When Should Suppliers Adopt Augmented Reality Technology in a Dual-Channel Supply Chain?

Abstract

In practical business, an increasing number of suppliers are adopting augmented reality (AR) technology in their online channels to provide consumers with virtual try-on experiences. While the adoption of AR technology is anticipated to enhance product matching levels in online channels, it may also intensify channel competition and raise costs for consumers’ privacy concerns. Hence, the wisdom of suppliers embracing augmented reality technology in a dual-channel supply chain remains uncertain. To address this challenge, we have developed a stylized model to explore whether a supplier should embrace AR technology in a dual-channel supply chain, taking into account consumer returns and the cost of consumer privacy concerns. The main findings are as follows: First, the supplier is motivated to adopt AR technology if the improvement rate of product matching is high or if both the improvement rate of product matching and consumer’s privacy concerns cost is low. Then, the implementation of AR technology does not invariably harm the retailer. When the improvement rate of product matching is low and the privacy concerns cost is high, AR technology can enhance both the marginal profit and demand in the offline channel, ultimately benefiting the retailer. Thus, there are specific circumstances under which the adoption of AR technology can create a mutually beneficial situation for both the supplier and the retailer.