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Augmented Reality Is Changing How We Shop

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Augmented Reality Is Changing How We Shop

Consumer shopping habits and preferences are rapidly evolving—and it can be hard for e-commerce marketers to plan when they can’t anticipate the next major change. In a market defined by uncertainty, business intelligence has become essential to monitoring trends and making better business decisions. And right now, one of the key drivers to watch is the rise of augmented reality (AR)—and how it will influence consumer purchases.

Gone are the days of having to wait for an online order to arrive to see exactly how it will fit in your home or look on your face. AR, or augmented reality, is allowing e-commerce platforms to give their customers a more immersive shopping experience by showing how new furniture will look in a room, or how their new makeup can look once it’s applied. AR is gaining traction quickly: it was used by over 100 million shoppers in 2021, and it’s predicted to grow even more in years to come. By 2025, more than 75% of smartphone users will be frequent AR users. Right now, we’re in the early days, and the impact of a technology like this can be a game changer for e-commerce marketers looking to deliver immersive, engaging customer experiences.

How do you incorporate AR? What’s meaningful to your customers? What are your competitors doing? These are key questions to consider in shaping strategy, and it’s essential to leverage business intelligence for your planning and decision-making. Line Item can provide this insight into what is and what isn’t working for your business’s e-commerce; it can also help you monitor and evaluate emerging trends in your market so you can make more informed, strategic decisions. This includes information at the product attribute level as well as insight into your SEO and campaign performance and much more—all via a single, powerful platform purpose-built for CPG and e-commerce.


New technology shapes the shopper experience

How does AR work? AR takes the image captured on a device’s camera and imposes an image or effect over it. It’s a powerful tool to overcome one of the biggest friction points (and risks) of online shopping: the dreaded “not as described.” About 30% of all products bought online are returned (compared to an approximate 9% return rate for brick-and-mortar purchases), with 22% of those returns attributed to the product looking different than described. A customer’s ability to have greater confidence in a product before purchasing can help curb those return rates.

Brands like Ikea are utilizing AR to show shoppers what a product will look like in their homes. A shopper considering buying a new piece of furniture could use their phone’s camera to view the area where they plan to place the furniture, and the AR technology would place a 3D model of the furniture into the landscape, providing views from multiple angles.

AR, of course, is not limited to furniture. According to Shopify, Bumbleride, a stroller company, and Gunner Kennels have both been using AR to allow potential customers to see how much space the product will occupy in their home or on the sidewalk, and if their dog will fit in a specific crate. This allows shoppers to get a deeper feeling for how a product will look or function once they have it, giving them more purchase confidence. And it translates to better business performance: Bumbleride and Gunner Kennels reported 33% and 40% increases in order conversion rates, respectively.

AR can also work for CPG brands. Cosmetic heavyweight Sephora is implementing a “Virtual Artist” feature to layer the appearance of makeup over the face of a potential buyer (similar to a filter on social media apps). The buyer can sample different makeups quickly without ever having to go into a brick-and-mortar store. AR will give consumers new avenues to explore products—upping the ante for e-commerce brands. According to Shopify product lead Ryan Smith, AR functions in e-commerce “will be ubiquitous by 2023.”

Staying on top of trends

How could AR strengthen your e-commerce strategy or enhance customer experience? What competitors in your category are already implementing it? Staying on top of trends in a dynamic market with rapid shifts in consumer preferences is challenging; powerful business intelligence enabled by Line Item makes it easier.

AR isn’t the only trend to watch. Are there any new competitors out there, undercutting your pricing or appearing first in search results? What product attributes are driving value? Line Item provides better business intelligence to answer questions like these. Through its proprietary AI engine, which calculates attributes for style, form, packaging, flavor and much more, Line Item can help you analyze what’s really motivating preferences and purchases.

Line Item also helps to ensure accuracy and consistency in product descriptions and images, which can affect search engine rankings and page one results. Line Item can identify if your items are overpriced or if your promotions are working.

In a constantly evolving marketplace, understanding what is working for you—and your competitors—can help you make strategic changes and execute smarter strategies for more successful e-commerce. It all starts with better business intelligence. This makes Line Item your lifeline to more profitable ecommerce.

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Ironbridge Software was founded in 1989 by Mike Dickenson. Mike’s unparalleled expertise and passion for technology led him to create the first-ever analytical solution for the Consumer Packaged Goods Industry.

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American and Chinese Consumers are Shopping Like There’s No Trade War

What Trade War?

If shoppers are worried about the U.S.-China trade war, it’s not showing up yet in measures of their buying confidence or holiday retail sales.

We are more than a year into dueling tariffs between the United States and China, and we know that tariffs add costs to supply chains, but how much of those costs are passed on the consumer depends on decisions by manufacturers, buyers and retailers as well as the “import-intensity” of the products we buy.

So far, if prices have risen on consumer products, it’s not dampening American appetites to buy. And Chinese consumers don’t rely to a great degree on imports in general, so China’s retaliatory tariffs on U.S. imports don’t appear to be the biggest factor in their personal spending either.

Spending and the U.S. Economy

At the end of the third quarter, the Bureau of Economic Analysis reported that U.S. consumer spending was on track for $14.67 trillion this year, reaching an all-time high.

Personal expenditures make up 68 percent of the U.S. economy, and it’s consumer spending that’s keeping growth of our economy from slowing further. (By comparison, our “negative net exports” or total exports minus total imports, comprise five percent of U.S. GDP.)

