Could Virtual Reality revive the economy?

    Etienne Goffin
    Etienne Goffin

    The interest for VR has increased over the last year in the Benelux. Several major companies are investing in VR and the market is expected to grow rapidly.

    Virtual reality (VR) is the fast-developing technology that enables advanced virtual interactions in a computer-simulated environment. It creates an immersive multimedia experience based on artificial sensory stimuli. Users can instantly send and receive detailed information through multimodal devices. VR improves human–computer interactions (1), remote control and telecommunication. Physical presence is simulated in the reproduction of a real or fictional environment. VR brings the world to users, just like the internet, but on a more precise level.

    Google analytics data confirms that the interest for VR has increased over the last year in the Benelux (2). Several major companies are investing in VR and the market is expected to grow rapidly in the next five years (3). This development will have a strong impact on the economy. It will strengthen competition and reduce market frictions. All buyers and sellers will be able to trade at the same time in one single virtual space, with a high degree of information. VR will increase labour productivity, reduce the marginal cost of production, and reshape entire value chains. Key sectors of the Benelux economy will be affected by this new technology:

    • Telecom: VR will speed up the dematerialisation process, and improve interactions between people and machine. Several activities which are still taking place in the real world will then happen online. Although Benelux is leading in broadband coverage, telecom operators still need to increase the bandwidths to accommodate the data flow induced by VR. Traditionally they account for the vast majority of investment, but they benefit only from a portion of the added-value generated. However, VR is an opportunity for telecoms to expand and offer enriched services, in a context of decreasing margins (4).
    • Transport and logistics: VR will reduce transport needs and make geographical location somewhat irrelevant. Instead of traveling, people will able to operate in virtual environments. This will have a positive impact on traffic congestion (5). In addition, VR improves the possibility to control vehicles remotely. This evolution will impact all transport modes (i.e. air, rail, road, and water) both for freight and passengers (6). Although, Benelux is currently the international gateway to the EU (7), the transport sector will need to invest substantially to maintain its competitive advantages and reap the benefit of VR related innovations.
    • Energy: Electricity consumption will increase with VR as it requires powerful computers to make it work. At same time fossil energy needs for transport will decrease (8). So the overall effect on energy consumption might be neutral (9) and the energy mix composition might change.
    • Culture and tourism: VR can be used to explore a city, visit a museum or check a hotel (10). Theme parks (11), game producers and leisure providers start to use VR to improve customer experience. The travel industry will then use VR to advertise tourist locations. It is likely to increase both the cost and revenue of tourism operators.
    • Retailing: VR will have a huge impact on online shopping. Currently, one of the biggest risks with e-commerce is ordering something that doesn’t match expectations (13). With VR, customers will be able to check products (e.g. clothing, machines or real estate) virtually and get a better understanding of what they’re buying.
    • Education and training: VR will ultimately decrease training costs and improve distance learning. It will allow students to interact with digital objects, act out mock experiences and exercise skills in virtual locations. VR will also require adapting schools’ curricula to prepare students working with VR (14).
    • Labour market: VR will change the work routine of many professions. For instance, designers and architects can visualise non-existent things using VR. More and more professionals (drivers, doctors and, industrial operators) will be able to work remotely. One of the biggest challenges is that the shortage of ICT professional will further increase due to VR programming requirements (15).

    In a nutshell VR will deeply change the economic landscape in the Benelux. However, the metamorphosis will be gradual as producing virtual environments remains a complex and time consuming process.

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    1. From an ergonomic point of view, standard interface devices, such as keyboard, mouse and screen, are considered as inefficient and counter-intuitive.
    2. Google trends show a sharp increase of interest for ‘virtual reality’ on Google search engine for the Benelux.
    3. Worldwide VR revenue for both hardware and software will increase sharply according to Superdata.
    4. According to Eurostat, the telecommunications sector represents only 2% of the Benelux GDP.
    5. According to the INRIX scorecard, Benelux is the European region most affected by traffic congestion.
    6. Amazon announced yesterday that it will test drone delivery in the UK.
    7. Benelux countries are among the top performers worldwide in terms of logistics performance, according to the World Bank.
    8. Currently the majority of the energy consumption of Benelux concerns fossil fuels for transport, according to the European Commission.
    9. Traditionally most of the energy consumption is used for transport. In the future it will mainly be used for telecommunications.
    10. Samsung recently announced it was partnering with travel agencies to let potential customers explore cruise liners using VR.
    11. Bobbejaanland was the first Benelux theme park to launch a VR roller coaster.
    12. The world’s first permanent VR cinema has opened in Amsterdam a few months ago.
    13. That is one of the reasons why e-commerce represents only around 10% of the total retail sales in the Benelux.
    14. According to the OECD, schools in the Benelux are not sufficiently equipped with new technologies. Besides a higher proportion than the European average do not have an IT-focused educational background.
    15. According to the EC and Ramboll, the occupation of IT professional remains one of the top bottleneck vacancies in the Benelux.

    Sources:

    http://ec.europa.eu/social/BlobServlet?docId=12644&langId=en
    http://inrix.com/scorecard/key-findings/
    http://lpi.worldbank.org/international/global
    http://venturebeat.com/2016/05/28/the-netherlands-is-a-serious-hotbed-for-virtual-reality-content/
    http://vr.nl/
    http://vrhackathon.com/past-events.html
    https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Energy-and-Resources/
    http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/analysis_group_vr
    http://www.benelux.int/files/5714/6607/2339/rapport-UK-DEF_WEB.pdf
    http://www.cepis.org/media/CEPIS_ECOMPETENCE_BROCHURE_INTERIOR_10OCT_LR1.pdf
    http://www.idc.com/getdoc.jsp?containerId=IDC_P33055
    http://www.moffatt-associates.com/energy_services/facilitating_industry_debate/symposium/
    http://www.recron.nl/k/n1747/news/view/70996/65022/eerste-vr-(virtual-reality)-ride-in-de-benelux.html
    http://www.researchandmarkets.com/research/6bnjqx/virtual_reality
    http://www.wsj.com/articles/research-firm-lowers-projections-for-virtual-reality-sales-1460485946
    https://www.google.com/trends/
    https://www.oecd.org/fr/edu/scolaire/Connectes-pour-apprendre
    https://www.tractica.com/research/virtual-reality-for-consumer-markets/

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