How digitalisation and the metaverse are revolutionizing the retail industry
Author: Shireen El Khatib — CEO, Majid Al Futtaim — Shopping Malls
- The metaverse is going to change how we buy our retail products. Clothing brands such as Adidas, Gucci and Vans are already preparing their presence in the digital sphere.
- Rather than reducing physical sales, the metaverse could unlock opportunities for retailers, but bridging the physical and the digital while creating a cohesive customer experience will be crucial.
- To succeed, phygital retailers must innovate and offer their customers the best of the digital and the best of the physical, as well as opportunities to move easily between the two.
“See you in the metaverse!” is a phrase that is becoming very familiar, as it’s predicted we’ll be spending an hour a day in the virtual world by 2026.
But what will we be doing there? Among the most highly anticipated possibilities will be shopping and owning non-fungible tokens (NFTs) — or even digital fashion. Brands including Adidas, Gucci and Vans are already staking out a presence.
What opportunities and changes does metaverse offer retailers?
The COVID-19 pandemic accelerated the shift to digital consumption, which changed customer experiences and expectations. At the same time, it enhanced the need for human interaction and a sense of community.
Shopping malls are already centres for these connections: hubs for culture, leisure, and wellness, as well as for physical shopping. And this role is set to strengthen as retailers evolve to seamlessly carry online experiences into physical spaces and vice versa, a fusion of both worlds to become “phygital”. It’s a mouthful to say, but very real and coming to your neighbourhood quite soon.
To thrive, phygital retailers must innovate and offer their customers the best of the digital and the best of the physical, as well as opportunities to move easily between the two.
Focusing on seamless integration
This marks a shift in our own expectations as well as those of our customers. There is no longer a bifurcation between the physical and the digital; it’s becoming clearer that a hybrid or omnichannel approach is what customers want and expect.
Digitalisation is opening up new revenue streams. Rather than focusing on ones that already exist, it is creating myriad opportunities to connect with customers and drive sales beyond the in-store visit.
To tap into this, retailers need to get used to meeting their customers wherever they are, and that includes the metaverse. Around $54 billion was spent on additional in-game content in 2020, according to JP Morgan, a figure that’s only set to grow. And it’s not just for kids: a digital version of Gucci’s Dionysus Bag created for the Roblox marketplace sold for over $4,000 — more than the price of the real version.
Cohesive experiences to increase sales
Bridging the physical and the digital while creating a cohesive customer experience offers the key to success. The need for this seamless integration is underpinned by Google research showing multichannel and marketplace formats will drive 86% of sales growth across Europe and the US in the next five years.
Retailers with a strong digital offering will prosper, the research shows, even if customers choose to buy in-store.
For malls, which have long offered more than just transactions, this is the next iteration, an extension of the role they play as a space to meet, spend time, and create memories.
The personalisation we’ve all come to expect online is fast becoming an expectation for the physical, with stores creating an immersive atmosphere, including digital displays that change content after assessing characteristics like your gender and age.
Physical retailers can tailor recommendations to individuals or display product information on-screen after customers show an interest, simply by picking something up from the shelf. Beauty products and clothes can be tried on virtually, or picked out in advance, like Chanel’s collaboration with FarFetch where shoppers use an app to select items and schedule an appointment to try them on.
Upping engagement and fostering trust
Interaction between brands and their customers in this way has a positive impact on engagement. While many parents-to-be prefer to try baby products out in person, stroller company Bumbleride saw a 33% increase in its sales conversion rate after it added 3D models of the strollers to its online shop.
Stores of the future, like the one in the Mall of the Emirates, will leverage technology and data to provide consumer behaviour insights. Visitor numbers, demographics, footfall heatmaps, dwell times, sentiment analysis, and store capacity can all be tracked and analysed to inform and tailor product offerings, improving the customer experience.
In the metaverse, our malls will have even greater reach, with people from outside the UAE eventually visiting virtually and experiencing the unique atmosphere and services. Ultimately, that might make them more likely to visit in person.
Opportunities abound within the phygital
Rather than reducing physical sales, the metaverse will unlock opportunities for retailers, infiltrating every sector in the coming years and culminating in annual revenues estimated to be in excess of $1 trillion. This means that physical footfall no longer tells the entire story when it comes to shopping malls.
We believe in the future of retail: in the physical and digital working together to put the customer at the heart of a sensory and emotional experience that will deliver what they really want.
Shopping malls have long existed at the centre of communities, and while people are starting to gather in the metaverse, research suggests the two can coexist and work in harmony to give everybody the sense of connection we know they need.