We’re living in an era of constant demand. With 24/7 access to online shopping, consumers now expect the freedom to shop where they want, when they want, and how they want. But this digital urgency is creating a shift in behavior which is seeing online apparel customers trading in-store changing rooms for the privacy of their own home, establishing what is now referred to as “Home-Try-On” (HTO).
Unfortunately for retailers, this growing trend has created an increase in return rates for online apparel sales – more than 40 per cent within women’s apparel. The problem lies in the fact that consumers are treating HTO as they would with any in-store experience, whereby they opt to try on multiple sizes of the same product. As a result, a higher quantity of apparel is being “purchased” – even though most of these items will quickly be rejected and returned to the retailer for a refund.
Unsurprisingly, this behaviour is having a profound impact on retail supply chains and online profitability. In addition to mastering the art of home delivery (also called ‘last mile’ or ‘final mile’ delivery) through direct-to-consumer fulfillment operations, retailers must also absorb the cost of direct order processing, handling and shipping. Further still, on top of those costs are all the costs associated with higher returns, including opportunity cost in lost sales resulting from having merchandise trapped in the HTO cycle. So how can retailers counteract the damaging impact of HTO behavior?
A solution that is showing promise is linked to re-establishing the in-store change room online. VR technology has now reached a point at which apparel retailers can integrate virtual changing rooms into their online stores. In fact, the use of interactive displays, magic mirrors and kinect technology to try on virtual products is already increasingly apparent in “phy-gital” stores – and we are seeing an increasing focus on creating engaging experiences via mobile apps when consumers are at home. This is being rapidly adopted across retail outlets, but is particularly prevalent in apparel and home goods and furnishings. Soon, consumers may be able to recreate an entire virtual store while sitting on their sofas, using augmented reality headsets, and be able to pick and place products in their virtual shopping baskets.
A study by professors Santiago Gallin and Antonio Moreno demonstrated that this approach can lead to impressive results. The Value of Fit Information in Online Retail: Evidence from a Randomized Field Experiment found that leveraging virtual reality technology to establish online virtual change rooms resulted in a whole host of improvements for retailers. From higher conversion rates (+6.4%), higher order value (+1.6%), and lower fulfillment cost (-5%), to a strong reduction in returns (-5.2%), virtual reality made the difference.
The study also highlights the ability of virtual reality technology to modify consumer behaviour, reducing the HTO effect by 25 per cent. All of this leads to higher net profitability per order, estimated at an increase of around 13 per cent, even hitting 20 per cent for those retailers that previously had a return rate of over 40 per cent.
An additional finding is the increase in consumer loyalty, along with more frequent visits to the retailer’s online store that result from incorporating virtual changing rooms. When a consumer takes the time to provide personal details (height, weight, bust size, waist size, along with hair color, skin tone, etc.) needed to set up their own virtual model, they have made an investment in their relationship with the retailer. Consumers who create their own 3D model, create and assemble their own outfits and vividly explore a brand’s offering are more likely to imagine themselves owning the brand’s collection. The relationship has evolved from transactional to loyal and personal, and total customer value increases along with per order profitability.
Several software platforms exist that can be used to launch an online virtual change room. The key is selecting one that fits within your brand’s online store and contributes to the consumer experience you want to promote. In addition, online content must be digitally enabled to allow consumers to outfit their 3D model.
Virtual online changing rooms demonstrate significant promise in addressing numerous challenges in online sales faced by apparel retailers today. With experts predicting that VR – along with other disruptive technologies such as AR and AI – will completely change the way consumers shop by 2050, now is the time for retailers to act. From headsets that gauge customer mood in the lighting and atmosphere of a simulated store, to interactive experiences with products and AI assistants, the future of shopping involves a merging of the physical and digital worlds. Retailers hoping to survive this turbulent period must ensure they become a part of the technology revolution.
The article was written by:
Manu Tyagi, Associate Partner, Retail, Infosys Consulting
Sylvie Thompson, Associate Partner, Supply Chain, Infosys Consulting