The Covid-19 pandemic forced fashion retailers of all stripes into a gear shift. With most of the planet subject to lockdowns that forced them to stay at home, e-commerce purchases soared. But fashion, the support system of a social life, was left behind, and clothing sales reached a nadir in Q2 2020, when retail sales in Europe dropped by a disturbing 43%. 

To recover, fashion businesses have had to quickly improve e-commerce platforms, adopting ever-more creative ways to engage consumers through virtual and augmented reality and gamification. Among retailers, 67% said they’ve accelerated their digital transformation strategy as a result of Covid-19, and 63% said they’ve increased their digital transformation budget.

Retailers have also had to reimagine physical stores and make them work harder to generate revenue – at a time when new shopping generations are demanding increasingly engaging consumer experiences. Recovery overall has been supercharged by an uptick in easy-access, buy-now-pay-later finance.

Phygital: the true omnichannel experience

Omnichannel has long been a buzzword in fashion retail but now the need for recovery has driven brands to realise some of its long-discussed potential.

During the pandemic, 76% of consumers changed stores, brands or channels, showing brand loyalty to be a thing of the past. In response, bricks-and-mortar stores are working with clever digital strategies to co-create “phygital” retail – the convergence of the physical and digital experiences – to maximise attention on brand and activate further spending. Customers converting from online shopping to physical stores spent up to 60% more on average per order.

Deloitte’s 2020 survey into luxury goods shopping showed that 63% of Generation Z respondents prefer offline shopping channels to online platforms. The features of phygital retail play to that crowd, combining the convenience of online shopping with the in-store experience. Store rails are augmented with digital kiosk points mimicking the “endless aisle” of online, while smart labels, QR codes and self checkout are making it easier for shoppers to find and purchase the items they want.

Discovery: voice search and live-stream shopping

New routes to product discovery are a key trend in fashion retail. Voice search is growing: a 2020 report showed that, while only 3% of fashion shoppers had used voice to buy, 22% expressed that they would use voice in the future. With 1bn shoppers having activated voice search in Google’s ecosystem alone, it’s an opportunity retailers can’t ignore, and they are beginning to harness voice search to improve convenience and discoverability in an increasingly competitive e-commerce environment.

At the same time, social commerce is integrating social media video and influencer engagement to create an entirely new digital shopfront. China and the US are hotspots, with social buyers in China expected to increase to 446.8m by 2023. In Europe, retailer priorities are also reframing: 30% of retailers in Euromonitor’s latest retail survey said social commerce would be a part of their investment agenda.

New tools and platforms: VR, AR and integration with gaming
 

Fashion has found an unlikely ally in the ever-growing gaming industry. Covid-19 restrictions led to an accelerated global gaming market, which reached a $74.9 billion value in 2020, and the metaverse is slowly evolving into a new reality.

Monetising games has traditionally been through in-app advertising but there is now a shift to in-app purchasing, and fashion is supplying both avatar apparel as well as portals through gaming to buy physical items. E-sports has been a positive testing ground: the global e-sports market is projected to reach $1860.2 million by 2026. And many users have money to spend: 60% are between the ages of 25 and 39; many of them are parents, and a notable 38% are women.

Augmented and virtual reality are also boosting fashion and its cousin industry, beauty, allowing users to try before they buy and reducing costly product returns, while adding to brand experience and marketing efforts.

Snap Consumer AR, in partnership with Deloitte Digital, reports that, by 2025, nearly 75% of the global population and almost all smartphone users will be frequent AR users, and that interacting with products that have AR experiences leads to a 94% higher conversion rate. Again, it’s not just a Gen Z trend; millennials are predicted to take up a slightly greater share in the AR-enabled consumer figures, come 2025.

Supercharged shopping fuelled by buy-now-pay-later

Buy-now-pay-later is possibly as old as commerce itself. But in the e-commerce era BNPL has had a makeover, to give shoppers faster and easier access to micro loans.

The BNPL industry is predicted to grow to $1.1 billion by 2024-25, with an annualised growth of 9.8%. The main source of income for BNPL providers such as Klarna comes through merchant fees, which are usually between 3% and 6%. The BNPL industry is expected to reach $680 billion in transaction volume worldwide in 2025.

Fashion retail may have taken a hit during the pandemic, but through a wholehearted embrace of tech-enabled omnichannel the industry has refreshed, renewed and repositioned itself for future growth.

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