Alibaba Group Holding Ltd (NYSE:BABA), the Chinese e-commerce giant, wants to make it a lot easier for its 400 million users to go shopping. In fact, Alibaba wants to make shopping so easy that you can go to the mall and shop at your favorite store without even having to leave your home. If all goes according to plan, good things will come to BABA stock.
Alibaba plans to do this by getting you to put on a virtual reality (VR) headset. The company announced last Thursday that it is diving into the virtual reality space with the launch of its own VR lab, called the “GnomeMagic Lab.”
“VR technology can create an immersive shopping experience for users,” said Alibaba engineer, Zhao Haiping in a press release. “Perhaps in the near future, users will be able to shop on Fifth Avenue in New York, while still sitting at home.” (Source: “Alibaba Looks Towards Virtual Reality To Enhance Shopping Experience,” IR.net, March 17, 2016.)
The company said that the first ever project for the VR lab will be to develop a 3D virtual warehouse with a view to integrate virtual reality into the shopping experience. Alibaba claims to already have completed 3D modeling for hundreds of products and will issue standards for merchants to create their own VR shopping option.
Alibaba also said that it is exploring other applications of VR, such as video with Youku Tudou and entertainment through Alibaba Pictures. Alibaba-backed Youku Tudou, recently launched 360-degree panoramic videos.
In February, the company also invested $793.5 million into virtual reality technology startup Magic Leap, which hasn’t released a single product yet. Alibaba will most likely harness some of Magic Leap’s technology for its own products in the coming years.
So why is Alibaba getting into VR?
Well, one reason is that the company wants to be a step ahead of the other e-commerce giant, Amazon.com, Inc. (NASDAQ:AMZN). Amazon hasn’t officially announced plans for virtual reality, but you can be sure that the company will be. According to a job posting on Glassdoor, Amazon is putting together a team to create a virtual reality platform. The posting is for a senior software development manager to lead the team. (Source: “Now Amazon Is Also Getting Into Virtual Reality,” Fortune, March 8, 2016.)
The second reason is that Alibaba believes that VR will eventually become as common as television. Virtual reality is a hot topic in tech and it looks like the technology is poised to take off over the next few years.
A recent report forecasts the number of virtual reality devices sold will reach 2.5 million in 2016, 12 million in 2017, and 24 million in 2018. The same report says that by 2018, virtual reality devices will become a $4.0-billion market (Source: “Augmented and Virtual Reality Devices to Become a $4 Billion-Plus Business in Three Years,” CCS Insight, last accessed March 18, 2016.)
Another report forecasts that the global virtual reality market will grow at an annual compound growth rate of 96% by 2019. (Source: “Global Virtual Reality Market 2015-2019 – Industry Analysis,” Research and Markets, last accessed March 18, 2016.)
A host of companies are also jumping into the sector. Samsung Electronics Co Ltd has already shipped its Gear VR. Facebook Inc (NASDAQ:FB), which bought VR company Oculus, is about to launch the “Oculus Rift” VR headset with an initial slate of 30 games set for release. Sony Corp will be releasing the “PlayStation” VR headset later this year.
In addition to gaming, expect to see the technology in a wide variety of areas, including healthcare, entertainment, and even the military.
The Bottom Line on BABA Stock
As the technology continues to advance and new applications emerge, VR is going to be a game-changer. Alibaba is already laying the groundwork to transform the shopping experience. As VR takes off over the next few years, expect BABA stock to follow suit.