Virtual Reality in Retail Market

Market Overview

The global virtual reality retail market size was valued at USD 2.5 billion in 2023 and is projected to reach USD 18.3 billion by 2032, registering a CAGR of 24.8% during the forecast period (2024-2032). The rising adoption of virtual reality (VR) headsets in the retail industry is transforming how customers purchase, leading to significant growth in the market during the projected timeframe.

Virtual reality (VR) in retail refers to integrating immersive digital technologies into traditional brick-and-mortar or online retail environments to enhance the customer's purchasing experience. Customers can engage with products in a virtual environment using virtual reality (VR) technology and software, generating simulated worlds replicating real-life purchasing situations.

The demand for a personalized purchasing experience is driving the market expansion. Over the projected time, there is an expected demand for more user participation in the retail sector, which will likely create potential market growth opportunities.

Highlights

• Software generates the highest revenue share based on components. 
• Head-mounted devices account for the largest market share by device.
• Planning and Designing generates the highest revenue share based on application.
• Food and beverage accounts for the largest vertical market share.

Market Dynamics

Global Virtual Reality in Retail Market Drivers

Integration of Artificial Intelligence (AI), machine learning (ML), and the Internet of Things (IoT) 

The incorporation and assimilation of Artificial Intelligence (AI), machine learning (ML), and the Internet of Things (IoT) into virtual reality are expected to increase the demand for virtual reality in the retail business. In 2023, Procter & Gamble Company plans to introduce a supply chain platform for its retail partners in North America. The company utilizes virtual reality technologies, proprietary algorithms, and artificial intelligence to enhance its business operations and create more accurate insights, stimulating market growth.

Increasing Penetration of Smartphones 

The utilization of smartphones has shown a substantial increase in recent years. According to the International Telecommunication Union (ITU), it is predicted that by February 2021, around 6.5 billion out of the total global population of 7 billion will possess a mobile phone. Consequently, the increasing prevalence of smartphones has led to a higher acceptance of virtual reality (VR) technology in the retail industry, resulting in market expansion. Smartphone usage is increasing worldwide, and internet usage has become increasingly widespread. Implementing 4G and 5G communication technologies will benefit the e-commerce industry. The phenomenon of online buying has experienced a significant surge in recent years. This will ultimately provide substantial opportunities for the market.

Furthermore, technological improvements have enabled people to see virtual visuals within real-world environments, and the usage of smartphones is increasing. Wikitude, a company that offers mobile augmented reality technology, forecasts that by May 2021, 32% of customers will regularly utilize augmented reality, and 73% of smartphone AR users will express high satisfaction with their experiences. The facts on augmented reality in the retail sector demonstrate this technology's widespread use and rapid expansion in the industry.

In addition, functionalities such as spatial visualization and virtual tours, which allow customers to digitally explore a business or property before visiting it physically, contribute to the increasing adoption of smartphones for augmented reality in the retail industry. In addition, augmented reality shopping apps that match colors are commonly utilized to blend colors and create the optimal color scheme for a room or an outfit.

Global Virtual Reality in Retail Market Restraint

High Initial Set-up Costs

The significant upfront expenses have hindered the adoption of virtual reality (VR) technology in the retail industry. These expenditures encompass not just the acquisition of VR equipment such as headsets and sensors but also the expenditure on software development, integration with current systems, and staff training. When entering the market, these initial costs present a substantial obstacle for retailers and small and medium-sized firms (SMEs).

In addition, the intricacy of adopting virtual reality solutions worsens the budgetary load. Adapting and customizing virtual reality (VR) experiences to suit unique retail requirements necessitates more resources and specialized knowledge, which increases the original expenditure even more. In addition, the swift progress of technological improvements in virtual reality (VR) hardware and software exacerbates the problem, as merchants must consistently upgrade their systems to stay competitive and offer immersive experiences that match the ever-changing demands of consumers.

