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With all the hype surrounding the Metaverse, you’d think we’re just days away from joining and living in the Matrix. Seriously, the Metaverse will be transformative and a tremendous opportunity for e-commerce, but we’re only at the beginning of this journey.
Many of the foundational technology components of the Metaverse stack—including artificial intelligence (AI), augmented reality (AR), virtual reality (VR), non-fungible tokens (NFTs), and bots—are available today. And dealers are spending aggressively on it.
IDC estimates that retail spending on AI is expected to grow at a compound annual growth rate of more than 25% between 2021 and 2025. It is estimated that AR/VR will experience a compound annual growth rate of 77% from 2019 to 2023. This year (2022) alone, experts estimate retail and marketing spending on VR at $1.8 billion. The consumer sector alone accounts for more than 50% of AR and VR spend.
Research shows that using even simple AI, AR or VR can significantly increase customer retention and conversion. These technologies also reduce a staggering $428 billion in product returns each year. In addition to their immediate benefits, these foundational technologies serve as a great stepping stone to the metaverse’s inevitable popularity—but only if you can tune them properly to take advantage of core human behaviors.
People demand personalization, new experiences and less friction
No matter what “verse” it operates in, e-commerce has always relied on aligning technology with basic human desires (which rarely change). We have an insatiable need for experiences—new experiences that are energizing and personalized and practically. And we’re growing impatient, demanding near-instant gratification and as little friction as possible. The best applications of these new fundamental technologies are aimed squarely at fulfilling these fundamental desires.
For example, 60% of people want to visualize how a product fits into their lives. AI can use advanced algorithms to look for patterns in our lives and make suggestions from inventory on which products we should start with based on data from previous purchases, browsing, geography, etc. AR/VR can then – effortlessly – do a visualization provide the context of the user’s environment.
IKEA’s Popular Place is an AR app that meets many of these criteria by showcasing the company’s products and helping consumers choose and place furniture in their homes. Not only does this app provide personalization and a simple, customized experience for consumers in their homes, but it also reduces returns.
In the fashion industry, several similar applications offer virtual try-on and sizing experiences. Simple technologies like FitFinder technology help shoppers personalize their sizing experience by taking the data of a brand or item they know will fit them and using an algorithm to accurately compare measurements. Stoney Clover Lane (which has just collaborated with Target) offers customers VR renderings of its designs on its website. More advanced 3D modeling technology opens up richer shopping experiences for shoppers who don’t fit the size stereotype. Merchants adding 3D modeling to their websites are already seeing it.
Where the basic Metaverse technology struggles
Some of the most popular uses of these technologies combine physical and virtual experiences. But the technologies are still inadequate on many fronts.
Geography and age-old habits of the physical world still create pitfalls across the tech stack. It’s still difficult to navigate the variety of sizes across both regions and individual brands. Understanding the differences between EU and US sizing still poses challenges for most buyers, and even the “large” size can vary significantly between manufacturers in the same country. Unless such baseline data is normalized and standardized, AI, AR, and 3D modeling will replicate what consumers are already experiencing. Anyone who has ordered the same shoe size from different suppliers in hopes of finding a shoe that fits knows the pain of the experience.
Bots are another prime example of fundamental technology that still doesn’t reach the critical match between fundamental desires and technology. Sure, it’s efficient for merchants to use bots, but they’re rarely helpful and consumers hate them. Research shows that a single bad experience can easily drive away even the most loyal customer. Merchants are weeding out the moments when bots are best and those when it’s better to prioritize the customer experience and put a human in charge.
Finally, sensory experiences in the virtual world still cannot be replicated beyond basic haptic responses. They cannot “feel” the fabric, smell the spices, or engage in any other sensory experience. Nothing in the virtual world comes close to the appreciation and joy of touching those fabrics or sitting on that couch.
Use the technology with the best immediate impact
Opinions and estimates differ as to how big and fast the Metaverse e-commerce gold rush could be. There’s still a lot of work to do to profile the Metaverse as more than just another distribution channel. But don’t wait to get started. Select the technologies that will both drive immediate ecommerce gains today (i.e., customer experience and satisfaction) and will be inevitable building blocks of the metaverse. The pioneering traders who do this will gain tremendous competitive advantages regardless of when the metaverse evolves into a full-fledged trading environment.
Just make sure the bits and bytes of technology match basic human desires – otherwise you’ll just create another bad bot.
Zohar Gilad is the co-founder of Fast Simon, Inc.
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