In under two months, the Coronavirus pandemic has changed the world at an unprecedented scale, forcing us to rethink how we engage, communicate, and interact with others. With store closures following the outbreak of COVID-19, retailers have been left with no choice but to recalibrate their strategies to adapt to the ongoing crisis.
The Pre-Pandemic State of Retail
Even though in-store still plays a key role in sales, the retail industry has seen a rapid increase in e-commerce due to its convenience and the vast amount of product information available. In 2019, the worldwide retail e-commerce sales were 3.53 trillion U.S. dollars and were expected to reach 6.54 trillion US dollars by 2022.
Pre-COVID-19, retailers’ priorities focussed on creating seamless omnichannel experiences across their digital and physical touchpoints in a highly competitive market - recognising the importance of providing more meaningful and personalised experiences to customers, which digital solutions have been key assets for.
The changing customer needs have accelerated the wider adoption of immersive technology such as augmented reality (AR) and artificial intelligence (AI) in the retail sector. Holition’s collaborations on virtual try-on Magic Mirrors with brands such Charlotte Tilbury and Uniqlo have allowed retailers to blur the boundaries between the digital and physical realms of the shopping journey to enhance the customer experience across the beauty and fashion sectors. Following recent disruptions to the market, such innovative digital solutions are expected to have an even more important role in shaping the future of retail.
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Closed for Business: Retail Shifts During the COVID-19 Outbreak
Very early on in the crisis, we saw top fashion players and industry leaders come together to provide aid and support, with luxury brands such as Moncler, Versace, among those that took the lead as Italy found itself becoming the epicentre of the outbreak in Europe. Other luxury brands such as the LVMH, Prada, and Kering Groups have also recalibrated their factories into producing personal protective equipment (PPE) such as face masks, medical gowns, while fragrance factories focussed on producing hand sanitisers in large quantities. It was clear that the fashion industry’s resolve to fight back and respond to the crisis became magnanimous too. (See here: Fashion fights back)
Amidst physical store closures, brands also redirected their attention towards more creative, technology-enabled storytelling in the online sphere to create new conversations with consumers. Back in 2019, one of the emerging Future of Retail trends that we forecasted included the rise in digital fashion and crossovers between the fashion and gaming industries. COVID-19 certainly accelerated this at a very significant rate.
Our first foray into digital fashion saw the launch of a HOT:SECOND, where store goers were able to virtually try-on a spectrum of digital fashion garments ranging from Couture to Streetwear through augmented reality. The success of the pop-up store indicated a general curiosity towards digital fashion and its integration within physical retail environments.
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Although the pandemic has temporarily limited the way we dress and express our individuality and creativity through fashion in the physical world, gaming and the virtual world have certainly made up for this in the online sphere. Today, that conversation is happening within the Nintendo Switch game, Animal Crossing. Brands such as Maison Valentino, Burberry, Acne Studios, and Marc Jacobs are virtually reimagining their new season collections and launching it in the game, enabling players to customise their virtual avatars, now fully decked out in designer merch.
While on one hand we have major players such as fashion house Saint Laurent announcing that it will no longer participate in Paris Fashion Week due to COVID-19 moving forward, on the other side of the spectrum, young designers such as Angel Chen are debuting their collections through a virtual reality in Shanghai Fashion Week. Here in London, we’re anticipating an all-digital London Fashion Week too. Needless to say, it will be very interesting to see how other fashion brands will innovate post-COVID-19. Perhaps, the future of retail will see more brands cashing in on all-digital and virtual multi-sensory experiences instead.
Online, IRL: E-Commerce takes precedence
Other brands have shifted their activities towards e-commerce platforms after the outbreak of COVID-19 crisis, opening up new perspectives for the future of retail over the long term. As a consequence, online retail sales have increased by 74% in average transaction volumes in March 2020 (compared to March 2019), however, not all the retail sectors are impacted the same way. According to Internet Retailing and the Financial Times, some retail sectors, such as beauty, have seen their online sales increase whereas others, such as clothing, can be perceived as less essential and, therefore, have recorded an important loss. For instance, the online sales of beauty products recorded a growth of 140% during the first week of April whereas the clothing sector suffered a 20% loss compared to last year. The Business of Fashion points out that the luxury goods industry is likely to suffer a loss of 50 to 60%.
