Augmentation of reality using the mobile phone as a platform to enhance the promotion of a wide variety of products and services is already a practical reality. Indeed, this application for AR is drawing support from some of the most visible consumer brands including car firms (Nissan, Toyota, BMW, and Mini) and retail outlets (Lego and IKEA.) AR has also been used to promote movies (Transformers, Iron Man, Star Trek).

As SmarTech sees it, there are broadly three ways in which AR can be used to generate revenues in the retail sector. These are to (1) provide additional information to/opportunities for customers that will make them more likely to buy in a conventional shopping environment, (2) more visible advertising/media and (3) add functionality to Web shopping experiences.

The Business Case for AR in Retail: Providing Additional Information and Opportunities to Customers

More specifically what AR can do for retail and promotional applications is enrich consumer product selection and the actual experience of shopping. In both cases, the way that AR creates this enrichment is through some well-established strategies such as (1) making the shopping experience one that is broader than just shopping or (2) helps to turn advertising and catalogs into a more interesting customer experience.

The IBM shopping application: Perhaps the most prominent example of what can be done to provide additional information to and opportunities for customers can be found in IBM shopping application, which received considerable attention when it was announced in 2012. As far as SmarTech is aware this application/ system that IBM has developed is not yet commercialized. However, it is a good example of what might be considered an objective enhancement of the shopping experience.

The concept here is to provide customers with a lot more information than is usually associated with conventional “product scanner” apps that are based on barcodes. To achieve this goal, the camera in the mobile device is used to recognize different kinds of packaging using image processing techniques.

All the user has to do is to point his or her phone at the merchandise to get additional information. In this application, according to IBM, users also create their own profile based on personal preferences such as foods they are allergic to, for example.

Other information that the user can access to through this application includes product reviews, special promotions, dietary information, product specifications, price, applicable discounts as well as other information based on personal preferences. The application can also send an “alert” message to the user’s social networks, alerting friends where the user is doing his or her shopping.

IKEA’s 2013 catalog: IKEA’s catalog—of which more than 200 million are shipped—is enhanced with AR. Where AR is used in the catalog is indicated by a symbol that resembles a smartphone. The catalog user is equipped with a smartphone and the IKEA app and holds his or her phone over the catalog. This provides the user with additional description, photos or video of the product being viewed. There is also an “x-ray” feature, that lets users look inside a piece of furniture. In addition to IKEA, McCann, the advertising agency was involved in creating the digital layer for the new catalog.

Business objectives: The various ways in which this kind of AR enhancement is supposed to make or save money is perhaps clearer than in any other part of the AR-enhanced retail market. These include the following:

• Extended exposure of customers to catalog and promotions. IKEA expects to generate new revenues from its AR-enhanced catalog by extending the life of the catalog in consumers’ homes. The additional interactivity supplied by the AR feature, it is hoped, will extend the lifetime of the IKEA catalog for a few months and that this extra lifetime, will mean more sales for IKEA.

• Incentive to a quicker purchase. The business objective of the IBM application appears primarily to enhance customer loyalty. It is hoped that in stores that have this system in place, the customer will get enough additional information that they will make an instant purchase rather than feeling that they need to do more research, at which point they leave the store and ultimately buy the product from another source or online.

• Improved market research. The IBM application can also serve as a market research tool for retailers. Capturing the likes and dislikes of customers is said to permit more opportunities for targeted cross-selling and up-selling promotions, optimized floor plans, better product arrangements and even new types of point-of-purchase AR deployments.

The Business Case for AR in Advertising and Media: More Visible Advertising, but the “Wow Factor” Could Disappear Quickly

Using AR to enhance advertising and media is already fairly well established and some examples of how this is being done are provided below. There are many others. In addition, AR can be used to integrate print and video marketing. Printed marketing material can be designed with certain “trigger” images that, when scanned by an AR enabled device using image recognition, activate a video version of the promotional material.

As the Domino’s example below shows, it is also possible to combine AR-enhanced advertising with an actual shopping experience.

Bloomingdale’s/NBC: This campaign involved virtual avatars of characters from the latest NBC shows being placed in store. Shoppers pointed their mobile phone cameras at a certain in-store location and were then able to see—and have their photos taken with—the virtual “stars.”

Domino’s: In the U.K., Domino’s has used AR-enhanced billboards at 6,000 sites, to enable consumers to order a special pizza deal. While this is a rather simple hybrid application, we see a lot of potential here, primarily because digital signage, the market being addressed by AR, is a very rapidly growing area. Domino’s is working with Blippar in this application.

Nike/Finish Line: Using GoldRun’s technology virtual Nike Air Max shoes have been placed inside Finish Line stores for a promotional campaign that shoppers could only see by using the cameras on their mobile devices.

Orange: One novel project that is being conducted in Israel by Ogmento in conjunction with Orange Telecom Israel to promote that service provider’s iPhone launch. If a user points an iPhone at the Orange logo a virtual iPhone hovering over the logo will appear. Finger gestures can be used to turn the iPhone around, zoom in or out, and launch apps.

Philadelphia Eagles: The Philadelphia Eagles football team has worked with HP’s Aurasma product to create AR tickets. The Eagles’ management sees this as a PR effort that exploits the “wow’ factor inherent in AR. In this application season ticket holders hold their smartphones over these tickets and view AR apps that showcase “favorite players,” with additional game highlights, analysis, game previews, and messages to fans from Eagles players.

