Selling in Covid times: Phygital becomes the new normal for retail
With the pandemic changing consumer purchase patterns, ‘phygital’ has become the buzzword for retail players who are innovating with experiences that encompass both the physical and digital space
The Covid-19 pandemic has changed the way the world behaves. The worldwide spread of the virus has led to a decrease in demand and revenue for various sectors or industries, barring a few. Consumer behaviour and shopping patterns have changed drastically to adapt to the new normal. Digital has played a big role in the consumer’s life over the past six-seven months, and like pretty much everything, it has also impacted the retail shopping space. Now with COVID fatigue setting in and with festivities underway, retail players are changing things up and offering customers what is called a ‘phygital’ experience. For the uninitiated, ‘phygital’ is a term that refers to the blend between physical and digital consumer experiences. 2020 has become that watershed year, where consumers can browse through the latest designer wear on WhatsApp, or get a demo for a new appliance over a video call!
There are naysayers that believe the pandemic spells doom for offline retail as we’ve known it. But retail players have been quick to adapt, innovating and ramping up experiences and safety measures for consumers, thereby building trust and enabling the sector’s recovery. The festive season is also touted to play an important role in driving revival for the retail industry. Harsha Razdan, Partner and Head, Consumer Markets and Internet Business, KPMG in India, anticipates a surge in demand across categories in the retail sector during festive season. “Going forward, we believe that entertainment and shopping could see a surge in demand– especially given the onset of the festival season,” he notes. “The retailer’s focus should shift on converting existing brick and mortar businesses to safe-delivery-oriented avatars. Since localisation has already become the new standard, going hyperlocal will be integral to a retailer’s success in the new normal.”
Creating a unique virtual experience for consumers looking for contactless purchase will be a critical game changer for the retail industry, observes Taranjeet Singh, Managing Director, SEA and India, Criteo. “Going forward, an optimistic trend to take note of is that of demand revival and a pivot towards a digital-first approach when it comes to shopping. Retailers including e-commerce players should gear up in advance to deploy an omnichannel marketing strategy and ensure that consumers get both the online and offline experiences they desire.”
FESTIVE SEASON: DRIVING THE RETAIL REVIVAL
The Covid-induced lockdown earlier this year had not only disrupted businesses and operations, but also changed consumer sentiment significantly. While safety and hygiene have become the new norm, consumers are now seeking more value propositions and opting for essential commodities as a result of the shrinking job markets and wallets. The shopping trend has changed during these extraordinary times, with apparel chains like Shoppers Stop seeing consumers make purchases of a higher bill value than even pre-Covid times. Explaining that customers were now picking up everything they need in one single visit, Uma Talreja, Customer Care Associate, Chief Marketing and Customer Officer at Shoppers Stop Ltd, says, “As the stores closed during the lockdown, business was significantly impacted, and we faced a cash flow issue. Our priority was to manage expenses and protect our staff. During Unlock 3.0, customers were still sceptical about stepping out of their homes and visiting stores. The footfalls were 25% to 30% lower than usual. And customers were slowly moving online and shopping on our omnichannel platforms – website and mobile app. Omnichannel in the last quarter contributed more than 10% to the company revenues.”
The fact that malls were shut also impacted the retail sector tremendously during the lockdown. Now that malls are open again, retail players are confident that consumers will walk back into stores and there will be a revival in business during the festive months. Shailesh Chaturvedi, Managing Director and CEO, PVH brands at Arvind, tells us that business became almost zero when the lockdown was imposed and both online and offline businesses were affected for some time. “During lockdown, there was no online business for most of the time, no offline, malls were all shut, so that was a complete contraction of business happening. Things then slowly started moving, online business started delivering essentials later, fashion also started online, the high street business picked up and then malls also opened from 1st September onwards. Now, our distribution channels are on and everything is running. And our business has reached more than 60% of last year. So it's sort of a journey, every week the numbers are growing up.” The company has also swung back into action, rolling out a high decibel campaign for its menswear label, Arrow with actor Hrithik Roshan and with plans to expand its footprint further by launching another 20 stores by the end of this year.
