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Augmented and virtual reality change how retailers and landlords engage customers

February 15, 2018

The use of augmented-reality and virtual-reality technologies is gaining popularity with retailers and retail real estate owners alike. As smartphones become ever more sophisticated and AR and VR apps get easier to use, adoption of these technologies is expected to accelerate over the next few years.

“Every retailer and a lot of landlords are looking at new technologies to augment the customer experience,” said Melina Cordero, CBRE’s head of retail research for the Americas. “AR and VR have been around awhile, but retail real estate is on the cusp of its adoption.”

Lowe’s, IKEA and other retailers have offered customers augmented reality for years, to help them visualize the way furniture items will look at home, for instance. Industry sources expect that such usage will keep growing. “I … see it becoming more of a trend, something that retailers will have to use,” said Taylor Coyne, a senior retail research analyst at JLL. “We are just starting to see the beginning of what, specifically, retailers can do with some of this technology, and it is only going to get better.”

“The idea that only Millennials know how to navigate technology is false. Both baby boomers and Gen X-ers have just as many smartphones.”

For now, increased adoption of AR is creating a win-win situation. “The winner of everything in this omni-channel game is the customer,” said Cordero. “But the retailers and the landlords leveraging the technology are learning how to get their own benefits from them.” Among those benefits to shopping center owners is greater collection of customer data. “When you have any of these sorts of augmented-reality and smarter technologies, those devices are also collecting information on how long someone looks at this item or that item; they are collecting information on specific customers to be able to then tailor things like advertising and product offers,” said Cordero. “That is a major win for retailers in leveraging and getting consumers to engage with these technologies.”

Landlords can also use AR and VR to pump up their leasing programs, says Mathew Shaffer, founder of Radical Galaxy Studio, in Bellevue, Wash., which creates virtual-reality scenes for real estate owners. “From a budgeting perspective, honestly, the virtual- and augmented-reality work is going to be a more cost-effective tool to use, rather than white-boxing or building out a spec unit,” said Shaffer. “Sometimes, though, there is a disconnect between the leasing brokers, the developers, the owners and the architects. If I am meeting with a developer, they may love it, but it is the leasing broker whom they give the budget to.”

A most common misperception about AR is that it is of interest only to the Millennial generation. Cordero says this is not the case. “The idea that only Millennials know how to navigate technology is false,” she said. “Both baby boomers and Gen X-ers have just as many smartphones. The main thing across all these technologies is around convenience and ease of use. When it is complicated or hard to understand or difficult to use, even Millennials aren’t going to use it. I think getting the biggest audience is really about making it super simple and straight forward.”

“It feels like a watershed moment to us, in that AR is coming into its own.”

The industry is on the precipice of the next wave, some say. “It feels like a watershed moment to us, in that AR is coming into its own,” said Ben Friedman, a partner at Imbibe, an Atlanta-based branding and technology firm that creates AR and VR tools for retail and mixed-used developers, including North American Properties and Columbia Development. “I think the numbers have supported that the business world in particular over the long term would support a larger market for augmented reality than [for] virtual reality.” 

Last year Friedman rolled out his latest VR technology at ICSC’s RECon, in Las Vegas, with an immersive virtual-reality walk-through of the Colony Square redevelopment, in Atlanta. The 50-year-old property was among the first commercial mixed-use environments in the U.S. Southeast. When North American Properties purchased it in 2014, the company wanted to alter the trajectory of that storied but aged asset.

Friedman built a detailed 3-D model of the 10-acre property to help share North American Properties’ vision with prospective tenants. “Being able to pitch a movie theater, for example, or a food hall, and not just have that single, inactive and unexciting still image but to enable them to see and walk around and experience the property to scale is a tremendous asset,” said Friedman.

Imbibe’s AR technology was optimized for Microsoft’s HoloLens, allowing a potential tenant to pull up to the project’s valet area, get out of the car, put the HoloLens on and walk through the property visualizing how it will look in the future.

Friedman says his firm is planning a major marketing initiative at this year’s RECon, in May, for Columbia Development’s $1 billion Fenton mixed-use project, in Cary, N.C. “We are going to be taking advantage of augmented reality, and we will be employing 800 square feet of their booth at RECon to [give] anyone who visits the opportunity to experience this new property before they have moved their first shovel of dirt.”

A number of firms are eager to break into the retail space, including Denver-based Walkthrough, which CEO Pascal Wagner says is looking to expand beyond the VR services it provides to multifamily clients. Another firm is San Francisco–based Multifold, which was formerly branded ShoppAR and provides web-based AR tools that enable the user to enter a mall and instantly see every promotional item, right on the smartphone.

In many ways, increased adoption seems inevitable. “Think about augmented reality as the next content format, the same way that audio got digitized in the 1980s and still photos and video got digitized in the 1990s,” said Jennifer Chen-Manwell, founder of Multifold. “We see augmented reality as the next content format.”

Others see it that same way. “Retail has no choice but to keep up with what is happening outside of retail and what the consumer’s expectations are,” said Coyne. “We are definitely going to see more innovation, and where these technologies enable a purchase, enable sales and enable customer loyalty, it is a worthy investment.”

By Ben Johnson

Contributor, Commerce + Communities Today

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