Digital Retail Experiences are Key - Online and Off
The COVID-19 crisis strengthened consumer demands for digital retail experiences at all stages of the customer journey.
You’ve heard it before: the COVID-19 pandemic changed the way people shop, with the closure of physical stores driving customers to purchase more online.
At first, consumers shopped online because there was no alternative. Later, even as lockdowns started to ease, many customers chose to continue buying online because it was the safest option. After a while, some consumers even stopped going to the shops entirely, impressed by the convenience of being able to buy what they need without ever leaving home.
The result has been an exponential increase in e-commerce sales. According to recent data, 2020 saw a twofold rise in European e-commerce revenue compared to the year before the pandemic. Rather than emulating or trying to replace the experience of shopping in store, most digital retail experiences set up during the pandemic were designed simply as points of purchase - a means to an end. Buying online may not have been the same as buying in person, but it was fast, safe and, in most cases, easy.
Initially disappointed by shop closures, all over the world, locked-down consumers started to experiment with digital retail experiences. By June 2021, when asked to consider the ways in which COVID-19 restrictions had influenced their consumer behaviour, over half of respondents in a PwC survey said they had become more digital. The key word here is become; rather than just providing a temporary solution, digital retail experiences irreversibly reconfigured consumer habits in a way that is set to have a lasting impact on the retail industry.
That said, perhaps it would be more accurate to say that the pandemic irreversibly consolidated consumer habits. National lockdowns only accelerated a trend towards digital retail experiences that was already underway. Even in 2018, nearly half of all consumers (47%) were shopping more on mobile than in store, a report by Ibotta suggests. The mainstream adoption of digital retail experiences during lockdown did not take place in a vacuum.
Poor digital retail experiences deter customers
Even if digital retail experiences were already a priority for retailers, the COVID-19 crisis forced them to dramatically condense their innovation timelines. Stores closed overnight, leaving retailers little time to make sure their products were available to the unprecedented number of online customers. For some retailers, this meant standing up e-commerce solutions from scratch; for others, it meant increasing capacity and offering new services like click and collect.
Given the sense of acute urgency, retailers were operating under dizzying timeframes. A study from McKinsey shows that companies acted 27 times faster to meet increasing customer demand for online purchasing and services than they would have done before the COVID-19 crisis. To look at this statistic another way: companies took 22 days to implement changes that should have taken them 20 months. The rush to go digital left retailers with less bandwidth to focus on quality assurance, and the result was often rushed, under-tested digital experiences that left consumers wanting at best and frustrated at worst.
The consequences speak volumes about consumer expectations. Digital burnout from poorly designed apps is now the single biggest reason keeping consumers from embracing digital experiences after the pandemic. In a separate survey by McKinsey, of the people who were dissatisfied with the digital services available during lockdown, over half cited discomfort with UX/UI as the main reason deterring them from pursuing e-commerce options after the pandemic. In fact, easy-to-use e-commerce services were more than twice as important to respondents as better prices.
As Applause has seen with clients repeatedly: users that have trouble understanding how to use an app, or difficulty using it, are quick to leave. The COVID-19 crisis was a trial by fire for retail that demonstrated the extent to which the quality of digital retail experiences can determine the success of a go-to-market strategy.
Accelerating an existing trend towards digital
While many retailers struggled to create exceptional digital retail experiences in the short term, their hard work in reevaluating their innovation timelines will pay off in the years to come. This is because the shift to digital was not just a passing trend inspired by locked-down customers; it is a development that had already been unfolding organically since long before the first cases of COVID-19 were reported.
The statistics are clear: consumers have been increasingly choosing to engage with retailers through digital assets for years. Even before the pandemic began, research from Salesforce showed that 87% of shoppers began their hunt for products in digital channels. By 2024, e-commerce market share is expected to reach 21.8%, having been at only 7.4% in 2014, according to recent consumer data. For some industries, such as cosmetics, the majority of sales are already executed over the internet.
If in-person shopping was preferable to online shopping prior to the pandemic, it is not because buying in-store was inherently better than on the internet. It is because it is what consumers are used to. When asked in a Eurostat report to name the main reasons for not buying online in 2019, force of habit was among the highest ranking criteria named by European shoppers. What COVID-19 achieved was to drastically transform these habits. Ultimately, as BestBuy CEO Corrie Barry put it at CES 2021: “There isn’t a world where people revert back to their 2019 behaviours.”
Digital retail experiences beyond e-commerce
While rising e-commerce sales are set to continue, so too is the availability of other digital retail experiences, both online and off. This is largely due to the growing number of Generation Z shoppers entering the market. Commonly referred to as Gen Z, this younger, digital-native breed of shopper expects to purchase online as a bare minimum.
Whereas online shopping is still a novelty for some millennials, it is completely commonplace, almost banal, for Gen Zs. They are spending more time online than any previous generation, with research by Adobe finding that Gen Zs spend 10.6 hours engaging with online content per day. 50% of Gen Zs even use multiple devices at a time, often engaging with laptop, mobile and smart devices as part of a single activity. Technology is part of the fabric of their everyday lives.
The seamless integration of technology in the lives of Gen Zs has meant that retailers need to think beyond e-commerce when creating digital retail experiences. Despite the obvious challenges of monitoring multiple digital assets, being able to connect with an increasing number of customers online is a game changer for retailers. Companies like IKEA already offer consumers the ability to see how products would look in their homes using VR technology, boosting sales and reducing returns by allowing customers to try before they buy. More retailers are likely to follow suit once Apple releases its XR glasses next year.
Given that Gen Zs are now more likely to leave the house without their wallet than their mobile phone, according to a report by the Global Web Index, even in-store retailers need to engage with Gen Zs over the internet if they are to capture this part of the market. One good example of such a technology is the retail app. Beyond enhancing e-commerce, retail apps will enable retailers to link a digital retail experience in store with an individual’s mobile device, from sending offers as browsers walk past items to providing shoppers with real-time inventory information.
Sportswear brand NIKE knows the value that in-store innovation can have on sales. Despite the pandemic-related decrease in foot traffic, the retailer has just opened its fourth House of Innovation. Like IKEA, NIKE also counts VR among its technical armory, in this case to provide a digital bra fitting service. And it’s no wonder: speaking in an interview, General Manager of NIKE Direct stores Cathy Sparks revealed that digital tools for employees have a 75% conversion rate.
The message is clear: as of 2021, there is no longer a clear cut distinction between brick and mortar and online in the world of retail. We have entered the age of “phygital” shopping, in which digital enhances the in-store shopping experience. As e-commerce platforms become the key point of purchase for consumers, brick and mortar stores are becoming sites offering immersive digital retail experiences through innovative technologies.
High reward doesn’t have to mean high risk
Technology is changing the face of retail, and this article has only touched on some of the areas in which digital retail experiences are enhancing customer journeys.
With so many potential digital retail experiences to invest in, from optimising e-commerce platforms to developing retail apps and investing in AI, how can retailers know whether an investment will pay off? The key lies in prototyping. Just as Amazon Go supermarkets were first tried out in localised instances, retailers need to get their products in the hands of customers and see what works and what doesn’t.
Following a test-and-learn approach, Applause’s Product Excellence Platform (PEP) enables retailers to trial new ideas before scaling them for the larger brand environment. Gone are the days when nailing digital experiences meant eliminating flaws from your e-commerce platform, which is why PEP’s approach to quality is comprehensive. In the post-COVID retail market, consumers don’t only expect your digital offerings to work flawlessly - they expect outstanding digital experiences at every interaction with your brand, online or offline.