Can Virtual Reality Stores Drive Revenues For eBay?

-10.74%
Downside
51.35
Market
45.84
Trefis
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EBAY
eBay

Recently, eBay (NASDAQ:EBAY)  announced the launch of the first ever virtual reality department store in partnership with Australian retailer Myer. Through this innovation, Australian consumers will get an immersive shopping experience of a Myer store on eBay’s platform, where they can browse more than 12,500 Myer products and buy them online.  A specially designed virtual reality viewer called “shoptical” will be needed to view products under this technology. The company has created “eBay Sight Search” which shoppers can user to select items by holding their gaze on them for a few seconds, thus eliminating the need for hand controlled devices to add items to the shopping basket. Virtual reality is being touted as the future of the online retail experience and eBay is an early entrant into this space.  Whether this new shopping experience will attract more buyers or increase conversion rates remains to be seen.

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An Immersive Shopping Experience Can Work To The Advantage Of Retailers

Virtual reality provides retailers with more avenues to convince shoppers to buy their products.  As consumers can view 3D images of the products, retailers will be able to display features, colors and material options more prominently, thereby providing a “real” shopping experience for users. This can encourage buyers to increase their online shopping volumes by re-creating a physical store experience online. The virtual reality store allows consumers to view different products in the store just like a physical shopping experience. Online shoppers can select an item for detailed viewing and purchase  just by holding their gaze on it for a few seconds, enabled by eBay’s “sight search” feature.  While eBay is piloting the virtual store option in Australia, where it found maximum purchases of virtual reality devices, the company can expand into other regions based on the success of the pilot. This will give retailers the option of opening a virtual reality store on eBay, potentially attracting many more buyers, given the sense of a real life shopping experience.

eBay has been working on a turnaround plan to establish itself as a strong e-commerce player, having suffered in competition with Amazon and other local online marketplaces. Innovation will be a key driver of this turnaround and we believe investing in a virtual reality store is an indication of eBay’s commitment towards innovation. The company currently has around 165 million active users.  We expect this number to increase steadily and reach more than 200 million by the end of our forecast period. The number of active users is a key driver for eBay’s revenues and if this figures increases at an accelerated pace as a consequence of innovations, there can be an upside to our price estimate.

Virtual reality online shopping is still at a nascent stage and its success depends on consumer adoption and mass availability of virtual reality headsets at cheaper rates.  We believe eBay’s investment in this technology is a futuristic move. The company can leverage its first mover’s advantage and this technology can drive revenues in future, particularly if it resonates with millennial early adopters of virtual reality in shopping.