Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Augmented Reality to Cut Return Rates
Transcript
- Lucas: Luna, I want to talk about something that keeps every DTC founder up at night: returns. Luna: Oh, absolutely. The classic 'try it on in your living room, send it back' problem. Lucas: Exactly. And there's a stat that's been rattling around in my head. A study by Shopify and an AR platform called Vntana found that DTC brands using 3D and augmented reality product viewing saw a 40 percent reduction in returns. Luna: Forty percent? That's massive. I mean, returns are basically a profit leak for most DTC brands. Some categories — apparel, accessories — run return rates of 30 percent or more. Lucas: Right. And the same study showed that conversion rates on product pages with AR were 94 percent higher than pages without. That's almost double. Luna: Ninety-four percent? Let me make sure I heard that right. So if a page normally converts at 2 percent, AR bumps it to nearly 4 percent? Lucas: That's the implication. And it makes sense when you think about why people return things. It's usually because the product didn't look the way they expected. Color was off. Size was wrong. The texture felt different. AR bridges that gap before the purchase. Luna: So the idea is, you let the customer 'try before they buy' without actually shipping anything. Lucas: Exactly. And it's not just apparel. Home decor brands use AR to show how a couch fits in a room. Sephora and L'Oreal use AR for virtual makeup try-on. Even furniture — IKEA Place has been doing this for years. Luna: I've seen the makeup one. It's pretty impressive. But I wonder — is this something a small DTC brand on a Shopify store can actually do? Or is it only for the big players with big budgets? Lucas: That's exactly the question I wanted to dig into. The short answer: it's becoming much more accessible. Shopify has built-in AR support through its 3D product viewer. You can upload a 3D model of your product and enable AR viewing on mobile. There are also third-party apps like Vntana, Sayduck, and Augment that integrate with Shopify for a monthly fee. Luna: Okay, but creating a 3D model of your product isn't free. If you sell a simple t-shirt, maybe it's manageable. But what if you have 200 SKUs? That adds up. Lucas: It does. You're looking at roughly $100 to $500 per model, depending on complexity. For a small brand with ten SKUs, that's maybe two thousand dollars upfront. But compare that to the cost of returns. The average return costs a DTC brand about $15 to $20 in shipping and restocking. If you save 40 percent on returns, and your product has a 30 percent return rate, the math works out pretty quickly. Luna: Right, so it's a ROI play. Spend on AR, save on returns, boost conversion. But let's talk about the other psychological angle. Does seeing a product on your own face or in your own room actually increase confidence? Or is it just a gimmick? Lucas: There's real psychology behind it. It's called the 'endowment effect' — once you visualize something as yours, you value it more. You're more likely to buy and less likely to return because you've already mentally owned it. Luna: That's fascinating. So it's not just about reducing uncertainty; it's about building attachment before the transaction. Lucas: Exactly. And that's why brands like Warby Parker invested so heavily in their virtual try-on. They were early. They saw returns drop and customer satisfaction go up. Now it's table stakes for eyewear. Luna: Speaking of which, let's take a quick breath here. Lucas, these marketing deep dives we do — they're fun, right? And they're ad-free. That's because of a small group of listeners who support the show. If these conversations have sparked a tactic you've actually used, or you just want to keep the show independent, you can buy me a coffee at buy me a coffee dot com slash fexingo. No pressure, just a quiet way to keep the lights on. And back to AR. Lucas: Yeah, and honestly, it's listeners like that who let us deep dive into topics like this without worrying about ad breaks. So, thank you. Now, Warby Parker — they actually acquired the AR company DITTO in 2018, and they kept building. Their virtual try-on today uses face-mapping and lets you see yourself in real time from different angles. Luna: I remember reading that their return rate for glasses is under 10 percent, which is incredibly low for e-commerce. Is that attributable mostly to AR? Lucas: It's a big part. But they also have the home try-on program with five frames. AR is the digital version of that. And what's interesting is that AR doesn't just reduce returns — it also reduces the friction of ordering multiple sizes or colors