/ Why Every Retailer Needs an Augmented Reality Plan

The United States is, by any measure, a retail wonderland. If you were to gather all 3.8 million U.S. stores1 under one roof—a true Mall of America—the square footage would cover 40% of Rhode Island.2 That translates into six times more retail space per person than exists in Europe or Japan.

Retail’s huge impact on the U.S. economy can be seen in employment numbers, with two-thirds of states ranking retail as their largest occupation. Walmart alone employs 1% of the U.S. workforce.3

But even so, retailers constantly need to adapt to meet the demands of hyper-connected consumers. It’s a story retail has heard before, with relentless e-commerce competition, growing debt, and changing consumer habits putting many well-known brands in precarious positions. 2017 ended with a record 7,000 store closures (more than the Great Recession of 2007), despite robust consumer confidence and a healthy economy.4

Each new wave of technology—the Internet boom, the mobile economy—has seen traditional retailers fall, replaced by smaller, nimbler, more data-driven brands. How can retailers keep this crisis from becoming a catastrophe when the next wave hits?

Augmented reality to the rescue.

Relying on the next big technology to save a sinking industry sounds like a classic Hail Mary play. But augmented reality (AR) is different, especially for retail.

But first, let’s talk about AR itself.

Simply put, AR is a group of technologies that let you overlay digital items (data, images, objects and documents) onto the physical world. AR is still in its infancy—most AR apps, like the Pokémon Go game—are found on smartphones, simply because phones offer the most computing power in the smallest package.

But recent releases of Apple’s ARKit and Google’s ARCore have made the technology much more accessible and powerful.5 AR isn’t meant to live in your pocket; it’s meant to overlay the real world with helpful data. As hardware advances catch up with creative technological minds, AR will soon shift to hands-free devices, like smart glasses or heads-up displays in cars.

The current digital world is great for organizing data, sorting information, and creating reports. But the data doesn’t exist outside of its virtual shell, leaving the hard work of bridging the virtual and the physical to us. Millions of dollars are spent each year on spreadsheets and analytics tools to offer insights, but don’t always connect to the real world in a meaningful and actionable way.

But AR, done right, won’t have the same problem.

Here’s an example: Say you are trying to convince a loved one with diabetes to be more disciplined with their diet. You shower them with nutritional data, health studies, and a scheduled regimen. The research and planning alone would take an enormous amount of time and energy and is usually met with both mixed results and emotional stress.

Now, imagine the same loved one wearing smart glasses and, after picking up a cupcake, seeing a small warning in their display. Hovering above the cupcake, a message lets them know the impact of their choice—a probable disruption in blood sugar balance—alongside a pulsing arrow pointing them to a better choice.

The same data exists in both scenarios, but with AR, the data now has context and is laid on top of a real-world situation without any effort on the user’s part. When you present the right data to a person at the right time in the physical world, the impact can be profound, and the opportunities become enormous.

The power of AR resides not just in the display of information in new places. AR’s true promise is bridging the chasm between the physical and digital worlds. And if you use that definition as a foundation for how AR can impact commerce, the implications for retail begin to shine.

AR done well is a superpower.

The way forward? Start in the back office.

With large tech waves, it’s wise to keep a tinge of skepticism. Not all technologies go mainstream. Sometimes tech’s promise finds itself stuck in the last mile for months, or years. No executive wants to sponsor an expensive project for “the next big thing,” just to watch “the next big thing” never happen. Even in the current phase of digital transformation, Forbes reports that only 3% of retailers have actually started on a digital transformation strategy.6

With any technology wave, you’ll always find early adopters testing the waters, and the same goes for AR. A handful of retailers have already begun the first steps to inform their augmented reality strategies. Sure, the tech isn’t exactly ready for primetime quite yet, but that hasn’t stopped pioneers from setting aside R&D and experimentation budgets for consumer-focused apps. Most of the activity has been focused on the platform already in our hands—the phone—which shouldn’t be too surprising (it’s reported that consumers spend five hours a day on their smartphones). But, if there is one lesson to be learned about new tech adoption, it’s that consumers are complicated.

While AR has great potential to add value to retail, it also has huge potential to miss the mark. Google Glass was met with widespread dismay when it launched in 2014. No one wanted to pay $1500 for something that didn’t quite work and made those around them uneasy. (Recently, Snapchat wrote off $40 million dollars in unsold Spectacles. History does repeat).7 The much-hyped MagicLeap offers impressive technology, but in a form factor that only a steampunker could love, and at a high price.8 Amazon’s Echo Look, which tells you which outfit looks better on you, has had mixed reviews. Perhaps we’ve been focusing too much attention on the wrong problem.

Instead of trying to redefine a potential finicky consumer to change their habits, why not focus on problems we can solve?

How AR can help retail right now.

Improving store operations.

Retail environments are complicated and require significant operational expertise to ensure the right products are on the right shelves at the right times. Take, for example, your local grocery store. It carries around 40,000 items—everything from alkaline batteries to zucchini.9

With multiple deliveries and promotions happening every day, products are constantly being moved from the back room to the shelves. At any given time, more than 1% of the goods need to be removed because they’re expired or damaged.10 It’s a logistical dance that demands constant attention.

