During the Covid-19 pandemic, online became a fundamental channel for retailers. Even as overall retail spending declined, e-commerce sales grew from the prior year. The impressive results may overshadow that e-commerce still accounts for only a small percentage of total retail sales – for example, in the US, the figure is as low as 14.5%, according to data from eMarketer.
This means that more than 85% of retail sales are still done in physical stores, which makes the synergy between online and offline key to the success of retail in the near future.
Online retailers have realized that to generate volume and sales they need to have multiple distribution channels. Very few people buy exclusively online or in store.
They have preferences for buying something online versus why they would opt for a physical store. Retailers want to be present in all the ways their customers want to buy.
There are many reasons why you should still invest in physical stores and spaces. And even more so to embrace omnichannel by integrating the best of on and off in a value proposition that adds.
Human beings want more, not only from our physical environment, but also from our digital experiences.
That means feeling involved and included by “being in the moment” wherever, whatever and what we do or have done.
People not only want to be present, but to be present in a way that describes a seamlessly digitally enhanced user experience. We become aware of this experience when we shop online or broadcast our updates on social media.
Organizations that are able to deliver “in the moment” experiences across the business and personal spectrum are those that realize the importance of utilizing technological innovations that enable seamless integration of online and social media experiences contained in phygital environments.
Despite the assumption that the consumer only lives online, in-store shopping remains as popular as ever.
The challenge for retailers is to provide consumers with a store that is relevant, a place that means something to people who are likely to live and shop nearby. Because as brands begin to focus more on core values and beliefs, many are now promoting a unique point of view to build loyalty, rather than simply pleasing the general consumer.
Some of the reasons that confirm the need for physical space could be summarized in these points:
1. High-quality, personalized customer service increases sales.
Despite the popularity of online shopping, the human touch remains an important part of the experience. According to research by RetailEXPO, nearly two out of three shoppers say that knowledgeable customer service and sales staff make them more likely to visit a brick-and-mortar store, and three out of four shoppers are likely to spend more afterward. to receive high-quality service from store personnel.
Products related to fashion and beauty, for example, have learned that the captivating images of Instagram ads cannot in any way replace the appeal presented by the experience of setting up direct contact with the brand.
Shoppers just love to touch, feel, and taste. And retailers are going the extra mile to meet their customers’ needs by creating immersive environments to physically interact with their brands.
2. People are more likely to buy a product when they have seen it in person.
According to KPMG research, the main reason consumers prefer to shop in physical stores is to see, experience and test products in person before purchasing. Having a physical location where people can go and make sure that, yes, this paint is exactly the color I want, can dispel consumer doubts and help close a sale. Seeing things in person can also reduce the risk of a product being returned because it is not the correct size, color or material.
3. Physical stores bring more traffic to your online store.
In one of the largest surveys of the International Council of Shopping Centers, a more direct link was found between physical stores and online commerce than ever.
Establishing a physical presence significantly increases online customer engagement.
Research from the International Council of Shopping Centers shows that when a retailer opens a new physical store location, their website traffic increases by 37% the following quarter.
The increased awareness and engagement runs even deeper for emerging retailers transitioning from online-only to omnichannel, leading to a 27-32% increase in web traffic for every one store open. new shop.
4. Customers who pick up items at the store buy additional items.
Click and collect (aka BOPIS, buy online and pick up in store) is extremely popular with both customers and retailers. Compared to home delivery, collection can be more convenient for customers, allowing them to get their purchases when they want, without having to wait for a courier at home. For retailers, in-store pickup offers many benefits: it is cheaper than delivery, attracts shoppers, and can lead to larger sales baskets.
According to Forrester, 30% to 40% of consumers who use click & collect purchase additional items when they enter the store.
5. Physical stores can reduce the cost of returns.
Returns have always been the least favorite part of online shoppers. Almost 88% of shoppers want to be able to return a purchase to a physical store. In addition, a Wharton study has found that customers who walk into a physical store end up buying something else and spending more.
Items purchased in physical stores are less likely to be returned than products purchased online. It is estimated that buyers return between 5% and 10% of what they buy in the store, but between 15% and 40% of what they buy online.
Allowing shoppers to exchange or return items purchased online can also help reduce the cost of returns by eliminating shipping and transportation fees for retailers. Consumers Like It Too: According to NRF data, 80% of shoppers say they would rather return products to a store than return them.
6. The brand experience is still inherently physical.
Retail is a highly competitive industry. While it can be difficult to stand out online, a brick-and-mortar store gives you the opportunity to create an engaging brand experience. Showrooms and concept stores, for example, can allow customers to immerse themselves in your brand culture, creating lasting impressions. Designing an experience that has the right balance of safety, excitement, and convenience is key and can help differentiate your brand from the competition.
Shopping malls that create a much more lively and vibrant environment that attracts people not only to choose and shop from a diverse collection of brands, but also to offer a common place to socialize, entertain and have fun, stand out. They cater to a variety of different demographics in one place, creating an ideal platform for brands to expose their brands.
7. You can use stores as part of your supply chain.
In omnichannel commerce, logistics costs can spiral out of control and erode margins significantly. Some retailers are achieving savings by using some or all of their physical stores, such as warehouses and fulfillment centers, to support and strengthen their supply chain. Transforming a store location into a so-called “dark store” can help reduce inventory management costs and expand reach across larger geographies by enabling faster and more effective distribution.