Two-thirds of spending is on services such as housing and health care, which are largely impervious to the trade war. The remaining third is spent on non-durable goods such as clothing and groceries, and on durable goods such as cars and appliances.

Brimming with Confidence

The Conference Board’s Consumer Confidence Index is a monthly report on consumer attitudes and buying intentions. Despite analysts’ expectations that concerns related to trade disputes would cause U.S. consumers to become cautious, the index shows a trend of rising consumer confidence since 2009.

Breaking Records Online

Retail sales figures tell us whether that confidence is translating into spending. Indeed, American consumers are still filling their real and virtual shopping carts to the brim.

According to the National Retail Federation (NRF), more than 165 million people were expected to shop over the five-day Thanksgiving holiday weekend. Online sales for last holiday weekend are already being reported and appear to be breaking records.

Americans spent $7.4 billion online on Black Friday, up 19.6 percent from last year. We spent another $3.6 billion on Small Business Saturday, up 18 percent from last year. And while surfing from our desks at work, Americans spent $9.2 billon on Cyber Monday, up 16.9 percent from last year. More than half of Americans surveyed by NRF said they start their holiday shopping the first week of November. Online sales for November came in at a whopping $72.1 billion.

Chinese Consumers Outspent Us All

Cyber Monday is so successful in driving online sales in the United States that Canada, the UK and Germany have all adopted Cyber Monday to kick off their holiday shopping seasons. Australia launched “Click Frenzy” day. The Netherlands’ equivalent is linked to the December 5 Sinterklaas holiday.

But hands down, the world’s largest 24-hour online shopping day goes to China’s Singles Day held on November 11 annually. This year, Chinese online shoppers bought $38.3 billion on Singles Day alone. Think of it this way – that’s more than $1 billion every hour.

This is not a one-day phenomenon. If you were to overlay China’s consumer confidence index with that of the United States, they would look similar. Despite being slightly lower for China and with a dip in 2016 that we didn’t see in the United States, consumer confidence rose between 2014 and remained high in 2019, trade war notwithstanding. In mid-2019, retail spending in China surpassed retail spending in the United States for this first time.

Retail Spending in China Exceeds US

Beyond the Tariff Headlines

Financial analysts are watching China’s consumer spending carefully amidst the trade war. Many said this summer’s drop in car purchases was a harbinger that shoppers are growing wary, but the slowdown also coincided with the end of big discounts. Others say retail sales actually underestimate the strength of China’s overall consumer spending because those numbers offer just a partial picture of personal spending on goods and services, which include large expenditures on healthcare, education and leisure activities.

For this reason, some prominent Chinese investors are nonplussed by the Trump Administration’s tariffs. They look at a decline in certain manufacturing and exports as a structural shift in China’s economy – an “economic rebalancing” – that began long before the current trade war. In their view, household consumption will drive most of China’s future economic growth, and China’s consumer spending is not very dependent on imports.

According to World Bank data, consumer imports comprise just 13 percent of China’s overall imports. Most of the large multinational consumer goods companies now produce in China for the Chinese consumer. According to McKinsey analysis, across key consumer categories including personal digital devices and personal care products, Chinese brands have become credible competitors to foreign brands, acquiring greater market share – and shielding Chinese consumers from tariffs on U.S. imports.

Consumer Spending to Play Bigger Role in China’s Growth

Consumption is playing a much larger role in China’s economic growth than just a few years ago. In 2011, consumer spending accounted for less than 50 percent of China’s GDP growth. Last year, it accounted for 76 percent of GDP growth, outpacing both manufacturing investment and exports.

In fact, China’s total exports of goods and services as a percentage of GDP has dropped from a high of 36 percent in 2006 to 19.5 percent in 2018, with exports to the United States at just four percent.

That why China’s central bank is also monitoring consumer sentiment. In recently released results from its biennial survey of 18,600 residents in 31 provinces, nearly 80 percent of respondents expressed caution about spending and a preference for saving.

China’s politburo has directed the government to focus on turning up the tap of consumer spending by China’s growing urban middle class and to kick-start spending in rural areas. The government already cut personal income taxes and began offering subsidies for large ticket energy-saving home appliances and energy efficient vehicles. The government is expected to announce more measures in the coming months designed to goose household spending.

WB Chart Title China Exports as % of GDP

Business is Ill at Ease

Economists worry the trade war is causing a drag on economic growth, not just in the United States and China but globally. Businesses say the trade war with its escalating tariffs is a “wild card” in their planning. Uncertainty is causing them to hold back on capital expenditures.

It’s looking less likely the United States and China will agree to a “Phase 1” trade deal by the end of the year, but even if they do, the partial deal may not be enough to restore business confidence. If businesses continue to hold back on investments and reduce inventories, it could start to negatively impact jobs and incomes. This may be particularly true in China where a larger portion of the population is dependent on manufacturing jobs.

Consumers Keep Calm and Shop On

Meanwhile, holiday shopping is in full swing. Some holiday merchandise is already subject to tariffs on Chinese imports, but the tariffs the United States plans to impose on December 15 will affect many more consumer products. If imposed, buyers and retailers will have to decide how much cost to pass on to their suppliers and consumers in the coming year.

For now, shoppers are keeping calm and shopping on with resilience. But as a last line of defense against slowing growth, their confidence can be fragile. Where the trade war is concerned, buyer beware.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.