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<137>BARCELONA, SPAIN - FEBRUARY 21:<252><137>Samsung Gear virtual reality devices are seen on seats ahead of the annual Mobile World Congress last month in Barcelona, Spain.<137>presentation of the new Samsung Galaxy S7 and Samsung Galaxy S7 edge on February 21, 2016 in Barcelona, Spain. The annual Mobile World Congress will start tomorrow February 22 hosting some of the world's largst communication companies, with many unveiling their last phones and gadgets. (Photo by David Ramos/Getty Images)<252><137> (David Ramos/Getty Images)
<137>BARCELONA, SPAIN - FEBRUARY 21:<252><137>Samsung Gear virtual reality devices are seen on seats ahead of the annual Mobile World Congress last month in Barcelona, Spain.<137>presentation of the new Samsung Galaxy S7 and Samsung Galaxy S7 edge on February 21, 2016 in Barcelona, Spain. The annual Mobile World Congress will start tomorrow February 22 hosting some of the world's largst communication companies, with many unveiling their last phones and gadgets. (Photo by David Ramos/Getty Images)<252><137> (David Ramos/Getty Images)

QASIM MOHAMMAD

Booming virtual reality sector poised to make its mark on retail branding Add to ...

Qasim Mohammad is a Toronto-based venture capitalist and member of the investment team at OMERS Ventures

Retail marketers who are eager to invent ways to engage with customers digitally should closely study augmented- and virtual-reality technology. AR/VR represents a powerful new technological medium that allows retailers and brands to provide consumers with immersive and experiential marketing experiences at scale, while creating innovative digital paths to product discovery that are high on emotional impact.

AR/VR is arguably the hottest emerging category within the tech sector. It gained significant attention when social media heavyweight Facebook Inc. purchased Silicon Valley-based Oculus VR for $2-billion (U.S.) in 2014. The transaction was important because it foreshadowed the broad commercial appeal of AR/VR. Facebook is the ultimate consumer technology business, and is well-suited to bring AR/VR to the masses.

In addition to Oculus VR, which officially starts shipping its flagship Rift headset this spring, there are a number of other exciting startups that are driving AR/VR forward. They are also well capitalized and equipped with the technological prowess and marketing savvy necessary to collectively build a massive market. How well capitalized, exactly? According to CB Insights, AR/VR startups (excluding Oculus VR) have raised more than $1-billion in private venture funding since the beginning of 2014.

With the AR/VR market projected to be worth many billions of dollars by 2020 (from both hardware and software sales), it is important for retailers and brands to take notice and be prepared to communicate their story with customers through this new medium – through a digital and/or experiential marketing campaign. As such, it is worth taking a moment to understand the key components that shape the industry, and who to connect with to develop a branded AR/VR experience for a target consumer base.

For starters, AR/VR represents two separate, albeit complementary, channels for real-world modification. As the name suggests, augmented reality consists of augmenting a certain part of the physical environment around us. Virtual reality entails creating an entirely artificial and immersive virtual world that lets us experience a foreign location or event.

The AR/VR industry landscape can be further compartmentalized into three main subcategories: hardware manufacturers, software back-end enablers, and content creation and distribution service providers. Companies belonging to the hardware manufacturing subcategory are developing the infrastructure to produce and display AR/VR experiences. The main players include manufacturers of scanners and cameras, headmount displays, motion trackers, speakers, and tactile controllers. These physical devices are necessary to make an AR/VR experience come to life. Examples of businesses operating in this subcategory include Oculus VR, Samsung, Google, Avegant, META, Leap Motion, and Bubl.

Companies belonging to the software back-end enabler subcategory are building programs that act as the main rendering frameworks for such AR/VR modalities as graphics, audio and haptic signals, or that enable 3-D mapping and real-world recognition (objects, faces, places, voices, etc.). These companies can be thought of as bridging the gap between production and delivery. Examples of businesses operating in this subcategory include Movidius, Blippar, Eyefluence, and Beyond Verbal.

Finally, companies belonging to the content creation and distribution service provider category include a diverse set of production houses, creative agencies, streaming platforms, app stores, and much more. They are best equipped to formally introduce AR/VR to brands and retailers, as they are designed to apply existing AR/VR technology in a variety of commercial, consumer-facing contexts. Examples of businesses operating in this subcategory include NextVR, Wevr, Immersive Media, Felix & Paul, and Condition One. It is in this domain of the AR/VR industry that retail marketers should begin to build their relationships.

Suffice it to say, some companies may span across the hardware, software, and content creation and distribution categories depending on their horizontal or vertical integration business strategy.

With so much happening in AR/VR, it’s no surprise that major retailers have already experimented with this new medium to enhance brand awareness, and bolster their sales and marketing efforts. Topshop and Tommy Hilfiger have previously given customers specially commissioned VR headsets within a retail setting to provide a 360-degree fashion show experience. As this example suggests and as runway shows become more consumer-centric, the most promising application of AR/VR in retail is currently within the context of original branded content. Enhancing that content to be AR/VR compatible is a good first step for any fashion brand to see how the technology works, and test its efficacy as a digital and/or experiential marketing tool.

As hardware sales grow and AR/VR technology becomes more widely available, the uses for brands and retailers will continue to expand into areas such as a-commerce or v-commerce – short for augmented or virtual commerce.

Skeptics of AR/VR often reference the failure of Google Glass. Indeed, Google Glass was an unsuccessful attempt at augmenting reality, and Google has formally retired the project. It was a commendable initial effort, but due to factors such as high cost and a non-intuitive user interface, the project did not take off as expected.

As in most instances, market timing had a lot to do with contributing to these factors. Looking on the bright side, though, the current crop of companies working hard to commercialize AR/VR are equipped with key insights from Google’s failed attempt. That should prove to be worth something as the industry matures.

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