“Covid-19 has changed the retail industry, providing brands with both opportunities and challenges. The consumer mindset has shifted, and our research indicates that a part of the market is waiting to get back to life as they knew it and therefore looking forward to shop and reclaim all the missed experiences,” says Srinivas Rao, Sr. Vice-President, Lifestyle, Marketing.
Categories like make-up and beauty are also betting big on the festive quarter to drive recovery. Observing how Sugar Cosmetics has been seeing a positive uptick towards revival for the brand and the overall industry, Vineeta Singh, Co-founder & CEO, Sugar Cosmetics also expects to see a surge in demand during the festive season. “Since May, when the unlock procedures kicked off, we have already clocked in our highest ever online monthly sales and 40-50% of our stores are already functioning. We’re seeing a trend of consumers who are celebrating the festive season to get their dose of normalcy by indulging in ‘feel-good’ items like makeup for themselves and gifting them to their dear ones who are away. We are gunning for a 50% jump from our FY20 numbers by the end of the FY21,” she says.
TOWARDS A ‘PHYGITAL’ RETAIL EXPERIENCE
With the gradual change in consumer behaviour in the new normal, retailers too have changed their business strategy decisions with increased investment in online platforms. Metro Brands for instance is investing in technology to ensure their e-commerce platforms are more robust and consumer friendly, says Alisha Malik, Vice president, Marketing and Ecommerce, Metro Brands. “Investment in WhatsApp communication and leveraging our loyalty program will also be a key focus area. We have started with different new ways of reaching out to the customers, like ‘home visit’ service where in, the customer can take a virtual tour of the store over WhatsApp, choose the products, and ‘Try and Buy’ from the comfort of their home. Our ‘drive – thru’ service allows the customers to make a purchase from the comfort of their car. We recently started setting up ‘pop-up’ stores in select apartments/ housing complexes while following the safety protocols.”
Brands are pulling out all the stops to leverage digital tools and AI to offer an enhanced shopping experience to consumers. Anand Narang, VP-Marketing, Bata India Limited elaborates, “For Bata, digitisation has been happening across multiple functions – be it in our factories, agile product creation, product distribution, managing retail operations or even customer experience. To manage and scale-up our franchise operations, we have launched a first of its kind ERP platform ‘Bata One’, an interactive AI enabled platform for taking orders from franchise partners with capability of suggestive ordering, KPI tracking, real time basis order confirmation, one stop solution for complaint resolution and integrated payment gateway.” Narang adds that the brand has also rolled out a service in Bata ChatShop that allows our customers to locate the three nearest stores by sending their location via WhatsApp.
Likewise, Lifestyle has also introduced tech enabled payment and billing options and new-age services like ‘buy & try’ where customers can make their purchase and try it at home at their convenience. Srinivas Rao adds that all these innovations will go a long way in improving the consumer experience, while ensuring safety for all. “We have also leveraged the power of WhatsApp to introduce ‘WhatsApp Commerce’ and also ‘virtual tours,’ through the video calling feature to enhance customer convenience,” he states.
THE ROLE OF SMALLER MARKETS
In comparison with metros and tier 1 markets, the tier 2, 3 and 4 markets have seen a relatively lesser impact from the pandemic. KPMG’s Razdan observes that these markets might well be the key to recovery across all sectors. “Higher disposable income due to enactment of new agricultural reforms, improved agriculture yield and reverse migration this year could be some of the contributing factors to growth in tier 2-3- markets in short to medium term,” he notes.
Sameer Shukla, Executive Director, Retail Intelligence, South Asia, Nielsen Global Connect, anticipates that rural markets will continue to perform better than the urban ones in the upcoming quarters. “There is definitely a strong tailwind for rural markets. The monsoon has been good for the second consecutive year. But what is very important is the kind of manufacturers and the distributors’ action there. So that supply side has to be equally packed and the expectations from the rural markets have to be met. Rural doing better than urban looks like a continuing trend, at least for the coming quarters,” observes Shukla. Nielsen in the fifth edition of its FMCG forecast COVID-19 -- Evolving consumer trends report, also notes that the festive season sales may get a boost from the pent up demand during lockdown.
