It’s hard to overstate the potential of digital twins for retail optimization. Leading brands that have implemented the technology have achieved increases in productivity of up to 200%, reductions in some costs of up to 95%, and a host of additional benefits. As the retail landscape becomes more complex by the day, the pressure on firms to adapt and optimize operations grows exponentially. Opportunities to gain a competitive advantage come at a premium.
It’s in this context that digital twins represent a chance to unlock incredible new value for retailers. That’s especially the case when teamed with augmented reality (AR) to create innovative and engaging customer experiences. This article examines what digital twins are and how they are being used in retail, the benefits of creating digital twins, and why these building blocks for immersive customer experiences are the future of ecommerce.
Example of a digital twin and its uses | Furniture: Roco
Understanding digital twins
A digital twin is a virtual replica of a physical object, asset, process, or environment that accurately mimics its real-world counterpart. Digital twins can be setup to capture data from multiple sources to create living digital models. Those models then update and change along with their physical equivalents.
Digital twins enable the creation of interactive 3D product models, store environments, supply chains, and more within a virtual space. This opens up a world of new possibilities for retailers.
Changes to the configuration, layout, and ambience of stores can be simulated using digital twins to gauge outcomes. This then removes the disruption, cost and uncertainty of doing so in the real world on a trial-and-error basis. The impact of potential supply chain changes can be modelled quickly and accurately. Real-world data such as footfall patterns or customer preferences can be harnessed to optimize everything from inventory management to stock placement.
“It’s clear that digital twin capabilities can be a boon for retailers—especially when it comes to strategic inventory and merchandise planning.”
-Forbes Magazine
What’s more, when combined with technologies such as artificial intelligence (AI), machine learning (ML), and Internet of Things (IoT), digital twins can spot patterns, predict future problems or scenarios, and recognize opportunities in ways that inform better planning and decision making.
Driving operational gains with digital twins
Industry analysts have identified numerous scenarios that realize the potential of digital twins for retail optimization. Sandeep Shekhawat, Director of Engineering at Walmart Global Tech, highlights a selection of use cases, including:
- Creating personalized shopping experiences for customers, both online and instore.
- Offering try-before-you-buy experiences using product visualization in 3D and AR.
- Optimizing inventory management.
- Improving business operations, including energy consumption and system performance.
- Leveraging advanced data insights to enable real-time changes.
“In the retail industry, digital twins can be utilized to optimize different processes and improve decision-making.”
- Sandeep Shekhawat, Director of Engineering at Walmart Global Tech
These use cases offer a topline view of the transformative potential of digital twins for retail optimization. For a more in-depth understanding, an examination of three key impact areas offers vital strategic insight.
1. Improving customer engagement
One of the most valuable ways of using digital twins for retail optimization is deploying 3D product models. Offering a lifelike representation of products that shoppers can customize and interact with, onscreen and in AR, is the basis for many modern customer engagement techniques.
3D viewer with a product configuration and AR 'view in your space' functionality, provided by Enhance XR
Captivating customers with product visualization
Global brands such as IKEA, Home Depot, and Wayfair use digital twins to enable real-time visualization of their products. By overlaying digital content on the users’ real world environment, consumers can use their smart phone to tailor items to their preferences and see how they will look in their own spaces, checking for fit, color match, and finish. This technology is now common across many retail sectors but is especially effective for higher-ticket items like furniture, which have longer consideration and purchase cycles.
Using digital twins for retail optimization has had a significant impact on the furniture industry in particular, offering brands an array of benefits. This includes increases in conversion rates of up to 200%, improvements in buyer confidence of up to 56%, and significant reductions in product return rates. In empowering consumers to more accurately assess products and make better-informed buying decisions, visualization experiences – powered by digital twins – bridge the online trust gap and, in many ways, surpasses the physical shopping experience.
Engaging shoppers with real-time customization
The other aspect of this is product configuration. Digital twins allow retailers to offer real-time product configuration functionality, enabling customers to instantly change product attributes such as color, material, and finish with the click of a button. As well as allowing retailers to showcase all variants and configuration options in one place, without the need for endless product pages or a huge retail space, 3D configurators enable shoppers to tailor items to their liking instantly. This drives engagement, brings products to life, and fosters an emotional connection – making a purchase more likely.
