ongoing shift of sales from physical stores to e-commerce, we see opportunities for AR and VR to make a significant impact on the market over the long term. We are seeing a growing number of retailers invest in such technologies, and there is a possibility that these services will become a new norm in furniture retail, comprising a minimum customer expectation. In such a scenario, the retailers that will stand out are those that are able to offer exclusive and personalized services that are not offered by competitors.