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'Pokemon Go' has the power to transform retail, analyst says

The solution for dwindling mall traffic may not be as elusive as retailers once thought. They may just need the help of some furry friends.

The rapid takeoff of "Pokemon Go," a mobile gaming app that fuses the digital and physical worlds, "has the power to transform retail," Cowen & Co. analyst Oliver Chen told investors Thursday.

"In our view, the new free-to-play [augmented reality] gaming app has broad implications for retail as it addresses declining mall traffic, plus emerging trends toward social experience and health [and] wellness," Chen said in a research note.

That is, of course, if players can take their eyes off the screen long enough to browse the racks. But beyond simply bringing shoppers into malls and other physical stores, where players can collect rewards at so-called Pokestops, the app's popularity is the first time augmented reality has taken off en masse.

That could have broader implications for retailers, who are trying to find new ways to engage with shoppers and build brand loyalty. Traffic at bricks-and-mortar stores declined 3.3 percent in June, according to Cowen, but Amazon on Tuesday rang up its largest sales day in history during its second Prime Day event.

Of course, online shopping still accounts for less than 10 percent of overall retail sales. But as retailers' experiments with augmented reality have been slow to take off, "Pokemon Go" offers a real-world example of how they can drum up excitement in their stores — and get shoppers off the couch.

The game "illustrates how augmented reality could potentially play a more significant role in retail over time," Chen said.