Research has found that 77% of consumers want to use AR-powered configurators to view product options when shopping. This results in 4.5-times longer dwell times on product pages which offer live configuration. As technology advances and with increasing penetration of digital twins for retail optimization, 3D and AR product configuration and previews will only become more tantalizing for shoppers.
Creating the right 3D product models
For retailers looking to implement digital twin technology, the first step is the creation of lifelike 3D models of their products. Depending on complexity, capabilities, and resources this can be achieved in-house, or with the help of a specialist technology partner. What’s crucial is to ensure that the models are created in line with best practice for the requirements of 3D and AR commerce.
READ MORE: The essential guide to creating 3D models for immersive commerce
2. Optimizing store operations and reducing costs
Retailers invest huge capital expenses into the physical buildouts of stores and supply chain infrastructure. However, determining optimal layouts and configurations usually requires guesstimating rather than making data-driven decisions. Digital twins eliminate such guesswork by enabling retailers to create digital replicas of physical locations.
“Digital twins help retailers minimize their capital expenditures, manage inventory better, and improve their earnings.
-PwC
US retailers including Lowes and Walmart use digital twin models of retail locations to virtually test out new layouts including shelving configurations, display placements, and staffing scenarios. This allows operational leaders to simulate months of different variations to determine the optimal layout before reconstructing the physical store.
Changes to physical retail environments also require significant capital investment. With digital twin simulations, retailers can model the expected impact and potential risks of any change without real-world consequences. Leaders can answer “what if” questions and determine effectiveness well in advance of investing capital into any physical change.
When fashion brand Guess turned to digital twins for retail optimization purposes, the results were remarkable. By using digital replicas of its stores to create virtual experiences for staff and buyers and enhance remote collaboration, the company achieved a 200% increase in productivity, 30% decrease in travel costs and 95% decrease in administrative costs. Strikingly, by working with an experienced technology partner to develop its use of digital twins, Guess achieved enhancements in both its virtual and bricks-and-mortar offerings.
3. Enabling better-informed business decisions
Combining the power of digital twins, data integration, and AI takes the capabilities of virtual modeling to new heights. Retailers can use real-time and historical data from point-of-sale systems, inventory databases, CRM software, and more to feed realistic data into digital twin models. The AI-powered twins can then analyze the data to produce predictive insights about the future.
Simulating a month’s worth of operations provides reasonably informed models. However, recreating five years of historical data produces deep granularity into cause-and-effect relationships. Retailers can foresee all sorts of challenges, from inventory problems to shipping bottlenecks, before making any impactful business decisions.
US home improvement giant Lowe’s provides a useful case study of how it leverages digital twins for retail optimization, on both a macro and micro level, and the benefits it brings to both customers and employees.
“This interactivity opens up numerous possibilities for Lowe’s associates.”
-Lowe’s
Embracing the digital twin-powered future
The market for digital twin technology was valued at $10.3 billion in 2023. That figure is forecast to skyrocket to $141 billion by 2031. That rise reflects how digital twins underpin a number of powerful trends that are reshaping retail. As the building block of interactive customer experiences such as product visualization and real-time configuration, the proliferation of digital twins for retail optimization is set to continue. This is driven, in no small part, by demand from the expected 75% of the world’s population who are forecast to be frequent AR users by 2025.
The operational gains, cost savings, and predictive insights that digital twins offer retailers mean few brands will be able to compete in the future without harnessing the technology to their advantage.
For forward-thinking retail leaders, the message is clear: partner with trusted technology experts who can guide you in the creation of digital twins. This will ensure their suitability for your businesses needs and, crucially, help you develop and integrate the game-changing capabilities offered by the technology.
By prioritizing use-cases that will help engage customers more memorably and effectively, improve conversions and sales, optimize operations, and inform decision making, brands can steal a march on their competitors today. Ultimately, that’s the only way they can ensure they are well-placed for the retail marketplace of tomorrow.
