Mixed reality: Is it necessary for the retail industry to embrace phygital?

The retail industry has seen significant changes in the last few years. New and immersive technologies, like augmented and virtual reality, are redefining how and where people shop, influencing how retailers and mall operators engage consumers today.

For instance, augmented reality (AR) has transformed online shopping and how consumers interact with products in the comfort of their homes. With just a smartphone, consumers can superimpose computer-generated 3D images of products onto real-world settings. AR has also enabled retailers to gamify the online shopping experience with virtual try-ons for clothes or make-up, creating a “try-before-you-buy” experience to give consumers peace of mind.

Many consumers have also started shopping in virtual stores. Using virtual reality (VR) headsets and gloves, consumers can transport themselves into these interactive and immersive computer-generated worlds, browse through virtual products, and even personalise them before hitting the “buy now” button.

Immersive technologies present exciting opportunities to engage consumers today and could translate to outsized business growth for those willing to adopt them. IDC predicts spending on VR and AR technology in Asia Pacific to reach US$16.4 billion by 2026.

Data points to continued online growth. Within Southeast Asia (SEA), there is vibrant digital growth and immersive tech adoption. A 2022 study by Bain & Company shows that 31% of SEA consumers use AR solutions, and 29% explore virtual worlds such as SecondLife and Minecraft. About 22% use VR solutions.

In the wider Asia region, digitally native shoppers are starting to dominate the marketplace. A United Nations study of major economies show that online sales accounted for 19% of the overall retail sales in 2020, up from 16% the year before. Moreover, almost half of the income earned today is by the tech-savvy Gen Z and Millennial generations. In addition, a study by Snapchat found that Gen Z consumers in Asia favour communicating in visual media more than written text.

Despite the growing adoption of immersive technologies, however, we have noticed that many shoppers are returning to physical stores, happy to see, touch and experience products — an experience they would otherwise miss if they shopped online.

While the pandemic may have accelerated e-commerce growth, there has been some rebalancing to offline experiences since economies have re-opened in the past year. Offline purchases accounted for a 41% share of wallet in Southeast Asia. Online sources continue to be important when consumers research and evaluate their purchase options, with 80% of respondents preferring to visit online sources before purchasing.

Given how tech-savvy Gen Z and Millennial consumers are, it is easy to assume they would choose to shop online. However, research from Criteo shows that these segments will continue to support brick-and-mortar retail stores because they prefer a blend of online-and-offline shopping experiences.

So, while there is a significant shift in where and how people shop, retail will not become a predominantly online or virtual experience anytime soon. Instead, it has become and will continue to exist as an omnichannel retail experience.

Adapting brand strategies to thrive in this physical and digital, or “phygital”, era boils down to one principle – evolving with consumers. The ubiquity of AR and VR technologies, married with the proliferation of virtual worlds such as the metaverse, allows for more immersive and experience-driven shopping journeys.  Retail brands must work with mall operators to rethink their omnichannel marketing strategies and find the right partnerships to create a mixed online-and-offline reality that engages and provides value for their customers.

We have started to help our tenants and retailers transform their shopping experiences by implementing AR at our developments.

Riding the gamification wave as part of our experiential marketing efforts, we have created innovative in-person moments for shoppers and retailers. In Singapore, we rolled out “Sleigh Dash”, a Christmas game within the Lendlease Plus app – our shopper rewards programme - in December 2022. Shoppers who chalk a minimum spend in Lendlease malls can earn game chances, score points, and prizes, which can then be redeemed in-store at Lendlease malls.

We also launched a “Find Your Fortune AR” activation during Singapore’s 2023 Lunar New Year festivities. It is common for celebrants to maximise their chances for a prosperous year and so we tapped into this cultural insight to gamify the shopper experience and incentivise participation through exclusive tenant-sponsored deals. Shoppers were invited to use the Lendlease Plus mobile app to play a treasure hunt game and collect rewards, such as e-angbaos, e-deals and non-fungible tokens (NFTs), at AR active zones in any of the Lendlease malls in Singapore. Besides immersive tech, we have also introduced digital payment and e-voucher solutions to stay relevant to these digitally-savvy consumers.

These activations also allow us, and our tenants, to farm data such as footfall, tenant engagement, time spent at malls, and types of offers that people are engaging in, to unlock new insights and improve customer engagement.

The data derived from using such technology is key to helping us re-engage existing mall visitors while finding ways to bring in new customers for our tenants.

We see continuous growth in digital literacy among shoppers. For example, our data shows year-on-year growth in e-voucher utilisation among our Lendlease Plus members. There was a 125% increase in e-voucher usage by Lendlease Plus members in 2021, and at the end of October 2022, e-voucher usage on the Lendlease Plus app had increased by more than 51%.

Looking at the growth alongside the rollout of our experiential marketing campaigns, this trend reflects how our experiential marketing efforts and in-app redemptions can shape consumers’ behaviours. Moreover, as a mall operator, the data helps us find the right tenant mix for consumers at each mall to ensure sustainable footfall.

Observing the uptick in online shopping, the return of offline shopping and the marrying of physical and digital experiences, an omnichannel shopping experience has emerged as a new norm. The Asia region is primed for a mixed reality that blends immersive technologies and physical retail.

As players in the retail industry look to evolve and keep pace with new consumers, we must not only look to advance our omnichannel marketing efforts but also focus on not just technology, but also value creation for all stakeholders, to thrive in this “phygital” era.