Augmented Reality in Retail: How Retailers are Using AR for Better Shopping Experiences

augmented reality retail

As digitally native shoppers start to take over the marketplace, retailers are turning to emerging technologies like augmented reality (AR) to enrich the relationships between consumers and brands. 

Consider these facts:  

  • 66% of consumers are interested in using AR for help when making purchasing decisions.
  • By 2025, nearly 75% of the global population and almost all smartphone users will be frequent AR users.
  • According to a Nielsen global survey from 2019, consumers listed augmented and virtual reality as the top technologies they’re seeking to assist them in their daily lives.  

By and large, many still view augmented reality as a novelty. The truth is that AR has already proven its value and should be acknowledged as far more than a toy—especially by retailers.

What is augmented reality, and how does it work? 

Augmented reality is a technology that enhances, or augments, the real world by adding real-time digital content to real-life objects.

When a user points their camera-equipped device at an object, built-in augmented reality software uses a combination of depth tracking and computer vision to analyze the video stream, recognize the object, and overlay digital content on top of it.

As users shift their camera, the size and orientation of the AR display move automatically with it, creating an exciting and immersive digital experience. 

While augmented reality has been around for years (think Snapchat’s dog filter and Pokémon GO), it has recently become a powerful lever for both brick-and-mortar businesses and direct-to-consumer brands.

augmented reality retail pokemon go

By bridging the physical and digital worlds, retailers are thoughtfully elevating customer experiences and unlocking new ways for consumers to interact with products. 

Benefits of augmented reality in retail 

Customer engagement and experiential retail 

As retailers shift toward an emphasis on in-person experiences, many brands are leveraging augmented reality to create immersive shopping experiences that drive engagement, increase customer education, and further curiosity among shoppers. 

In its first in-store augmented reality experience, Starbucks brought customers along on the journey of a coffee bean: watching an animated version of newly roasted beans dropping into a cask and providing more information about how a bean turns into the Starbucks coffee customers know and love. 

augmented reality retail starbucks ar

“It’s like Alice in Wonderland meets Willy Wonka,” said Emily Chang, senior vice president and chief marketing officer for Starbucks, China. “It’s one thing to imagine a fully integrated in-store and digital experience, which brings together the impressive scale of the Shanghai Roastery with the highest quality small-lot coffee beans. It’s quite another to watch the AR experience get built, and come to life.” 

Sales and conversion lifts

Whether through in-store displays and activations, virtual try-on experiences, or virtual navigation, augmented reality can significantly impact both in-store and online conversion rates and make a meaningful difference in your bottom line. 

According to Shopify internal data, merchants who add 3D content to their stores see a 94% conversion lift, on average 


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Contactless experiences 

As ecommerce evolves and consumers become more comfortable shopping online, we will see a lift in contactless transactions.

In many ways, augmented reality can replace the need to physically interact with a product. Instead, users can save time, effort, and even money by virtually evaluating the photo-realistic representations and viewing the product from different angles.

Accelerated by the pandemic, we have already begun to see innovative ways to use augmented reality to improve contactless transactions both in-store and online.  

Sharable and trackable content

Not only are AR-powered filters, displays, and applications fun to interact with, but they also serve as powerful organic marketing tools. Take Ulta Beauty’s filters on Snapchat, for example. In January 2022, Ulta released shoppable AR filters on Snapchat, allowing users to swipe through and take photos with virtual makeup looks.

These photos can then be shared with friends on Snapchat and other social media platforms. Furthermore, if shoppers are happy with the way they look, all products can be purchased directly in-app. 

augmented reality retail ulta

In addition to generating brand awareness, these filters are an important tool for educating customers, driving revenue, and gaining important customer insights. Along with each filter, Ulta provides SKU-specific product details, and updates prices and available colors in real-time. 

“Gen Z is looking for different ways to engage and interact with the products and brands that they care about,” said Rajni Jacques, Global Head of Fashion and Beauty Partnerships at Snapchat in an interview with Glossy. According to data from the platform, users engage with its AR features more than six billion times a day. Snapchat also states that 93% of its users are interested in using AR for shopping.  

Use cases of augmented reality in retail  

Virtual shopping

Widely popularized among teens on platforms like Snapchat and Instagram, augmented reality enables consumers to overlay digital clothing, images, and accessories directly onto their bodies in real-time—otherwise known as virtual shopping.

Over the past few years, AR-powered virtual try-on experiences have been a big win for retailers like Ray-Ban, Nike, Kendra Scott, and most recently, Amazon.

In an effort to introduce retailers of all sizes to the potential of augmented reality, Snapchat recently announced the release of free access to its AR shopping technology

Companies like Apple and IKEA have also used augmented reality to test out how their products fit directly in shoppers’ homes. From there, users have the ability to purchase these items online or in-app.

With Shopify AR, store owners can upload 3D models and link them to products to provide customers with shoppable AR experiences. 

augmented reality retail

Virtual navigation

AR navigation systems can guide shoppers through brick-and-mortar retail environments, while also providing additional information about physical products directly on a user’s smartphone.

Now, shoppers can easily navigate even the largest malls and department stores to find the items they desire.

augmented reality retail

In-store displays 

The average shopper makes three unplanned purchases in four out of 10 stores they visit. With this in mind, augmented reality windows and digital in-store displays are one of the best ways to engage prospective shoppers and drive brand awareness. Most importantly, these solve an age-old problem of most OOH campaigns: the lack of ability to measure effectiveness. 

In addition to giving customers exciting new ways to interact with advertisements, these augmented reality displays are able to track and capture real-time analytic data. And unlike billboards or bus advertisements, which are static, AR displays are dynamic and can be updated to iterate based on data collection over time. 

PacSun recently rolled out an AR-centered campaign with Emma Chamberlain as part of its recent spring-summer ’22 drop. At the forefront of the campaign featured a window-shattering, wave-crashing AR storefront video display at its flagship store in Soho, New York. 

Humans have a subconscious attraction to striking visuals. Window displays not only grab their attention, but help them envision how products will look on them or in their homes. Said Jose Monsivais, Art Director and Visual Merchandiser for DiMarco, in a previous discussion with Shopify: “These displays inspire would-be customers and make it easier to buy once they are in-store.”

Virtual fitting rooms 

Similar to mobile AR try-on experiences, virtual fitting rooms allow shoppers to try on items without physically touching them. They also allow retailers to offer items that they may not currently have in stock, and then ship these products directly to shoppers’ doors. A fairly new addition to most stores, the global virtual fitting room market is predicted to grow from $3 million in 2019 to $6.5 million by 2025

Retailers like Ralph Lauren, Adidas, Nordstrom, and Macy’s have all already added virtual fitting rooms to their most popular physical stores, giving customers new shopping options while increasing conversion and reducing returns in the process.

Over the next five years, it is largely expected that augmented reality will go from  nice-to-have to a retail essential, especially with the advancement of high-fidelity virtual try-on. As more shoppers become enamored with AR and understand its true power, more retailers will be looking to incorporate the technology into both new and existing strategies. 

But while augmented reality is fun and exciting, it still must have a true purpose, says Ara Parikh, Product Marketing Manager at 360/VR/AR advertising agency OmniVert. 

“Make sure that the AR experience is not solely entertainment-driven but has some form of utility and is providing real value,” she says. “You’re competing with content that’s ubiquitous—you can’t just use AR for the sake of it. You really need to consider the value it provides to your customers.”


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