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COVID-19 and changing consumer behavior

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Feb 26 2020

The global economic fallout of the novel coronavirus (COVID-19) is yet to be determined, but what is becoming clear is the significant impact it is having on the retail sector. From cancelled runway shows at European fashion weeks to the deserted shopping malls of major Asian cities; many stores have been closed or are operating reduced hours and reporting daily store footfalls of single digits. What do these challenges mean for retailers and what opportunities does it present?

Enhanced multi-channel retailing

In the face of a public health emergency, consumer behavior is changing. With many countries imposing significant travel and visa restrictions, large numbers of people are being forced to work from home, are avoiding crowded places and abstaining from travel altogether. This has resulted in a surge in online retail sales – something of little surprise given that China has 855 million digital consumers. This change in shopping behavior will undoubtedly impact 2020 online sales figures, but what is interesting is to see how brands are reacting to the need to enhance their multi-channel retail offerings.

In reaction to this accelerated growth in online retail, it has never been so important for retailers to create cohesive user experiences at every touchpoint in the buyer journey. Harmonizing messaging across every channel is key, as people are increasingly living their life online. Optimizing cross-device experiences and improving the user experience of mobile interfaces and apps is essential to making mobile a place to purchase, rather than just a discovery and amplification touchpoint.

Contextual commerce

Contextual commerce refers to the ability to buy a product or service, anywhere, at any time, using anything – from a button to your voice. Social media is a huge driver of contextual commerce, and the introduction of Instagram’s “action buttons” and Pinterest’s “buyable pins” are helping retailers capitalize on consumer’s desire to buy in the moment.

With more people than ever going online in the search for entertainment and experiences, the role of influencers and KOLs (key opinion leaders) and KOCs (key opinion consumers) continues to be significant. 67% of Chinese consumers say their purchases were influenced by KOLs/KOCs and they are an important part of Chinese social media fabric. Brands that create shoppable content in collaboration with KOLs and enable consumers the ability to buy products more conveniently through things like social buttons could see an uptick in sales.

Rapid technology adoption

With enforced quarantine and home confinements common practice, retailers have been relying on various forms of technology to ensure products are delivered to even the remotest parts of China. Self-driving robots and drones from JD.com have been used to deliver food and vital medical supplies to many towns. While other retailers have recognized the need to offer secure pick-up locations for products, with smart lockers being used to ensure the safety of food deliveries ordered online.

Similarly, facial recognition payment systems could see greater adoption in an increasingly contactless world. Alibaba’s Alipay already uses facial recognition for payment, and in a time where consumers are looking to avoid physical contact this method of payment could see greater utility.  With face masks now a common sight in most Asian cities, it is interesting to see China’s SenseTime, an AI startup already rolling out a facial recognition product with a mask algorithm. The algorithm allows for the identification of people through their masks and flags those who are not, removing access rights to buildings in some cases.

Voice commerce will be an interesting area to watch, especially with an increase in people wanting to shop outside of the traditional physical channels. Baidu, one of China’s leading internet search providers already sees 1 in 10 searches conducted by voice and this is a trend we expect to see increase. The success of smart speakers illustrate that this is a technological development that is more than just a fad, and anything that reduces the time between product engagement and purchase will help drive shopper conversion.

Improved digital payment methods

By the end of 2019, online retail sales in China were set to hit $1.5 trillion – a quarter of China’s total retail sales volume according to a recent McKinsey report. With even more Chinese consumers going online because of the current health emergency, it has never been so important for retailers to enable seamless payment options.

Yet many cross-border online retailers are not setup to cater for Chinese consumers, who are accustomed to using their own payment methods. Union pay, a major card scheme in mainland China is rarely accepted nor are many other mobile payment solutions such as WeChat or Alipay, making it difficult for the Chinese consumer to make online purchases. Despite China itself being significantly ahead of other countries in terms of its digital payment ecosystem, international retailers and brands are lagging way behind and this could prove costly.

As the COVID-19 situation continues to evolve, it is important to highlight that the current changes we are seeing in consumer behavior will not be permanent. But what it does highlight is that those retailers who continually look for ways to create harmonized cross-device experiences that embrace “new” technology will be best equipped to meet the ever-changing demands of consumers both proactively and reactively if the situation requires.

Tag is a leading end-to-end marketing production partner to brands and agencies worldwide. We help businesses produce marketing content at scale that ignites brand ideas across all media and channels. We specialize in creating memorable customer experiences across every touchpoint.

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Related reads:

On the cutting edge: The evolving retail landscape in China

What can FMCG brands and retailers do to win at retail 

Hyper-personalization in retail: The key to building brand loyalty with shoppers

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