ONLINE SHOPPING GETS A BOOST
While retail continues to be one of India’s largest industries, e-commerce has also come to the fore as shopping habits have been majorly affected during the pandemic. According to a recent report released by mobile marketing analytics platform – AppsFlyer, India witnessed a massive jump in the fashion and e-commerce apps post lockdown. "2020 will be remembered as a year of managing seismic shifts across businesses. Given that in-app shopping activity skyrocketed during the pandemic in Q2, surpassing even the 2019 Q4 rush, we can expect the upcoming 2020 holiday season to do just as reasonably well. India is fast becoming a mobile-first economy, and having the right measurement infrastructure is the most critical requirement to succeed in this space,” says Sanjay Trisal, Country Manager, AppsFlyer India.
Diptanshu Ray, Lead, Retail Intelligence, South Asia Nielsen Global Connect expects the organised sector to get bigger. “E-commerce is also going to be bigger here, not to say that the traditional trade is going to go down. Some of the resets are the prominence of home delivery and contactless behaviour, these resets are going to change certain retail behaviour and enhance some dynamic ability as well. But overall, the organised sector is going to get bigger and more dynamic in the coming days.”
Social and digital media has steadily been gaining momentum in the past few years, says Sachin Jain, Managing Director, De Beers India, while revealing that e-commerce is the way forward for the brand. “Our research shows that a consumer sees a category online six times before visiting the store. During the pandemic, when we could not physically interact with our consumers, we conducted virtual diamond master classes through various platforms to engage with our audience. Interactive technology like gamification, tribute kiosk and virtual try-ons featured in stores provide a lot of engagement amongst the new age consumers. Surely e-commerce is the way forward for us and we are investing time and energy in creating our consumer-based platform to encourage sales online.”
Retail players are rapidly innovating to meet the heightened need for safety while leveraging technology to enhance consumer experience. Ranjani Krishnaswamy, General Manager, Marketing, Tanishq, Titan Company Limited explains how the brand has adapted to the new normal. “There are multiple things that we're doing across the digital platform to ensure that a significant amount of the consumer journey is sitting on the digital interface, and thus reduce the exposure for the consumer. And even when customers visit our store, there is technology getting used inside the stores as well, there are UV machines to make sure that consumers feel safe and reassured when they come to shop with us.”
The emphasis will be on ‘phygital’ as India unlocks and as the retail sector works towards revival. Explaining how technology will continue to remain the brand’s backbone, Tanvi Malik, Co-Founder, Indya says, “We are introducing new tech-driven initiatives such as preference-based catalogue curation, subscription boxes, and other AI-enabled features to deliver a personalised shopping and browsing experience for our customers.”
MALLS GO PHYGITAL TOO!
Malls have been one of the hardest hit businesses, facing challenges like low footfalls, offline businesses moving online and meeting retailers demand for either rent waivers or new rental agreements. Now with unlock well underway, players like Phoenix Malls have also launched ‘phygital’ initiatives, including home delivery and curb-side pickup. Rajnedra Kalkar, President West – The Phoenix Mills Ltd. tell us how they are operating under the new normal. “It has become increasingly important to reach customers across touch points that they are comfortable with. We have transitioned to become experience centres that match offline joy, online. We have adopted a unique approach, which has integrated digital and physical initiatives to give customers the freedom to engage with us across platforms they prefer, be it physical or virtual.”
Online businesses see increased conversions in markets with offline stores and the growth of online origin brands establishing a physical footprint is only increasing. The impact of the pandemic notwithstanding, Naviin Ibhrampurkar, Head of Marketing and Corporate Communication, Inorbit Malls notes that quality space is always in demand. “Malls are social spaces designed to help people relax and rejuvenate, discover new things and share memorable experiences with friends and family. Businesses moving online is an opportunity for engagement with retailers to understand and help them optimise their evolving supply chains. Quality space is always in demand and we are operating with near zero vacancy.”
The past few weeks have been good news for the malls, as shoppers are returning after staying away for almost six months now. Malls are also exploring technology and contactless solutions to keep staff and consumers safe during the coming months. “Infiniti Mall has roped in offline technology platform DotPe to provide contactless dining solutions to its F&B partners. Customers can order food from select brands. Moreover, we are providing the best rental solutions to our retailers which is mutually beneficial to both,” says Mukesh Kumar, CEO, Infiniti Mall.
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