As the COVID-19 crisis forces customers to shift to e-commerce, online retailers’ main focus should be on optimising the e-commerce journey and integrating digital solutions, which allow them to provide similar product information to what customers would normally find in-store.
Positive signs of recovery in China, however, give a more optimistic view of the near future of the beauty sector as more countries slowly transition out of the lockdown period. Taking on a phygital approach to connect both online and offline worlds through AR and AI technologies could offer a more realistic and engaging experience. These will be an integral part of the future of retail and will enable brands to provide consumers with a personalised and immersive brand experience while solving hygiene concerns.
Augmented Reality integrates computer-generated visuals and sounds that can adapt to the user’s environment into the real world. In the beauty industry, this technology will mainly be used to power virtual try-on experiences.
In the beauty sector, virtual try-on enables customers to digitally test different makeup looks in seconds thanks to AR and AI technologies while removing constraints related to hygiene, solving consumer pain points surrounding choice paralysis and facilitating decision making.
Virtual try-on experiences can be used with in-store magic mirrors, as Charlotte Tilbury did with its Charlotte’s Magic Mirror or integrated into smartphone apps, such as the Rimmel Steal the Look mobile application that allows you to snap a photo of any face and steal that look to virtually try on (with Rimmel products) and purchase.
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More recently, these virtual try-on experiences have been reimagined through an added layer of artificial intelligence and beauty diagnostics capabilities, which support the emerging personalisation trends. Applications, such as My Makeup Artist and Younique Beauty Guide create a highly personalised beauty experience, offering not just virtual try-on functionalities but recommendation capabilities too.
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As we look to the future of retail, we foresee AI being used for many other purposes such as voice-operated tools, performance marketing measurement platforms, demand forecasting and supply chain tools, in-store data collection or chatbots.
A socially distant in-store experience awaits
Whilst safety and health assurance are now becoming critical for generating foot traffic in the near future of retail, key focus areas for in-store retailers besides complying with social distancing requirements will be maximising sanitisation and minimising touch-based interactions.
As a consequence of the perceived safety risks and limitations on product information available to consumers, brands will need to find alternative ways to entice them to visit their stores. Shifting the focus even more to the experiential aspects of the store environment by providing unique and meaningful digital experiences will allow retailers to position in-store as a platform for entertainment and provide additional value to their customers.
Concerns and restrictions around product testers/samples and interactions with sales advisors will challenge retailers to find new ways to communicate product information to customers, proving that virtual assistants and try-on experiences will play an even more significant role in consumers’ decision making in-store. In the post-pandemic era, implementing touchless digital experiences with the help of gesture technology or voice control systems could be new exciting directions for the industry to evolve into.
What does the Future of Retail look like?
To survive in the post-COVID-19 world, retailers will have to adapt to the new norms by implementing more hygienic and effective solutions, supported, for instance, by new technologies. Improving their online presence and their omnichannel strategy will also be essential in the future of retail, not only to offer a more seamless and engaging experience but also to help overcome the new concerns related to physical interactions and hygiene.
New technologies will play a major role in the future of retail, in particular with the adoption of enhanced omnichannel or e-commerce experiences, virtual and augmented reality, artificial intelligence and the Internet of Things. Retailers will have to offer an increasingly personalised, exclusive and innovative customer experience to stand out, and the integration of these new technologies will be a prerequisite for their success, as well as the exploitation of customer data.
A roadmap to the Future of Retail
In the coming weeks, we will be introducing a new series, which aims to tackle the emerging technology trends that are shaping the future of retail and how brands, retailers, and business leaders can adapt to this post-pandemic new normal.
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