Alibaba wants the Chinese to shop at Macy’s New York without leaving the comforts of their homes in Shenzhen. Last week, on Chinese National Ecommerce Day, the company launched Buy+, one of the world’s first virtual reality (VR) shopping experience.[i] Buy+ is a meta mall which can be accessed through Alibaba’s Taobao app. Using a VR viewer, a customer can experience shopping in New York or Tokyo and even have virtual models showcase apparel and accessories on a catwalk.[ii] The customer can view product details by staring at an item and authenticate payments with head movements, touch or by staring at a point on virtual display for longer than 1.5 seconds.[iii]
Historically, Alibaba facilitates value creation by creating a synergistic IT platform that connects consumers, merchants and service providers, increases transaction and marketing efficiency and expands the market base.[iv] Buy+ would further complement Alibaba’s business model in several ways.
To customers, Buy+ offers an enhanced shopping experience with more speed and convenience than those of typical online shopping. Buy+ restores the recreational aspect of shopping that is arguably absent in online shopping experience. Instead of viewing a static online gallery, shoppers can become virtual tourists as they trek shopping arcades in cities like New York, Tokyo and Sydney.[v] The immersive experience is not only valuable on its own right, it can also be more valuable than traditional brick-and-mortar shopping since shoppers can easily access product details and make payment in the blink of an eye.
To retailers, Buy+ helps generate traffic and increase product impressions. The novelty of virtual reality shopping would attract customers to browse at shops who are already on Buy+. Additionally, because Buy+ shoppers have to move through a virtual space, retailers have more opportunity to cross-sell and stimulate impulse purchases compared to in an online shop where customers are accustomed to being able to search for the categories that they want. Retailers will also be able to take some of the appeals of their offline stores online. If before an Alibaba retailer can only rely on ads, search engine optimization or discounts to attract buyers, retailers can now use the visual appeal of their virtual shop as another marketing lever.
The ability to create a meta space is especially valuable for non-Chinese retailers to access the Chinese market. Without building a department store in China, a retailer like Macy’s can serve Alibaba’s 437 million active users through Buy+ with a virtual shop based on one of their offline shops.
Moving forward, Alibaba could consider a few things to further enhance its value proposition to customers and retailers:
- Enable retailers to create a virtual store that is not based on an actual brick-and-mortar store: If shoppers are conditioned to shop in virtual stores, retailers can in the long-run reduce their brick-and-mortar presence and serve customers through a single virtual store. The cost-to-serve will presumably be lower. Since virtual shops do not have the physical constraints of a brick-and-mortar shop, retailers have the freedom to design their optimal space to showcase and sell their goods.
- Incorporate augmented reality to personalize retail experience: Alibaba can further enhance customer experience by incorporating augmented reality. Augmented reality superimposes computer-generated elements over the physical world and would allow a customer, for example, to try on a virtual dress or test out virtual couch for fit in her apartment. Fashion retailers like Rebecca Minkoff and Ralph Lauren have started allowing customers to try-on clothes virtually.[vi][vii] Similarly, IKEA has launched augmented reality app using which customers can see how an IKEA furniture would fit into their homes.[viii]
- Increase access to VR technology: The growth and success of Buy+ hinges upon a high penetration of VR technology in China. While Alibaba distributes cardboard VR headsets that only cost 15 cents each, the headsets have limited capabilities and might dissuade consumers from trying out more advanced iterations later.[ix] An Oculus Rift VR gear costs $798 as of today.[x] Given the price tag, it’s doubtful that the technology can be widely and quickly adopted in China where the average monthly salary stands at $922.[xi] Alibaba would need to either work with manufacturers to develop lower-cost VR gears or develop offline spaces that customers can visit and shop using Alibaba’s VR gears.
It is important to note that the cost of creating a 3D version of a single product is expensive – at about $50.[xii] Zhuang Zhuoran, the mobile technology director of Alibaba, noted Alibaba is not currently focused on profitability: “The goal for now is to “enhance [the] online shopping experience, making it more fun, more immersive and more experiential.”[xiii] While there are only few items available to be purchased on Buy+ at this time, it’s hard to argue against the technology’s potential to disrupt the e-commerce industry in China and beyond.
[i] “Alibaba Offers Virtual-Reality Shopping on Singles’ Day,” Wall Street Journal, November 10, 2016, http://www.wsj.com/video/alibaba-offers-virtual-reality-shopping-on-singles-day/8D484747-9555-4AFA-810B-596E2D684587.html, accessed November 2016.
[ii] Stefan Innerhofer, “Alibaba Wants You to Shop in Virtual Reality,” VR Scout, August 28, 2016, http://vrscout.com/news/virtual-reality-shopping-alibaba-buy/, accessed November 2016.
[iii] Reuters, “Alibaba’s New Payments Concept Lets Virtual Reality Shoppers Pay by Nodding,” Fortune, October 12, 2016, http://fortune.com/2016/10/12/alibaba-virtual-reality-payments/, accessed November 2016.
[iv] Wu, J., Li, Q. & Kee Wei, K. 2016, “Alibaba’s IT platform and electronic commerce synergy in driving “Singles’ Day””, Journal of Organizational Computing and Electronic Commerce, vol. 26, no. 3, pp. 193-202.
[v] “Alibaba Offers Virtual-Reality Shopping on Singles’ Day,” Wall Street Journal, November 10, 2016, http://www.wsj.com/video/alibaba-offers-virtual-reality-shopping-on-singles-day/8D484747-9555-4AFA-810B-596E2D684587.html, accessed November 2016.
[vi] Lydia Dishman, “Inside LA’s new, futuristic store — magic mirrors included,” Fortune, October 8, 2015, http://fortune.com/2015/10/08/rebecca-minkoff-technology/,
[vii] Rachel Strugatz, “Ralph Lauren, Oak Labs Debut Interactive Fitting Rooms,” WWD, November 18, 2015, http://wwd.com/business-news/retail/ralph-lauren-oak-labs-connected-fitting-rooms-10280895/ , accessed November 2016.
[xiii] Hunter Skipworth, “Ikea app can virtually place furniture in your living room,” Digital Spy, August 5, 2013, http://www.digitalspy.com/tech/apps/news/a504162/ikea-app-can-virtually-place-furniture-in-your-living-room/, accessed November 2016.
[ix] Helen Wang, “From Virtual Reality To Personalized Experiences: Alibaba Is Bringing Us The Future Of Retail This Singles Day,” Forbes, November 6, 2016, http://www.forbes.com/sites/helenwang/2016/11/06/how-alibaba-will-use-the-worlds-biggest-shopping-day-to-transform-retail/#d8f9db87b434, accessed November 2016.
[x] Oculus Rift, https://www.oculus.com/, accessed November 2016.
[xi] Wu Yan, “Average salary in major Chinese cities is $900 and growing,” China Daily, January 21, 2016, http://www.chinadaily.com.cn/china/2016-01/21/content_23183484.htm, accessed November 2016.
[xii] Alice Hines, “Virtual Retail-ity: The Strange Lonely World of Virtual Shopping in China”, Vice, November 11, 2016, https://news.vice.com/story/alibaba-vr-shopping-buy-singles-day, accessed November 2016.
Featured image is sourced from: Stefan Innerhofer, “Alibaba Wants You to Shop in Virtual Reality,” VR Scout, August 28, 2016, http://vrscout.com/news/virtual-reality-shopping-alibaba-buy/, accessed November 2016.