Functional Practicality
From the consumer standpoint AR/VR headsets are confusing. VR headsets are bulky and isolating but some have the ability to ‘see’ the real world through cameras that mimic eyesight. AR headsets are not isolating and typically less ‘weighty’, making them a more practical alternative for everyday use, but there are now two flavors of smart glasses, those with a display and those without, which seem to have replaced what were once thought to be AR glasses. The reality of these variations is that many consumers are unsure what they are buying and what they might be used for. Expecting smart glasses to be able to project a walking path for the user a few steps ahead will prove to be disappointing if one purchases smart glasses without a display, as directions can only be verbal, but easily met using smart glassed with an internal display.
Unit volume data and forecasts for each of these devices is also confusing, especially as the importance of each category has changed radically over the last year. VR headset growth has slowed this year as the user base for VR tends to be limited to gamers. Those purchasing VR headsets for a ‘virtual experience’ are likely to still be a bit disappointed in headset performance as the software does not seem to be able to create a true ‘virtual leap of faith’ for all users. AR headsets are almost not a thing as they have morphed into smart glasses with displays, and smart glasses without displays are essentially a more mobile extension of a smartphone. With all of these changes in a short period of time it is no wonder why estimates and forecasts are a mishmash of data and do little to give consumers much information.
Unit volume data and forecasts for each of these devices is also confusing, especially as the importance of each category has changed radically over the last year. VR headset growth has slowed this year as the user base for VR tends to be limited to gamers. Those purchasing VR headsets for a ‘virtual experience’ are likely to still be a bit disappointed in headset performance as the software does not seem to be able to create a true ‘virtual leap of faith’ for all users. AR headsets are almost not a thing as they have morphed into smart glasses with displays, and smart glasses without displays are essentially a more mobile extension of a smartphone. With all of these changes in a short period of time it is no wonder why estimates and forecasts are a mishmash of data and do little to give consumers much information.
Growth estimates for these categories are equally obtuse as the newer categories are coming off of a very small base last year and product combinations are different for each brand, but it is almost a moot point given that Meta (FB) dominates most of the categories with over a 60% share on a general basis. Throw in the Chinese market, which shows different product acceptance patterns than the US and that mishmash becomes a large pile of poorly assembled data.
At the same time consumers are confused about what they are buying and what they can do with each device. Now that ‘AI’ is stamped on every box, consumers are rushing to buy smart glasses so they can walk down the street, get directions to the nearest CVS, be directed by their glasses to the nasal spray aisle and have the AI purchase for them using their CVS bucks to lower the price. Unfortunately smart glasses are not quite at that point yet, and if you purchased a pair without a camera, you would have to listen to turn-by-turn directions rather than see them virtually, and integrating your glasses into CVS’s system is far above current capabilities, so you would be forced to ask for directions to the nasal spray and actually wait on line to pay.
Given the strong sales of smart glasses in China mentioned earlier, one would believe consumer excitement to be at or building to a fever pitch and that is the case on large Chinese retail sites like JD.com (JD) where the volume of transactions for smart glasses has increased by 10x, but there is a catch.
JD.com and Tmall (BABA) are reporting that while sales are very strong return rates are around 30% for smart glasses, with the primary reported reason being “Lack of functional practicality”. An example would be that Xiaomi’s recently released AI glasses, which sold 70,000 units during their first week of release, faced a return rate on the Douyin (pvt) platform was ~40%. Consumers were disappointed by the fact that the glasses were essentially earphones with a camera and left the consumer to still rely on their smartphone, although a bit more time reading the spec sheet might have given an indication of the device’s capabilities.
Where brands now have to be very careful is to make sure they are not leading consumers down a path of disappointment by over-promising capabilities during a period of market enthusiasm, as that disappointment will live on with consumers even as the products grow more sophisticated. Meta seems to get the idea with their recently released Ray-Ban display smart glasses that don’t promise to create a virtual experience but provide the functionality that gives them value, the opposite of Apple’s (AAPL) Vision Pro XR headset, which over-promised and under-performed. Don’t promise the world, just find things that make smart glasses useful to consumers, and they will beat a path to your door…
At the same time consumers are confused about what they are buying and what they can do with each device. Now that ‘AI’ is stamped on every box, consumers are rushing to buy smart glasses so they can walk down the street, get directions to the nearest CVS, be directed by their glasses to the nasal spray aisle and have the AI purchase for them using their CVS bucks to lower the price. Unfortunately smart glasses are not quite at that point yet, and if you purchased a pair without a camera, you would have to listen to turn-by-turn directions rather than see them virtually, and integrating your glasses into CVS’s system is far above current capabilities, so you would be forced to ask for directions to the nasal spray and actually wait on line to pay.
Given the strong sales of smart glasses in China mentioned earlier, one would believe consumer excitement to be at or building to a fever pitch and that is the case on large Chinese retail sites like JD.com (JD) where the volume of transactions for smart glasses has increased by 10x, but there is a catch.
JD.com and Tmall (BABA) are reporting that while sales are very strong return rates are around 30% for smart glasses, with the primary reported reason being “Lack of functional practicality”. An example would be that Xiaomi’s recently released AI glasses, which sold 70,000 units during their first week of release, faced a return rate on the Douyin (pvt) platform was ~40%. Consumers were disappointed by the fact that the glasses were essentially earphones with a camera and left the consumer to still rely on their smartphone, although a bit more time reading the spec sheet might have given an indication of the device’s capabilities.
Where brands now have to be very careful is to make sure they are not leading consumers down a path of disappointment by over-promising capabilities during a period of market enthusiasm, as that disappointment will live on with consumers even as the products grow more sophisticated. Meta seems to get the idea with their recently released Ray-Ban display smart glasses that don’t promise to create a virtual experience but provide the functionality that gives them value, the opposite of Apple’s (AAPL) Vision Pro XR headset, which over-promised and under-performed. Don’t promise the world, just find things that make smart glasses useful to consumers, and they will beat a path to your door…
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