Moreover, the lack of predictable return on investment (ROI) linked to implementing virtual reality (VR) in the retail sector discourages numerous enterprises from investing significant cash in such ventures. Although virtual reality (VR) can improve customer engagement, boost sales, and set businesses apart, it is challenging to measure these advantages beforehand. This makes it hard for shops to justify the significant initial expenses.

To summarize, although virtual reality shows potential for transforming the retail sector, the considerable upfront expenses continue to hinder its broad implementation, especially for small and medium-sized enterprises (SMEs). 

Global Virtual Reality in Retail Market Opportunity

Personalized Shopping Experience 

The demand for a customized shopping experience is anticipated to propel the expansion of virtual reality (VR) in the retail industry. Users can obtain a comprehensive perspective of an item from all angles, without physically holding it, and personalize it according to their requirements. This experience cannot be replicated in a physical store. Customers have increased satisfaction and are three times more inclined to purchase due to their ability to customize their products (resulting in an approximate 10 percent increase in spending).

Similarly, virtual reality shopping offers a simulated experience that allows users to try various hair colors, makeup, outfits, and other products without cost. Providing customers with a personalized and Immersive virtual reality shopping experience, regardless of location, reduces the likelihood of them returning things. This enhances the competitiveness of retailers and enables them to generate more profits. This element is anticipated to stimulate the expansion of VR adoption in retail stores and the overall VR market.

Additionally, customer involvement is the central focus of marketing. Retailers can utilize virtual reality to generate three-dimensional content. These advertisements garner more significant attention than a typical banner, potentially increasing sales. By integrating virtual reality with social media in the retail sector, organizations have the potential to achieve great success. As a consequence of this, customers exhibit a greater inclination to divulge their encounters. In addition, virtual reality headsets gather user data to assist in targeted marketing on social media platforms. This factor is anticipated to bolster the expansion of virtual reality (VR) in the retail business.

Regional Analysis

North America Dominates the Global Market

The global virtual reality in retail market analysis is conducted across North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America is the most significant global virtual reality in retail market shareholder and is estimated to grow at a CAGR of 24.7% over the forecast period. This can be linked to the region's digitization and advancements in virtual reality technology. Moreover, the regional market growth is anticipated to be driven by the combination of high discretionary income levels and declining prices of headsets equipped with displays and processors. Moreover, the increasing need for enhanced customer purchasing experience and the escalating competition among shops in the area are anticipated to expand virtual reality in the retail market further.

Europe is anticipated to exhibit a CAGR of 25.2% over the forecast period. The market expansion is credited to several prominent fashion companies utilizing virtual reality to improve the client experience and bolster brand visibility. Furthermore, the increasing inclination towards online shopping, which offers users tailored shopping experiences and a broad category of products, is anticipated to drive the growth of virtual reality in the retail market in the region.

Asia-Pacific holds a significant market share. Several main forces are propelling the virtual reality (VR) market in retail across the Asia-Pacific region. Initially, consumers' increasing desire for immersive shopping experiences promotes businesses' acceptance of virtual reality (VR) technologies. Furthermore, virtual reality (VR) technology and software improvements increase the feasibility and affordability of integrating VR solutions for shops. Moreover, the growing rivalry among retailers is compelling them to distinguish themselves by utilizing cutting-edge technologies such as virtual reality (VR), further boosting the demand for VR in the retail sector across the Asia-Pacific region.

Segmental Analysis

The global virtual reality retail market is segmented based on components, devices, verticals, and applications. 

The market is segmented into Hardware, Software, and Services based on components. 

The software segment dominated in 2023 due to continuous improvements and technological advancements in virtual reality in the retail market; virtual reality software enables clients to visually see products in a realistic and immersive manner before making a purchase decision. The software incorporates advanced 3D modeling and rendering features, allowing shops to present the goods from several perspectives, displaying alternative sizes, colors, and configurations. As a result, this is likely to increase the category's growth during the forecast period.

