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The benefits of digital twins for retailers
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The benefits of digital twins for retailers

Written by

Rod Reynolds

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January 11, 2024

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The retail landscape grows more complex by the day. Customer preferences change rapidly, new technologies disrupt business models, and competition reaches new heights. With pressure on retailers to continually adapt and optimize operations to stay ahead, opportunities to gain a competitive advantage come at a premium. 

It’s in this landscape that the creation of digital twins represent an opportunity to unlock incredible new value for retailers, especially when teamed with augmented reality (AR) technology to create innovative and engaging customer experiences. This article will examine 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.

What is a digital twin?

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 that 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, opening up a world of new possibilities for retailers. 

Changes to the configuration, layout, and ambience of stores can be simulated using the digital twin to gauge outcomes – without the disruption or uncertainty of doing so in the real world. 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.   

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.

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How are retailers using digital twins?

Industry analysts highlight multiple high-value use cases for digital twins in retail, so let’s take a look at some of the most important examples:

Improved customer engagement

One of the most valuable applications of digital twins for retailers is using 3D product models as the basis for improved customer engagement techniques. 

A host of global brands such as IKEA, Home Depot, and Amazon have used digital twins as the basis for enabling augmented reality visualizations of their products. Augmented reality is a technology that overlays digital content on the users’ real world environment – in this case, enabling consumers to use their smartphone or tablet to see how potential purchases will look in their own spaces, checking for fit, color match, finish, etc. 

Product visualizations have been shown to offer an array of benefits to retailers, including 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, visualizations therefore represent a crucial tool for retailers to employ. 

Another engagement driver is product configuration. Digital twins allow retailers to offer real-time product configuration functionality, enabling their 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 product options in one place, without the need for endless product pages or a huge retail space, product configurators enable shoppers to tailor items to their liking, making a purchase more likely. 

Research has found that 77% of consumers want to use AR-powered configurators to view product options when shopping, leading to 4.5-times longer dwell times on product pages which offer live configuration. As digital twin technology continues to advance, augmented reality-powered try-on capabilities and preview-driven product configuration will only become more tantalizing for shoppers.

Optimized store operations and reduced costs

Retailers invest huge capital expenses into the physical build-outs of stores and supply chain infrastructure. However, determining optimal layouts and configurations usually requires guesstimating rather than data-driven decisions. Digital twins eliminate such guesswork by enabling retailers to create digital replicas of physical locations.

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.

Furniture featured: Roco/Muebles Romero

Better-informed business decisions

Combining the power of digital twins, data integration, and artificial intelligence 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, re-creating 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.

Read more: The profit margin puzzle in furniture: a complete guide

The digital twin-powered future

We’ve seen how digital twins are the foundation of a number of powerful trends that are reshaping retail, and particularly ecommerce. As the building block of immersive customer experiences such as product visualization and live configurations, digital twin usage seems certain to continue increasing, driven by demand from the expected 75% of the world’s population who are forecast to be frequent AR users by 2025.

At the other end of the spectrum, the operational gains, cost savings, and predictive insights that digital twins offer retailers mean few 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 to suit 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, and ensure they are well-placed for the retail marketplace of tomorrow.  

3D viewer with a product configuration and AR 'view in your space' functionality, provided by Enhance XR

Contact Enhance today to discuss digital twins for your products.

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