Playboy: Playboy has “selected Layar as its provider of choice for interactive print,” according to the company. In the deal with Playboy a “certified Layar partner,” Limebizz is also involved. Readers of the print version of the Dutch edition of Playboy can now scan special pages with the Layar App to receive extra content in the form of videos, image carousels, custom links and Layar’s newly introduced HTML widgets. The company has explicitly noted that the source of advantage of using Layar in this way is that adding AR the amount of content can be almost infinitely extended beyond the actual 114 pages of the print magazine.

Virtual Smurfs and other movie ads: Another GoldRun campaign was based on an AR app that placed a virtual Smurf inside iPhone photos as a means of supporting the latest Smurf movie. The app is claimed to extend the “movie experience into reality. Other movies that have been advertised with AR campaigns include “Iron Man,” and the 2009 “Star Trek” movie.

In general, SmarTech believes that the case for using AR in advertising and promotional activities is very strong. In fact, even a cursory review of what is going on today with regard to AR-based advertising shows that AR is already well established among major brands and as such may be seen as having a credibility in the advertising space that AR does not have in some other applications.

This perhaps should be no surprise, since novelty plays an important part of any successful advertising or promotional strategy. AR appears to provide such novelty to a considerable degree. Given this, we think that the near-term market for AR-based promotional and market support of the kind described here is huge. Catalog and advertising revenues, for example, run into the tens of billions of dollars.

For short-term revenue generation, therefore, the advertising sector may be a good place to be for AR firms. What we are more skeptical about is profitability, both short-term and long-term. In the short-term it seems highly likely to us that ad agencies, PR firms and perhaps even AR technology firms themselves will rush into this sector, taking on medium sized projects, and then finding that project cost mount considerably to the point of unprofitability. New technologies often cost more to implement than people initially expect.

Even once AR technology is mastered in the advertising/promotional industry sector, we think there will be some issues with AR-based promotion; in fact, it may be that once the technology is mature and people know how to deploy it, this may be exactly when the problems begin. There are few barriers to entry and AR could become ubiquitous. Once upon a time, Web sites were considered to be cool and drew positive attention to the firms that put them up. Now every company has to a have a Web site or it will not be taken seriously by anyone. We think it is possible that AR enhanced promotion could go the same way; that is that the “Wow” factor will ultimately be lost.

There is some evidence that this is already beginning to happen. QR codes are after all not novelties. However, it does seem that AR firms whose chosen target market is primarily advertising can still attract funding from venture capitalists and certainly from angel investors. But longer term, AR advertising and promotion is likely to be seen as necessary costs to maintain market share, rather than as innovations to build new business revenues and gain market share. Revenues will continue to increase, but the profitability of AR technology in this area will certainly come under pressure quite quickly

The Business Case for AR in Retail: Enhanced Web Shopping

With Web shopping and e-commerce being so ubiquitous, Web-based retailing is also looking for novelty and many of the comments on the role of AR in conventional retailing also apply to Web base retailing, including the likely long-term outlook. However, there are also higher levels of functionality that AR can bring to Web-based retailing.

One application that seems to be attracting serious attention is businesses built around the concept of trying on clothes, jewelry and so on. There are—in our opinion—some limitations on what can be achieved in this regard. This is because, although certain items can be “virtually tried on,” others—especially clothes that either cover the whole body or need to be seen in a complete body image—are poorly represented.

This contradicts the purpose of the virtual “try on” in the first place and we think that AR-based clothes shopping is likely to do best when small items such as spectacles or jewelry are involved. Suits and dresses, not so much.

SmarTech expects the quality of this kind of application to improve and if it can reach a quality of performance where people can broadly use “try on” services for a broad range of clothing, it could have some relatively important implications for clothing retailing. Because there are many other aspects of trying on clothing than just seeing the clothing worn on a person, we doubt that it is ever going to replace the real world trying on of clothes. But the concept can be extended to other revenue generating services such as making clothes and then trying them on, entirely in virtual mode.

Ditto: Ditto is a start-up firm that has developed an AR application that lets the customer “try on” glasses before buying them. The Ditto application (1) enables the customer to see him or herself in 180-degree views of a customer in glasses and (2) also allows users to post side-by-side snapshots in different glasses, and then post these pictures to Facebook for feedback from friends, spouses, etc. Ditto has recently (2012) been funded to the tune of $3 million.

TryLive: This is a virtual dressing room application that is intended for use by clothing companies. It is described as a new brand of Total Immersion, but also seems to have been developed in conjunction with Intel. In this application, the user puts himself or herself in front of a Web cam and the app then tries on the clothes using AR technology. A description of this app specifically mentions that TryLive is suitable for trying on glasses, shoes, watches, jewelry, and headphones.

Zugara: The Zugara “Webcam Social Shopper” platform generates an image of what an item looks like when worn using information from a web cam. The Zugara application also detects when a user waves a hand and automatically increase or decrease the size of the product. Users can also take pictures of their virtual ensembles and share them on their social networks. In addition, multiple users can simultaneously browse, chat, try-on and comment.

This information is extracted from SmarTech’s Opportunities for Augmented Reality: 2013-2022.

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