Imagine you’re a retailer. Now imagine you had the magical power to make the shopping experience addictive, seamless, convenient and enjoyable. E-commerce started that transformation, but in a few short years the immersive world of virtual reality could finish it, turning even modern-day retail on its head.
Will VR fully and permanently disrupt retail? If so, exactly when and how will that happen? And from an investing perspective, what stocks win and what stocks lose?
VR today. A few decades ago, you might’ve thought the likelihood of shopping for kitchen appliances in virtual reality and flying your car on an aerial highway had the same long odds of occurring in your lifetime.
In 2017, VR is here … technically. But because there are only a few widely available ready-for-market VR devices — none of them heavily marketed or with a potpourri of hit apps and games — VR is still viewed as a fringe technology.
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And, as is often the case with innovative new tech, it’s been criticized as being far too pricey for mainstream consumers.
“The good headsets like the HTC Vive are still $600, and you still need a good computer to run them well,” says Chad Taylor, the Connect Store Manager at Abt Electronics, the nation’s largest single-store retailer of electronics, appliances and home goods located in Glenview, Illinois. “I do not see VR being used for a simple purchasing decision at a reasonable price point.”
Still, Silicon Valley is in overdrive working to bring VR mainstream — and monetize it however possible. And some of the world’s biggest retailers have already been first-movers in this area.
Mastercard (NYSE: MA) and luxury goods maker Swarovski teamed up on a shopping app. Ikea’s swooping in, and so are Home Depot ( HD) and Lowe’s Companies ( LOW).
It turns out that the costs, as well as the limits of virtual reality, are much more appealing than what the mainstream public probably thinks.
Where VR is going. One of the mainstream objections to VR has been that you can’t actually “feel” the things you’re interacting with in the virtual world.
Well, that’s changing.
Today, there are a handful of ways to preserve the sense of touch in virtual reality, and Tactai is one of the companies leading the way. Its product, Tactai Touch, is a low-power 20-gram device that can be worn on your fingertip; it costs just $20 for the manufacturer to make it, and you only need one to grasp, click, move and feel things in virtual reality.
And, to give you a sense of what Tactai Touch can do, it’s not like you can only tell the difference between a stone and a sponge.
“We feel we have the strongest, richest fidelities of anything that exists today,” says Steven Domenikos, founder and CEO of Tactai. “You can tell the difference between 320-grit sandpaper and 220-grit sandpaper.”
This has gargantuan implications for retail.
“Imagine, the next time you buy something from Amazon ( AMZN), you put your finger into an Echo and touch it,” Domenikos says. The Tactai Touch “could be in a mouse, it could be in Google ( GOOG, GOOGL) Home or Amazon Alexa or any of those things.”
Also, dressing rooms could become practically obsolete. Amazon just dropped at least $50 million on a startup that can tell your size by taking a quick body scan.
In the retail world of tomorrow, “A person’s clothing measurements can be taken and the person can see his or her virtual avatar fitted with the clothing that they are seeking to assess,” says Vikram Kapila, senior member of the Institute of Electrical and Electronics Engineers and a professor at the NYU Tandon School of Engineering.
“Then, the retailer can provide custom tailored and fitted clothing to the customer,” Kapila says, noting that social media can play a role by acting as fashion police for curious consumers.
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If you don’t trust your Twitter ( TWTR) followers to give good fashion advice, Amazon already has a product for that, too: the Echo Look has a built-in camera, and after giving a fashion show the device will grade your outfits.
Cost and convenience advantages. Needless to say, other than being incredibly cool, there are immense cost and convenience advantages to using VR in retail.
Home Depot is using a VR application to train warehouse employees how to load the most goods onto a pallet efficiently. A Lowe’s app lets customers practice certain home improvement skills they’ll need when doing a remodeling project.
Sellers of large, bulky items — think furniture companies — can benefit from apps that show off their sizable inventory in virtual showrooms, reducing overhead, inventory and leasing costs substantially. One might even reduce labor costs with custom checkout agents tailored to someone’s preferences, like a virtual salesman.
“Once you experience it, you’ll probably never buy things any other way,” Domenikos says of so-called virtual shopping arcades that allow users to view and touch products in a fun, “addictive” environment.
Timeline. So how long will it be before VR is flipping the already-shaken U.S. retail industry on its head yet again?
It won’t happen overnight; even industry insiders think it will take a few years for the price points of new technology to converge at a point amenable to the mass market.
A spokesperson for Ultrahaptics, a company that enables touch experiences in VR and AR through speakers that emit highly concentrated ultrasonic waves, predicts that within five years, AR devices will be as ubiquitous as smart phones are today.
By that point, the price points of VR headsets should have come down dramatically as well, while the quality will go up. That’s more or less a golden rule in consumer electronics; from TVs to computers to mobile phones, they each started off clunky, expensive and exclusive — and each ended up sleek, cheap and mass-produced.
Winners and losers. Clearly companies like Amazon, which is already by far the most tech-savvy retailer around, have an opportunity to benefit enormously. Facebook ( FB) is devoted to VR as well, having spent $2 billion on its acquisition of industry leader Oculus in 2014; Microsoft Corp. ( MSFT) is also in the game, and so is Google.
But there will likely be more losers than winners. Many will be the same kind of companies we’ve seen fall behind as the e-commerce revolution heated up: bricks-and-mortar and mom-and-pop retailers especially.
“The smaller outfits are going to continue to have downward pressure,” Domenikos says.
Other potential laggards, ironically, could be the same companies that stand to benefit the most if they only had the resources, expertise and foresight to invest in the coders, headsets and controllers that will revolutionize their industries with or without them.
Furniture makers, real estate agencies, interior design firms and many others will be some of the first businesses to choose their fate: adapt or die.
“Once you have an addictive experience at store A, you’re not going to go to store B unless it’s giving things away for free,” Domenikos says.
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Few businesses can afford to do that. But the ones that can are the same ones that, as early adopters of VR, won’t need to.
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Why Virtual Reality Will Disrupt Retail originally appeared on usnews.com
