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Recently in the news, Starbucks opened a new Roastery outlet on Nanjing Road in Shanghai last week begging the question, so what?

There’s nothing surprising about a new Starbucks in China, except this is now the world’s largest one at 30,000 sqm, twice the size of its counterparts in the US and will be the first-ever to incorporate in-store augmented reality (AR), thanks to China’s most influential internet company – Alibaba.

What can consumers do in this store powered by Alibaba’s technology and Mobile Taobao app?

  • Access a detailed map of the floors and menu with Alibaba’s location-based technology
  • Save favorite Starbucks products to their Mobile Taobao account
  • Scan key features around the Roastery to get information on coffee bars, brewing methods via animations
  • Earn a customized photo filter for sharing on social media
  • Ultimately, appeal to the digitally savvy Chinese audience

Sure, China is an attractive market to invest in but what is Starbucks planning with its“most ambitious project ever”?

An augmented reality app is used in the new Starbucks Roastery in Shanghai, China. Photographed on Friday, December 1, 2017. (Joshua Trujillo, Starbucks)

Slow Growth Around the World

Starbucks second quarterly earnings reported $5.29 billion, short $120 million of the expected $5.41 billion. While the coffee giant has found great success in its 46 years because of its consistent and convenient services and products, the company has felt the squeeze of rising competition from convenience stores and fast-food chains like McDonalds aggressively improving the quality and pricing of its beverages and menu.

And so, to capitalize on a blue ocean, the company decided to focus on a region where coffee culture is only emerging

Revenue from Asia Pacific makes up almost 15% of Starbucks’ annual revenue, a 5.5% increase from five years ago.

It’s obvious to us that the holding power of China for Starbucks is going to be much more significant than the holding power of the US,” — Starbucks’ founder and Chairman Howard Schultz.

As the Chinese economy grows, Starbucks’ success does as well in a country where disposable incomes increase and the younger generation is attracted to quality-driven and unique brands that speak to who they are.

“For coffee, there’s a certain kind of ‘in-the-know’ from consumers who seek out these good boutique shops,” said Jack Chuang, partner at OC&C Strategy Consultants who studied the Chinese coffee market.

Although still predominantly a tea-drinking nation, China is rapidly developing a taste for coffee, an activity previously thought was for the affluent or Westerners.

Jack Ma’s New Retail Vision Reinforced Through Coffee

What does Alibaba get out of it?

It was as recent as Single’s Day when Jack Ma announced the ‘New Retail’ concept that aims to blur the line between conventional brick-and-mortar retail and ecommerce with the help of technology and data.

In the coming years, we anticipate the birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain,” — Jack Ma.

Alibaba’s HEMA Supermarkets already blur the line where consumers can shop for groceries online via the HEMA app and receive them within half an hour, or scan barcodes at the store, pay via the app, and set up delivery.

A shopper can easily scan barcodes in the store and pay for the products through the HEMA app before having them shipped home. Source: Alizila

Partnering with a highly influential brand like Starbucks and providing them with the right technology is Ma’s push for even faster digital adoption..

A survey has shown that 40% of consumers are willing to pay more for a product if they could experience it through AR, and 71% claim that they would shop at a retailer more often if they offered AR.

Seems like Starbucks and Alibaba will be brewing some heavy money in China.

The first thing that comes to a consumer’s mind when asked about virtual reality (VR) often involves gaming.

Why? Because virtual reality is used to describe a three-dimensional, computer-generated environment that can be explored by a person. That person is immersed in a space where they are able to manipulate objects or perform a series of actions.

The virtual reality technology buzz, whether in content or hardware, is projected to be worth $80 billion by 2025 globally, while gaming unsurprisingly will make up the largest share of an estimated value of $11.6 billion.

But the application of virtual reality is not limited to only video games. According to Jirayod Theppipit, CEO and Founder of Infofed, a VR content development startup, virtual reality can be used as a marketing strategy in almost every area.

“Dare we say that virtual reality is the future of content? The experience VR offers can solve the pain points of businesses in almost every industry.”

“People often associate virtual reality with gaming and we can’t blame them. Consumers in the gaming segment have the ability to afford new technology and gadgets,” continues Jirayod. “This is why they’ve adopted virtual reality before others.”