just to try them. Which saves the brand inventory and logistics costs. Luna: So the brand gets a double win: lower return costs and lower cost of goods sold because they're shipping less inventory on speculation. Lucas: Exactly. And there's another layer. AR data gives you insights into what people actually try on versus what they buy. You can spot trends. Maybe a certain color gets tried on a lot but never purchased — that's a signal about your product photography or your pricing. Luna: That's smart. So it's a data tool as much as a customer experience tool. Lucas: Right. But not every brand should jump in blindly. The best use cases are products where fit, color, or scale are hard to convey in a 2D photo. Apparel, accessories, furniture, home decor, cosmetics, even consumer electronics — think about how a pair of headphones looks on your head. Luna: What about something like a water bottle? Is there an AR use case there? Lucas: Surprisingly, yes. Some brands use AR to show the bottle next to a person or in a lifestyle scene. But honestly, the ROI is lower for simple products. The rule of thumb: if your return rate is above 15 percent, AR is worth testing. Below that, maybe not. Luna: Let's talk about technical execution. What does a customer actually see? Is it just a 3D model they can rotate, or is it full-on camera-based try-on? Lucas: There are two main types. One is 3D product viewer — you can rotate and zoom, but it's not overlaid on the real world. The other is camera AR, where the customer uses their phone camera to 'place' the product in their space — like a sofa — or on themselves — like glasses. The camera version drives higher engagement and conversion. Luna: And that requires WebXR, right? The browser-based AR standard. Lucas: Yes. Most modern smartphones support it. Chrome and Safari both have WebXR APIs. So you don't need a dedicated app. It works right in the browser. That's a huge barrier removed. Luna: But what about older phones? Not everyone has a flagship device with a LiDAR scanner. Lucas: You don't need LiDAR. Standard camera-based AR works on phones from the last four or five years. The experience is slightly less accurate on older devices, but still functional. The Vntana study found that 85 percent of users who interacted with AR on a product page had a successful experience. So the technology is mature enough. Luna: I want to get concrete. Give me one brand that's doing this really well that isn't Warby Parker. Lucas: Sure. There's a DTC mattress brand called Purple. They use AR to let customers see a mattress in their bedroom, scaled to their room size. It sounds simple, but it addresses a huge anxiety: will this giant mattress fit? Their conversion rate on pages with AR is reportedly 25 percent higher than without. Luna: Twenty-five percent uplift. That's significant for a high-consideration purchase like a mattress. Lucas: Exactly. And let's not forget the potential for social sharing. When a customer tries on a product via AR, they often screenshot or record it and share on social media. That's free UGC and organic reach. Luna: So AR becomes a marketing channel in itself. That's a nice loop. Lucas: Right. And with Apple's Vision Pro and the broader spatial computing push, I think we're going to see AR become a standard expectation. The next generation of shoppers will expect to see products in their space before buying. Luna: That raises the bar for DTC brands. Those who invest now will have a head start. Those who wait may find themselves playing catch-up. Lucas: Yeah. And the cost of entry is dropping every year. The 3D modeling tools are getting cheaper. There are even ai powered tools that generate 3D models from a few photos. So I think within two years, AR will be as common as product zoom. Luna: Two years? That feels aggressive, but given the pace of change, maybe not. Lucas: Look at how quickly UGC replaced professional photography in DTC. AR is on a similar trajectory. The brands that test it now, learn the tech, and iterate will own the next wave. Luna: Alright, so final question: if a small DTC brand listening wants to start today, what's the first step? Lucas: Pick your best-selling product. Get a 3D model made — there are freelancers on platforms like Fiverr or specialized agencies. Upload it to Shopify's 3D viewer or use an app like Vntana. Then A/B test the product page with and without AR. Measure conversion and return rates over a month. That's it. Luna: Start small, measure everything. That's the DTC way. Lucas: Exactly. And I'd love to hear from listeners who try it. Reach out to us — we might do a follow-up episode on the results. Luna: Yeah, that would be great. Until next time, keep testing.