By Steve Ryan, Managing Director of DTC at Resident
The decline of the brick-and-mortar store is a trend that I think we’re all quite aware of — and while reports of retail’s death have been greatly exaggerated, the broader shift from in-store shopping to seamless ecommerce and DTC options has been, and will continue to be significant.
As the world hopefully begins to emerge from the worst of the pandemic, it’s possible we may see a renaissance in in-store preference, due in part to consumers missing the in-store experience as they were confined to their homes or adhering to social distancing measures. Thus, the in-store experience will continue to hold a level of importance.
Still, brands will begin to differentiate their in-store and ecommerce experiences as they continue to lean into the new tools and technologies that will enable seamless DTC shopping — trends like live ecommerce, AR projections of clothes and furniture, and even digital storefronts in the metaverse will blur the line between physical and online shopping even further moving forward.
In this article, I’ll speak to why brick and mortar and ecommerce will continue to coexist in the short term, how their relationship will change and experiences will eventually fragment (i.e. the Ecommerce “spin-off”), as well as the trends that I envision for ecommerce and DTC brands in the near future.
Brick and mortar vs. ecommerce through the pandemic and beyond
Consumers are still relatively split down the middle 50/50 in terms of preference toward in-store shopping or online shopping, according to the most recent State of Consumer Behaviour report from Raydiant, with ecommerce gaining a slight edge — 46% of respondents would prefer to shop in person rather than online. Reasons cited for preferring in-person shopping include seeing and touching the merchandise (33%), enjoyment of the physical shopping experience (26%), and aversion toward waiting for delivery (13%).
It follows that in-person, or “offline” shopping experiences will continue to play a large role in how consumers shape their perceptions of brands and their products as well; in the same report, 90% of consumers say they are more likely to return to a brand, 61% of consumers say they are likely to spend more at a location and 65% of consumers say they are likely to spend more online with a brand, all if they have had a positive experience offline.
This data underscores the importance of brands maintaining a positive and memorable physical presence, whilst continuing to invest in their ecommerce and DTC offerings. The pandemic may have briefly forced consumers inside, but physical retail is holding on for the time being. Brands that hope to succeed in the future must keep a close eye on evolving consumer spending habits and seamlessly integrate their physical and digital experiences.
Changing consumer spending patterns and comfort zones
As the world continues to emerge from the full bore of COVID-19 and its subsequent restrictions, consumers are beginning to cautiously look ahead to the hope of an endemic phase to the pandemic, which will bring with it both a return to former shopping behaviours and some evolved ones. Research from NielsenIQ indicates that over 60% of fully vaccinated US adults and nearly 70% of boosted adults will continue to live life but “with some caution”, and nearly 20% of boosted adults “no longer fear COVID-19 at all”.
Despite this relative relaxation about COVID, consumer’s reported spending intentions for 2022 still reflect a shift away from out-of-home spending on things like dining and entertainment (both down -31% year over year, according to the NielsenIQ report) and mostly toward essentials like groceries (+23%) and utilities (18%). Further, most consumers rated their physical and mental well-being highest in order of priorities (65 and 63%, respectively).
While maintaining some physical presence is key for brands, the evident shift toward consumer spending online cannot be ignored. In 2022, as the pandemic continues to ease, some brands will invest in a “spin-off” of their ecommerce experience that differentiates from their physical stores.
The ecommerce “spin-off” and the evolution of DTC for a digital future
When consumer spending habits and attitudes cater toward less dining, less going out to concerts or sporting events, and more investment in future security and mental and physical well-being of themselves and their families, it follows that the more significant brand touchpoint for these increasingly inward-focused consumers will be in the digital realm.
Brands don’t have to recreate their physical experience digitally, nor should they try to. Each is separate and unique and should be celebrated as such. They should instead lean into the inherent strengths and capabilities of digital, boldly utilise new technologies like augmented and mixed reality, hold livestreams for customers to preview products and even buy “on the air”, and meet their customers where they are and will continue to be — that is, at home and online.
Longer term, I believe DTC and retail in general will flip 180 degrees, with the consumer becoming the store, making brick and mortar effectively obsolete. Think of a football kit or an F1 car splattered with logos of sponsors and owners — now imagine that on the person of the future, all the time, displayed digitally and alterable in a modular fashion.
Enabled by wearables, smart clothing, and AR layers beamed onto the physical realm through peripheral devices or a heads-up display (think like Snap’s Spectacles, or Google Glass, but good), customers will be reached directly by all brands and products, and wear and display whatever they choose (or can afford) on their physical/digital person or avatar. DTC brands will start to collaborate together to enable this new evolution of seamless customer engagement, since competition will muddy and there will be no need for physical separation of storefronts — any and all brands will be available for consumers to peruse in the digital bazaar, making Amazon look like a trading post.
The pandemic changed the world, and in the sense of retail trends and consumer attitudes, it exposed at least two things starkly: 1. The sheer amount of money consumers spend on dining and entertainment has been given second thought, and many people are re-focusing their spending habits inward to invest in their health and save for the future, and 2. The physical storefront, while still in the midst of dying by 1000 cuts, is still a source of comfort and genuine brand interaction and perception-building for the vast majority of consumers.
Brands will do well to parallel-path their investment and adoption of future-focused, digital-first technologies for future ecommerce and DTC evolutions, whilst not neglecting their existing physical storefronts — especially until, and after, the pandemic ceases to have an outsize impact on our lives and the purchase decisions of consumers everywhere.