The hardware segment is the fastest growing due to the significant emphasis on improving headsets to boost display quality, comfort, and overall performance. In addition, eye-tracking technology is included to collect vital consumer information, while gesture and motion monitoring improves user interaction. Furthermore, there is a need for VR solutions that can be easily adjusted in size and cost to meet the requirements of many shops and customers. This leads to the development of new and improved hardware in the virtual reality retail sector.

Based on the device, the market is segmented into Head Mounted and Gesture Tracking Devices.

The Head-mounted Devices (HMDs) segment dominated in 2023. The growing demand for VR headsets, including HTC Vive, Oculus Rift, and PlayStation VR, among consumers is fueling the expansion of the HMDs industry. These headsets offer captivating experiences and are extensively used for retail purposes, such as virtual product demos, virtual try-ons, and virtual store visits. With the continuous progress of technology and the decreasing prices, there is an expected increase in the demand for Head-Mounted Displays (HMDs). This will solidify the position of HMDs as a significant source of revenue in the virtual reality retail sector.

The gesture tracking devices segment is the fastest growing. The growing utilization of gesture-tracking technology, such as hand tracking and motion sensors, is fueling the expansion of this market. These gadgets facilitate users' interaction with virtual surroundings and manipulation of virtual objects using intuitive hand movements and gestures. Gesture tracking devices in the retail industry provide a smooth and intuitive method for customers to traverse virtual stores, choose items, and interact with virtual content. This is anticipated to contribute to the growth of the gesture-tracking device market in the projected timeframe.

Based on vertical, the market is segmented into Food and Beverage, Home Products, Clothing, and Consumer Electronics. 

The food and beverage dominated in 2023, primarily due to the rise of virtual dining experiences. Customers can fully engage in virtual restaurant environments, examining menus and communicating with virtual waitstaff. This trend provides customers with a distinctive and captivating way to preview and experience dining alternatives before making reservations or ordering meals. This enhances the whole eating experience and contributes to the expansion of virtual reality (VR) in the food and beverage retail business.

The clothes segment is the fastest growing. Virtual reality is transforming the garment industry by providing cutting-edge technologies for customers to engage with their chosen products, allowing brands to display their products, and enhancing the shopping experience. Moreover, a growing demand exists for integrating virtual reality (VR) technology in retail. This is because it significantly improves client interaction on websites, especially for specific products. The heightened customer engagement directly influences purchasing decisions, stimulating market expansion and further propelling virtual reality (VR) use in the retail industry. 

The market is segmented based on application into Information Systems, Advertising and Marketing, Try-on Solutions, and Planning and Designing.

The planning and designing segment dominated in 2023. The qualities offered by virtual reality for the retail business include store design and layout, store prototype design, and visual merchandising, among others. Furthermore, VR technology aids merchants in visualizing and constructing virtual shop layouts and designs before their implementation in physical environments. During the projection period, retailers can gain an advantage by utilizing virtual reality to enhance shelving arrangements, product positioning, and design adjustments, driving market growth.

Advertising and marketing are the fastest growing due to the implementation of virtual reality in retail, which enables brand differentiation, increased market presence, more excellent product presentation, targeted campaigns, and essential insights into enterprises. 

Recent Developments

• February 2024 - Apple launched its inaugural mixed-reality headset, the Vision Pro, and a collection of 600 new applications and games. Major retailers ventured into augmented reality (AR) and virtual reality (VR) to provide consumers with more interactive e-commerce experiences.
• January 2024 - Samsung Electronics America, Inc. presented its advanced range of display technologies and partner solutions, driving the future of retail stores at NRF 2024: Retail's Big Show (Booth #3657). Using Samsung visual displays, prominent retailers and restaurant organizations, including Chevron, Good American, Hy-Vee RedMedia, White Castle, and Buona Beef, implement linked retail experiences and provide their customers with user-friendly self-service choices.