Smartphones and social media are redefining the retail market – here’s how

Every Black Friday we are greeted by a wave of videos showing shoppers physically attacking each other, desperate to get that 50 percent off or ‘buy one, get one free’ deal. In 2018, however, smartphones bore the brunt of this relatively new retail event. Consumers – freed from high-street queues – made purchases from the comfort of their sofas, their workplaces and during their daily commutes instead.

Analysis carried out by MyVoucherCodes found that online searches for “Black Friday deals” were more than 1,000 percent higher in 2018 than the previous year. In the US, $6.2bn worth of Black Friday sales were generated online, with smartphones accounting for over a third of purchases.

As technology has developed, consumers have been granted increased flexibility: they are now able to shop, compare prices and avoid the crowds around the clock, all at the touch of their fingertips. According to Brand Finance, e-commerce companies dominated the top 10 most valuable retail brands in 2018, with Amazon, Alibaba and JD.com placing first, third and seventh, respectively.

Social media platforms, such as Facebook and Instagram, are at the heart of online shopping. Interactions have increasingly moved online, with roughly 2.34 billion people having social media profiles. The average person now has five social media accounts and spends at least 40 minutes per day using a social network. The market is changing, forcing retailers to adapt to consumers who demand flexibility. Consequently, the high street – and shopping in general – will never be the same again.

Online interaction
One of the most popular platforms for convincing users to make Black Friday purchases is Instagram. “Our phones have become shop windows – and social media has become a new marketplace for brands and shoppers to meet,” Amy Cole, Head of Brand Development (EMEA) at Instagram, told The New Economy.

“Nowadays you can compare prices online when you’re actually in a shop. The way that people discover and engage with businesses has evolved – they expect immediacy and personalisation.” Instagram launched its built-in shopping feature in 2017; now, users have the opportunity to purchase items without even having to leave the platform.

Brands are no longer in control of the discussion: if a product fails to meet customer expectations, social media can quickly create a PR nightmare

Instagram has also introduced shopping tools such as Explore, Story and Collection, enabling consumers to understand a particular brand’s ethos. Crucially, 27 percent of UK and US consumers agreed they could trust the platform to handle payment processes – a rather meagre number, but a growing one. Although inexperienced buyers can still find themselves duped by intricate scams, social networks are becoming more integrated with commerce.

“Consumers are looking – and expecting – for every brand interaction to be connected, personalised, and convenient,” said John Zealley, senior managing director of consumer goods and services at Accenture. As a result, brands have been forced to pump resources into developing an online presence. SEO and digital marketing expert Neil Patel claims that 88 percent of online customers are less likely to purchase from brands that leave social media complaints unanswered. Just under half of users now expect brands to provide online customer service.

One of the most significant challenges facing brands is that they are no longer in control of the discussion: if a product fails to meet customer expectations, social media can quickly create a PR nightmare with disgruntled customers voicing their opinions. Equally, when a product stands up to scrutiny or service goes the extra mile, these same customers can become brand ambassadors.

Generation game
So-called social media ‘influencers’ – who boast tens of millions of online followers – have become top targets for advertising campaigns. “Social shoppers are far more likely to trust the (hopefully) honest opinions of an influencer over a brand,” said Carrie Gilbertson, Commercial Manager at Displaysense. Gilbertson believes this is due to the fact influencers can give customers the vital insights that a brand simply cannot. This authority has opened up the social shopping market.

Founded in 2012, online marketplace Depop has tapped into this phenomenon to quickly expand its user base into a vibrant community of more than six million. “The majority of Depop users globally are part of [Generation Z] (aged 13-23), who are persuaded more by the opinions of their peers than by [the] advertising or… trends [that are] thrust upon them,” Depop CEO Maria Raga told The New Economy. “[Depop] is aligned with their preferences to buy and sell ‘preloved’ clothing from their friends and people they admire.”

Just like the NFL, whose ratings have gone WAY DOWN, Nike is getting absolutely killed with anger and boycotts. I wonder if they had any idea that it would be this way? As far as the NFL is concerned, I just find it hard to watch, and always will, until they stand for the FLAG!

— Donald J. Trump (@realDonaldTrump) September 5, 2018

Nearly half of Generation Z – an age group that accounts for 27 percent of the global population – are online throughout the day, primarily watching visual content. In 2017, consumer-generated video content saw a 96 percent interaction rate among shoppers. It’s also important to note that younger people are more likely to care about social issues than any other group: Ipsos MORI, a UK-based market research company, found that 58 percent of individuals aged between 10 and 20 took part in some form of social action in 2016.

This generational change has forced companies to rethink how they advertise their products. Nike, for example, has demonstrated that advertising campaigns can remain successful for decades if they are regularly adapted to match the trends of the day. Now in its 30th year, the slogan “Just Do It” is one of the world’s most recognisable and enduring.

Last year, Nike’s slick motivational videos took a risky and controversial turn. The advert in question, which featured Colin Kaepernick, the first NFL player to take a knee during the national anthem in protest against racial injustice, initially saw Nike’s share price drop, with a number of online videos showing consumers destroying their Nike apparel in protest.

“Just like the NFL, whose ratings have gone WAY DOWN, Nike is getting absolutely killed with anger and boycotts,” US President Donald Trump tweeted. However, Nike would go on to record a 31 percent increase in sales, with the video being mentioned 5.2 million times on social media in just 72 hours. Clearly, the advert achieved its goal – it was talked about around the globe.

An experience, not a service
Despite their online success, Amazon and Alibaba have both plunged into the physical world: in 2018, Amazon opened a checkout-free grocery store, Amazon Go, in Seattle, while Alibaba welcomed customers to its own retail store, Hema. The respective moves were no doubt a reflection of the fact that, according to GP Bullhound, 61 percent of shoppers still prefer brands with physical stores. The boutique investment banking firm also found that 58 percent of customers use their smartphones in store to research products. With online shopping lacking the sensory experience offered by bricks-and mortar shops, GP Bullhound’s research concluded that there is room for online and physical shopping to co-exist and thrive.

With online shopping lacking the sensory experience offered by bricks-and mortar shops, there is room for online and physical shopping to co-exist and thrive

According to Marcus Harvey, Sales Director at consumer electronics firm Targus, retail will soon be an experience, not a service: “Changing consumer needs call for shopping locations to exist as destinations to hang out, connect with friends, interact with surroundings, catch up on social media or even get stuck in with some work.” As such, Harvey expects to see retailers experimenting with AI and virtual reality technologies to provide their customers with an immersive experience while in store.

Retailers are looking at how technology can elevate the customer experience further. Nations such as Japan and China, for example, have already started placing QR codes on external packaging, allowing both retailers and customers to effortlessly access a world of information on their smartphones. This enables customers to make better-informed purchasing decisions.

A virtual dressing room is another proposal that retailers are working on as they look to bypass the lack of ‘try before you buy’ in online shopping. This is perhaps unsurprising when you consider research by Barclaycard indicates that social media has driven a “return culture”, creating a “phantom economy” that costs retailers an estimated £7bn ($8.9bn) in purchases each year.

“Our research highlights the popularity of purchasing an outfit or item of clothing online in order to post it on social media and return it shortly after wearing,” said Anita Liu Harvey, Director of Strategy at Barclaycard. Studies show that almost one in 10 shoppers admit to having done this.

Just as technological developments provide new opportunities for brands, they also create challenges. Whether this concerns social media, AI or virtual reality, online outlets and physical stores must start preparing for the future now because the world of retail is changing fast.