8. Obtain market research on the preferences and habits of your customers.
Fashion retailer ModCloth opened its first physical store after more than 13 years of selling only online. They discovered the little things, the details that their customers love. They loved the linings in dresses and skirts, and they loved the pockets. Although the data collected from the online store can help to see trends, retailers can learn a lot about their customers just by watching them buy, interact with space and products.
“From a market research point of view, [a store] pays for itself. The amount of market research you get from just observing people equals 100 focus groups,” said Sucharita Mulpuru of Forrester Research. .
To remain fully competitive, brands are leveraging affordable and flexible leases to build brand awareness. Pop-up store partnerships have become much more affordable, and in-store experiences are designed not just to make sales, but to create more memorable and interactive experiences, geared toward driving connection with your shoppers.
A new wave.
The first wave of disruption was about how to compete with online, the next wave will really be about integrated solutions. It’s not buying online or in store, but rather about delivering value to customers wherever they want to be. It is clear that you have to have both and merge those experiences.
This is key when looking to 2030 because a lot of progress will have been made. Stores will no longer be designed primarily to sell products. The main street of the future will be a mixed-use mix. Shoppers value experiences as much as purchases, hence the rise in showrooming and stores like Instagram.
Social media: from entertainment to sale.
And to add to the above is the novelty of social commerce that makes it possible for consumers not only to discover new products in the places where they spend the most time, but to buy them directly. With social media platforms increasingly implementing features to enable those transactions, social commerce is becoming an essential part of the 21st century shopping center.
The change in consumer mentality. For a long time, social media was where consumers shopped before heading to Amazon, AliExpress, Walmart, or other e-commerce sites to make a purchase. Brands used social platforms solely to build relationships, communities, and trust. However, visual first-rate platforms like Pinterest and, more importantly, Instagram began to blur those boundaries and change the game.
The last few years have seen the rise of “Instagram brands” that exist entirely on that platform. The app also helped fuel the explosion of influencer marketing, with key opinion leaders (KOLs) paid to promote brands, products and services on social media. All social media platforms are now rushing to add business features, giving brands various options when moving to social shopping. Social media is becoming a shopping center. Social commerce climbed to $ 36 billion in sales in the United States this year (+ 35%).
The phenomenon has only just begun. Pinterest and Shopify join forces in 27 countries to promote ‘social commerce’. The Canadian company is also integrated with Instagram, Facebook and TikTok, as it is convinced that although transactions within social networks is a phenomenon that is starting now, it will have a huge boost.
Both Shopify and Pinterest are confident in the success of this alliance following the significant changes in consumer habits of people around the world, especially after Covid-19. According to the Canadian company’s Future of Commerce 2021 study, 84% of surveyed consumers worldwide have shopped online since the start of the pandemic. Shopify currently has more than 1.7 million merchants globally in 175 countries, and its merchants generated 120 billion in transactions in 2020.
Social commerce has been around for a while, mostly since 2007 when Facebook launched its first version of Marketplace, where users could sell to each other on a peer-to-peer-style platform. But only recently has social shopping taken off, as the pandemic-fueled e-commerce boom has made consumers very comfortable shopping online. People continue to spend more and more time on social platforms, which, in turn, are adding features that make shopping posts practical for both brands and consumers.
According to Statista, the average person spends two hours and forty minutes on social media per day.
When the shopping experience is positive, the customer is so fascinated that they become a prescriber, in the best advertising channel that any brand could wish for. It is estimated that more than 65% of recommendations about a brand come from consumers themselves. Consumers’ purchasing decisions are much more influenced by the recommendations and advice of other users than by any aggressive advertising campaign or marketing action.
The power of the people is becoming more and more powerful. Keep sending word of mouth.
The brand must generate a moment with the consumer and this occurs only through experience. Total quality management has banished bad or just acceptable products and services from the market, hence the need for emotional or meaning differentiation.
Strong brands not only sell, but also provide use and purchase value. However, there are still companies highly oriented to the sale of products and not to offer services, which makes them weak against the competition and not very sustainable over time.
The brand is a management tool that must include all the agents involved, since it does not make sense to make a solid brand, if the workers do not identify with it. In general, a strong brand improves demand (generating higher sales volume, a higher price, higher loyalty, reducing the churn and churn rate) and supply (with lower capital and acquisition costs, better economies of scale and terms more favorable for the supplier).
Let´s get phygital.
One of the most important points to understand is that phygital is not a tool to replace a channel or experience; rather, it increases them all. A better way to think about this trend is that it is a convergence of physical and digital spaces and associated experience.
The emergence of phygital experiences demands more and more connectivity between products and services and the customers who use them. Increasingly, brands will evolve from the traditional and conventional business-to-consumer model and adopt digital-centric methods to communicate with customers using a business-to-person approach.
The integration of the physical with the digital results in a higher level of enrichment. This enrichment occurs when consumers personalize their experiences and tell whoever wants to hear or see how the interaction was meaningful and memorable.
Retail will not be perfect even in 2030. Traditional retailers will continue to try to cut costs on their path to prosperity and grapple with legacy and new technologies. And online shopping trips won’t be completely frictionless. Nonetheless, the next wave of disruption mentioned above will really be on the move.
Before we dismiss “phygital” as another buzzword, it is clear that consumers increasingly want the best of both worlds.
The challenge for brands is knowing how to effectively combine the two.