Instead of scrambling to compete in an already crowded gaming market overtaken by virtual reality gaming content creators like VRX, Infofed sees a blue ocean in real estate for virtual reality content in Thailand.

“I know this technology is going to take off because big players like Facebook and Google have already jumped into it.”

Two years ago, Facebook invested $2 billion into VR technology to promote its own VR headset Oculus and only earlier this year, Apple launched ‘ARKit’ to turn its iPhones and iPads into AR/VR (Augmented Reality/Virtual Reality) devices.

IKEA has already jumped on board with its new app, IKEA Place.

IKEA ecommerce

The highly affluential Chinese shoppers have also taken a liking to VR based on a survey by Worldpay, which has been a strong indicator of how content will be consumed in the future.

Phil Pomford, General Manager for Asia Pacific at Worldpay, says,

“China is blazing a trail for VR/AR adoption and showing other Asia Pacific markets what the future could look like…with China leading the way, Asian businesses should start investigating the future of VR/AR technology now, so that they’re ready to meet consumer demands as and when they arise.”

84% of 16,000 consumers surveyed across Asia Pacific believe that AR/VR is the future of shopping, 92% say they’d like to see more retail apps make use of AR/VR – Worldpay.

But for a nascent market like Thailand, can virtual reality successfully take off?

Infofed believes it already has.

ecommerceIQ speaks with Jirayod to understand how the two-year old startup has utilized VR in industries like tourism and education and what it has learned from its latest project, real estate.

Giving a slow-moving industry an upgrade

The current real estate industry in Thailand is experiencing slowing growth but the number of new condominium units are set to rise 15% from 2016.

To sell units, typical marketing tools often include flashy brochures with heavily photoshopped photos and miniature models in an attempt to give homebuyers a glimpse of the expensive home they should buy.

Higher-end real-estate developers will also set up a physical showroom for visitors to experience the ambience of the unit, but this requires travel and more effort than today’s digitalized world is used to.

Virtual Reality Infofed

The Deck, project by Sansiri. Source: Sansiri

“Because my background is in architecture, I can understand the blueprints and engineering language that the marketing material contains but there are many people who are confused by it. The current content in brochures and on websites aren’t extremely helpful for consumers who want to properly ‘experience’ the product.”

Through VR content, Infofed believes that its content can help developers market its products to consumers. What better way for someone to experience their new home than to actually walk through it?

The company has already worked together with Nirvana Property, one of the leading developers in Thailand, to showcase its showroom through virtual reality content.

 

Virtual Reality Infofed

Virtual reality Showroom for Nirvana Rama 2 by Infofed

Consumers are able to view the showroom in 360 degrees, simply through their electronic devices without the need of a virtual reality headset.

According to Jirayod, consumers on average spend up to five minutes viewing a VR showroom whereas they spend no more than two minutes flipping through a brochure.

“The longer consumers spend on our content, the more interest they develop in the product and reflects on a higher rate of purchase.”

The appeal of VR can also save real estate companies money to build and dismantle their showrooms – especially in trade shows and exhibitions. From Jirayod’s past architectural experience, building a showroom has an average cost of $60K for condominiums and $200K for houses.

Creating VR content, on the other hand, can start as low as $1,500 at Infofed according to Jirayod.

New age but in demand

Despite North America being the current leader in VR content market with a share of 73.4% in 2016, Asia Pacific is forecasted to exhibit higher growth.

Transparency Market Research has forecasted that this region will see an exponential CAGR of 116.1% between 2016 and 2024.

Virtual Reality Infofed

But in order to capture the opportunity VR presents, Infofed is committed to educating Thai consumers about new technology and training the people necessary to create VR content. One way it has done so is by creating content for influential industry players like the Tourism Authority of Thailand and leading real estate companies.

“It’s important that we help create build an ecosystem for virtual reality content. I have never viewed other virtual reality players as competitors but instead as partners to together push this technology out.”

Infofed has also brought in experts from the US through partnerships to equip its local staff with sufficient virtual reality knowledge to produce content. It’s also sharing its own experiences at top universities to educate the incoming digital-savvy workforce.

Virtual Reality Infofed

Infofed Team

All of the company’s efforts come down to one goal – to make Thailand a virtual reality society, even if it’s not fully ready now.