A new era. It's the reality we began to experience in 2020 when Covid-19 entered our lives. The pandemic brought many changes and proved the adaptability of human beings, who had to change their habits. It is a fact that with Covid-19, our daily life and consumption habits have drastically altered.
On top of that, the severe economic crisis that the world is currently experiencing is impacting consumers significantly. In the UK, inflation reaches levels unseen in decades as it is expected to reach 11.5% in 2022 and is estimated at 5.4% in 2023. This obviously impacts how people consume goods as the retail sales volume should fall by 3.4% in 2022, even though a rebound in consumption is expected in 2023 with a 2.6% increase in retail sales volume.
But the question remains: is this new era we have embarked on a finality, or is it just a transitional phase? In the wake of the lockdowns, aren't consumers looking for more meaning and human contact?
The fact is that after reaching a peak of nearly 38% in January 2021, the internet share of retail sales in the UK dropped to around 25% in October 2022 (a figure which is still higher than before the pandemic).
So yes, people want to resume physical contact. But at the same time, consumers have formed new habits, as they have become accustomed to convenient and easy online experiences.
Between the digitalisation of consumer habits and their desire to return to more physical experiences, the challenges have rarely been more significant for the UK retail industry, which finds itself at a crossroads. It is, therefore, essential to innovate, and the winners will be those who know how to do so.
Still, while everyone is talking about digitalisation, the question remains: how can you combine the best of the digital and physical worlds? In other words, how do you introduce a physical dimension into your customers' digital experience or vice versa?
Although consumers have adapted quickly to the changes brought about by the Covid-19 pandemic - and while many e-commerce-averse consumers have discovered the joys of online shopping - there is no doubt that brick-and-mortar shops will always have a place in the retail landscape. The fact is that people love to shop. And indeed, UK shoppers are returning to bricks and mortar shops, as 73% of all retail sales will still take place offline in 2023, according to a YouGov survey.
Consumers want to enjoy the social aspect of walking down a shopping street with their friends or family, grabbing a coffee or a bite to eat, and getting feedback from the people they are with if they need to buy an item that has caught their eye. The issue is that this experience cannot precisely be replicated by shopping on a screen. However, many retailers try to simulate the social element that shoppers seek with their digital offerings.
Take the example of live-streaming shopping. It has been popular in China - driven by retail giants like Alibaba.com - and in parts of the Asia Pacific region since 2016; it has taken off in these markets in the two years following the start of the Covid-19 pandemic.
Live streaming has been successful because it answers one of the pain points of e-commerce - customers have no personal interaction with the product. This problem is resolved with a person showing you the product and replying to your questions in real-time.
The point is to create a connection between the seller and the buyer and make the experience more human as if the customer was in a store where they could receive advice from the seller or, so to say, making "physicalise" the digital experience.
This is an experience that Amazon is replicating with Amazon Live and that startups like Tilt want to develop in the UK.
Many brands and retailers are also looking to develop solutions reproducing shopping experiences with friends via devices, such as squad shopping and group buying.
Squad shopping became prominent when UK retailers noticed that during lockdowns, 20% of people called their friends via video while shopping online.
To facilitate interaction between shoppers and their friends, retailers are creating a platform with video and screen-sharing technology where shoppers can invite their friends to share their wish lists, exchange tips, create outfits and give their opinion on the latest trends.
On the other hand, group buying is for people who want to get together and buy items collectively at a significantly reduced price. It is a quick way for retailers to gain visibility, enter new markets, and for customers to bond over a joint purchase by sharing ideas, opinions and content. Unlike Groupon, this form of selling focuses on the social aspects of shopping and community building.
Another promising area of innovation for the UK retail sector is augmented reality (AR), particularly in brick-and-mortar outlets. According to a study by PYMNTS, UK consumers use their smartphones 16% less than consumers in other countries to enhance their in-store shopping experience. This seems a curious abnormality in a country generally very open to mobile technology.
But although the growth of smartphone shopping appears to be stalling in the UK, pioneering retailers in the country have continued to innovate in the area of mobile ShopTech and especially in AR.
For example, when Apple opened its new flagship store in London in July 2022, it promoted the opening with an AR experience centred around the London poet and painter William Blake, initially designed for the Getty Museum using Apple technology.
Apple is one of many companies to harness AR to enhance their in-store retail experience in the UK. Some notable examples include department store Harrods, which has used augmented reality technology for its 2021 Christmas windows, and the global pioneer of augmented reality in shops, Lego, which has run several AR campaigns over the years.
Even though smartphone shopping is still in its early stages in the UK, and despite the slow uptake in the country, there are promising signs that tools such as AR are likely to engage consumers and boost their use of mobile devices in physical retail.
Indeed, research by Bazaarvoice found that 48% of UK consumers want to see AR and virtual reality (VR) in physical shops. While it is unclear at this point how AR will be applied to in-store retailing in the future, some companies have entered the market, offering AR tools to retailers. In the UK, for example, Dent provides an augmented reality platform that aims to enable businesses to serve their customers on a 1-1 basis, with advice and information to optimise their experience.
The next step for the retail world is to personalise experiences while taking advantage of the contributions offered by new technologies. Today, more than ever, consumers want to have a social experience and feel valued. After the period of digital anonymity linked to the Covid-19 pandemic, it is time to enter a new era and make digital experiences more physical.