Experience, personalisation, and technology will be at the centre of consumer demands this year. We saw these trends being accelerated by the Covid-19 pandemic and in 2022, they will continue to have profound impact in the retail sector.

1) Experiential shopping:

Since the beginning of the pandemic, consumers have been starved of experiences so naturally, the demand for a holistic store experience is higher than ever.

Retailers must create an entertaining experiential store with their brand identity merged. This will not only solidify their brand identity but it will also create a unique experience for consumers, forcing them to keep coming back.

Sephora is a great example: consumers can try on makeup on their face and receive expert tutorials virtually with its augmented reality (AR) app. Such AR technology will help overcome Covid-19 safety fear and also inject fun in shopping. Furthermore, an added benefit is that consumers are more willing to exchange data for experiences. Therefore, this type of service helps add to customer profiles to be later used for targeted promotions and personalised experiences.

Nike’s flagship stores are also highly entertaining: the Times Square store holds a basketball court, treadmills, football area, customisation shoe bar etc. The cameras in these areas record the action and the basketball hoop captures body movements with kinetic sensors. Shoppers can access such footage on the app and share them on social media; but more importantly, store sales assistants can analyse the data and suggest the perfect pair of footwear. Nike is ticking several boxes with this: 1) providing an experience; 2) collecting data; and 3) personalising the shopping experience.

2) Sustainability:

Consumers’ interest in sustainability began before the Covid-19 pandemic. However, like many shopping trends, it had accelerated the demand for sustainable products and business as people started to think more about the planet and its resources.

Chriss Biggs, Global Head of Retail at Boston Consulting Group, says, “our research reveals that 90% of consumers are more concerned about sustainability than ever before”. In the USA, 32% of consumer already prioritise businesses that are making an active effort to be environmentally friendly. Similarly, in the UK, 41% say recyclability and sustainability of packaging influences their purchasing decision; and 70% are willing to pay 5% premium for sustainable products.

Along with recyclable and sustainable products, the global fashion resale market is expected to double to $77 billion by 2025. Companies such as Patagonia, H&M, IKEA, Farfetched, and Etsy are already preparing for this trend by running buyback programs, designing reusable products, and acquiring companies who can help with their mission.

It is imperative that retailers make sustainability a real priority and prove to their customers that their efforts are genuine. By aligning their values to their customers’ values, retailers will create emotionally engaged customers who have lasting, profitable, and strong relationship with the brand.

3) Tighter consumer spending:

Consumers will show more spending caution in 2022 since throughout the pandemic they suffered from the lack of product availability and rising prices.

FedEx has already warned of the increase in shipping rates this year due to labour shortage – Portland’s distribution centre is currently operating at 65% capacity as a result of labour shortage.

It’s not only increased prices that’s concerning; prices are also going fluctuate this year as it is being predicted that retailers will order too much extra stock to compensate for the delays and need to discount them in the latter half of 2022.

Such uncertainties will cause consumers to think more than usual before making a purchase. The BRC suggests retailers should “anticipate and plan for rising prices with [provide] clear customer communications to instil people with confidence.”

4) Buy now Pay Later:

Buy Now Pay Later (BNPL) has been seamlessly integrated in online stores and this year, consumers will be expecting the service in-store also.

Companies such as Affirm, Klarna, Afterpay and more have achieve good growth during the pandemic as BNPL purchases were up 29% in 2021 in comparison to 2020. PayPal alone saw 9 million shoppers use BNPL transactions on Black Friday, a 400% increase, and 1 million first-time users in the month of November. Dan Schulman, CEO of PayPal says, “It's not just popular but accelerating in popularity” and retailers should prepare for that.

Younger shoppers, millennials and Gen Z, are currently the biggest users of BNPL services. A CNBC survey found that 12% of 18-34 year old shoppers used BNPL for Christmas shopping but it was 0% for 65+ year old shoppers. Therefore, younger generations are who retailers are catering for when offering BNPL transactions.

5) Hybrid retailing:

The shift from in-store to online shopping was already happening but the pandemic accelerated the growth of online shopping. Since non-essential stores were closed, consumers were forced to shop online. Vulnerable individuals, and those who were unable and unwilling to risk going to physical stores, even did their essential shopping online.

Many shoppers have continued to shop online preferring the price compactivity and convenience it provides. 50% Britons said they mostly or always shop online for non-food products; 29% said they shop in store; and 31% said they split their shopping between online and in-store.

Gen Z are the online shopping generation while 55% of millennials have stated they always or mostly shop online. As for boomers, 67% favour online shopping and 28% shop in-store.

However, don’t make the mistake of taking a ecommerce heavy approach because the high street is not dead. According to the BCG, 48% of shoppers favour hybrid shopping compared to the 39% last year and it is expected to grow further in 2022. Consumers utilise many different touchpoints to learn about products and interact with the brand before making the decision to purchase. The reality is that consumers are becoming increasingly savvy and their buyer journey is complex. 50% of consumers regularly use more than four touchpoints (the average is six), making omni channels a necessity for retailers.

6) Technology:

Part of the reason for online sales success is efficiency and convenience. Retailers can replicate that in-store with the help of technology. The line between online and offline is blurring and consumers using omnichannel means it’s time to bring digital in the stores.

A quarter of UK consumers believe that being able to ask questions and get help in-store instantly would encourage them to buy products that are difficult to buy. Shortage of labour and reduced stock has caused distress in shoppers throughout the pandemic. Thus, it’s important for stores to employ technologies such as bots, analytics, and cashier-less shopping to create a seamless experience for consumers.

Aldi and Amazon’s checkout-free stores, for instant, have delighted consumers in 2021. Back of house, technology such as real-time inventory management software will help improve supply chain and stock efficiency.  

7) Personalisation:

Consumers are starting to expect personalisation in recent years. Meaningful 1:1 interaction, personalised messages, accurate recommendations, and targeted promotions are all tools to maintain customers and earn loyalty.

AI based video analytics can help retailers understand consumer behaviour and their interaction with products and the brand, helping them create a personalised shopping experience, personalised offers, promote relevant products and more.

According to Brandon Ashcraft, VP Engineering, Mobiquity, “the ability to create and deploy the immersive, personal experiences customers crave will determine who wins and loses as platform use becomes every bit as important – or more important – than in-store experience.” Everything from products, promotions, and experience must resonate with the shopper.

 

8) Social media:

Live streaming and influencer marketing have quickly become important touchpoints for consumers. The live streaming market alone is expected to reach almost $224 billion by 2028. In China, where it is more established, live stream shopping accounted for $180 billion in 2020.

Selling on TikTok’s has also become easier since they allowed advertising on the platform. However, Instagram is pioneering social commerce by integrating direct purchases through the app. Discovering products on the platform is fun, which improves footfall and time spent, and the virtual stores make purchasing journeys quick and easy.

 

Final thoughts:

With rising costs of providing the best in-store experience and acquiring new customers, loyalty will become the winning stake.

By fully adopting these trends, retailers can provide entertaining, easy , and personalised shopping experience, leading to higher consumer engagement, improved footfall, and ultimately higher sales.

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