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Augmented Reality in Retail and its Impact on Sales

Augmented Reality in Retail and its Impact on Sales

Yong-Chin Tan and Sandeep R. Chandukala

JM Insights in the Classroom

Teaching Insights

Insight: Findings from our research provide preliminary evidence that AR usage has a positive impact on product sales. The overall impact appears to be small, but certain products are more likely to benefit from the technology than others. In particular, the impact of AR is stronger for brands that are less popular and products with narrower appeal, suggesting that AR could level the playing field for niche brands or products at the long tail of the sales distribution. The increase in sales is also greater for products that are more expensive, indicating that AR could increase overall revenues for retailers. Additionally, customers who are new to the online channel or product category are more likely to purchase after using AR, suggesting that AR has the potential to promote online channel adoption and category expansion. These findings provide converging evidence that AR is most effective when product-related uncertainty is high, implying that uncertainty reduction could be a possible mechanism for AR to improve sales.

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Related Marketing Courses: ​
​​​​Classroom Code(s): Digital Marketing; Principles of Marketing, Core Marketing, Intro to Marketing Management; Retail Marketing

Full Citation: ​
Complete citation: Tan, Yong-Chin, Sandeep R. Chandukala, Srinivas K. Reddy (2021), “Augmented Reality in Retail and its Impact on Sales,” Journal of Marketing.

Article Abstract
Abstract: The rise of Augmented Reality (AR) technology presents marketers with promising opportunities to engage customers and transform their brand experience. While firms are keen to invest in AR, research documenting its tangible impact in real-world contexts is sparse. In this article, the authors outline four broad uses of the technology in retail settings. Next, they focus specifically on the use of AR to facilitate product evaluation prior to purchase, and empirically investigate its impact on sales in online retail. Using data obtained from an international cosmetics retailer, they find that AR usage on the retailer’s mobile app is associated with higher sales for brands that are less popular, products with narrower appeal, and products that are more expensive. In addition, the effect of AR is stronger for customers who are new to the online channel or product category, suggesting that the sales increase is coming from online channel adoption and category expansion. These findings provide converging evidence that AR is most effective when product-related uncertainty is high, demonstrating the technology’s potential to increase sales by reducing uncertainty and instilling purchase confidence. To encourage more impactful research in this area, the authors conclude with a research agenda for AR in marketing.

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Special thanks to Demi Oba and Holly Howe, Ph.D. candidates at Duke University, for their support in working with authors on submissions to this program.

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Yong-Chin Tan is Assistant Professor of Marketing, College of Business, City University of Hong Kong, Hong Kong.

Sandeep R. Chandukala is Associate Professor of Marketing, Lee Kong Chian School of Business, Singapore Management University, Singapore.