AR offers the potential to notify employees of expected deliveries and recommend optimal product placement, improving efficiency and reducing the problem of “phantom inventory”—misplaced stock resulting in costly write-offs. AR can automatically direct employees on the floor to remove recalled or expiring product, freeing up managers’ time spent assigning employees to go hunting, checking dates and labels.

Up-leveling employee performance.

Presenting employees with the data they need in a clear and actionable way will undoubtedly improve their ability to make better decisions. Using your data and codifying some simple best practices, even with early passes at AR tech, will give all your people the best opportunity to read and react to situations on the floor. It can be difficult to find informed, experienced judgement in entry-level positions, and data can help educate the workforce, filling the gap.

Better customer service.

As if retail operations weren’t hard enough, here come the customers. Shoppers are your lifeblood but can also be one of your biggest challenges to manage efficiently. AR could provide better and consistent data to answer customer questions from anyone on the floor. And even better, consumer-facing AR could answer customers’ questions before they tap employees on the shoulder, asking where they can find the HDMI cables.

Get your people working on experimenting with AR to understand the best customer experience possible. Do people want alerts as they’re walking your aisles? Do people want to chat with your brand via a bot for a more convenient experience, or would they rather talk to a real human being? If you can answer these questions, it won’t just help chart your AR strategy, but will also help inform your overall experiential design for the next few years.

Getting retail ready for AR.

How do retailers prepare for the coming AR wave? The good news is that whether you believe in the power of AR or not, getting your back office in order is going to enable you to be more efficient and competitive, even if AR doesn’t go mainstream in the next few years. The steps to get your systems, data, and people ready are things you should already be doing as part of any retail digital transformation strategy.

Your systems.

Many retail operations, especially ones that have been in business for several decades or more, are afflicted by a motley mix of legacy systems. Legacy systems might be the bedrock of your operation, but they are also an anchor to your growth, since they:

• Are difficult to scale;
• Are expensive to maintain;
• Buckle under the increased demands and complexity of your ever-growing products;
• Lack functionality that has become standard in modern systems, leaving you and your teams at a competitive disadvantage.

While your situation might be unique, the best strategy is not to rip-and-replace, which could cause major disruption to your business. Instead, consider SaaS providers, which can offer much of the functionality you need while also decreasing your IT maintenance and development costs. And when you do make the leap, go all in. Seek out solutions that centralize disparate sales, inventory, and accounting systems, which will result in tangible improvements across operations.

Whether you choose to take your system to the cloud or rebuild, this problem will take substantial effort to fix correctly. Without it, your antiquated systems will continue to be the cause of countless roadblocks.

Your data.

Use this as an opportunity to get your data warehouse in order to make the most out of AR. The steps you need to take to be AR-friendly are actually steps you should be taking anyway.

Get all of your relevant data in one place. 

Sales and inventory data can be overwhelming and difficult to collect. However, if you’re not tracking successes and areas of opportunity, you’ll regret it later. Retailers typically track sales information in multiple places and have a hard time piecing together what’s relevant. If you want to make smarter decisions and have greater visibility into your performance, implement a central inventory solution that tracks inventory, order statuses, sales data, COGS, and more. It’s important that this lives in one place so your team always knows where to go for information.

Fix SKU-less inventory. 

Identifying your inventory is critical for any AR app, whether internal or customer-facing. Implementing unique SKUs (stock-keeping units) might seem tedious, but it’s one of the most important assets you can create. Relying solely on product barcodes puts you at the mercy of manufacturers and leaves you with inconsistent inventory data.

Consolidate your data. 

This will help you find new insights by matching up diverse data. For example, why not link popular reviews to your product inventory? This will give you an enhanced understanding of customer likes and dislikes across your entire product spectrum.

Use data to identify inefficiencies and eliminate waste. 

As annual retail growth continues to slow, you’ll have to look for opportunity everywhere. Better data can help you do things that were nearly impossible before, like optimizing supply-chain operations, predicting staffing needs based on customer traffic analysis, and testing new ways to position and promote inventory across the store.

Five years ago, who would have believed that Tesla would have a bigger market cap than Ford and GM? Who would have believed that Uber and Lyft would materially change millennial car-buying habits?

There’s pressure on technology companies to create the next big thing. CNET recently reported that Apple has an AR headset in the works, slated to launch in 2020. Will retailers be ready if the hardware turns into the next iPhone? Will you be ready?

SOURCES:

1. https://nrf.com/advocacy/retails-impact

2. http://www.wolframalpha.com/input/?i=13000000000+sq+ft

3. https://fred.stlouisfed.org/series/USPRIV

4. https://www.cnbc.com/2017/12/26/store-closures-rocked-retail-in-2017-and-more-should-come-next-year.html

5. https://www.x.company/glass/

6. https://www.forbes.com/sites/nikkibaird/2018/03/12/retail-apocalypse-explained-retailers-have-not-actually-embraced-digital-transformation/#279b76762806

7. http://www.businessinsider.com/snap-writes-off-nearly-40-million-spectacles-charges-after-product-flops-2017-11

8. https://www.theverge.com/2018/2/13/17010360/magic-leap-rony-abovitz-code-media-interview-pricing-tiers

9. https://www.fmi.org/our-research/supermarket-facts

10. https://hbr.org/2012/01/why-good-jobs-are-good-for-retailers