Retail's balancing act: Customer's fickle loyalty in the phygital age

Omnichannel shopping, or the phygital (physical and digital) experience, is gaining traction as the preferred way to shop among Indian consumers, who are increasingly forsaking physical stores. However, customer loyalty is becoming increasingly fickle, as consumers frequently switch brands and retailers.

 

While the percentage of respondents who are optimistic about the Indian economy has remained stagnant for over a year (with around 76 per cent expressing optimism), there is a gaping gender disparity.

 

In the last quarter of the calendar year 2024, women’s sentiment on the economy dropped by 8 per cent, while that of men increased by 6 per cent, a trend observed across all income levels.

 

These are some of the findings from the global ConsumerWise ongoing research undertaken by McKinsey & Company, which released its Asia-Pacific findings just a few days ago.  The international survey is conducted  on more than 100,000 consumers across over 18 countries. It tracks 5 billion transactions valued at over $1 trillion and covers 90 per cent of global gross domestic product.

 

As much as 74 per cent of overall respondents in India say they have moved or researched product categories on omnichannel in the past three months, based on the latest survey conducted in November, compared to 14 per cent who did so through physical stores. 

 

The remaining respondents shopped exclusively online. Based on previous surveys, the research indicates that the number of respondents planning to shop in stores has halved, while omnichannel adoption has increased by 20 percentage points.

 

However, the numbers vary across categories. In non-alcoholic beverages (24 per cent), jewellery, and over-the-counter (OTC) medicines and vitamin supplements (22 per cent), physical stores are still the first preference. Yet, omnichannel dominates as the preferred choice for groceries, apparel, consumer electronics, and baby supplies, among others. Exclusively online shopping is preferred for segments like skincare and makeup, mobile phones, and even baby supplies.

 

In many categories, while exclusively online shopping is closing in as a better choice than physical stores, it still lags behind in some areas, including groceries, OTC medicines, jewellery, footwear, and furniture.

 

Loyalty to brands and retailers is eroding, making it a challenge to ensure stickiness for brands. However, this creates opportunities for new players and startups, as consumers are willing to try new brands. When asked whether they had visited a different retailer, store, or website in the past three months, 60 per cent of respondents said yes. Fifty-four per cent affirmed trying a new brand, and 50 per cent used a different social commerce method to shop.

 

The research also highlights that Indian consumers are splurging in certain key categories, including groceries, jewellery, restaurants, and beauty and personal care. Those trading down are primarily adjusting quantities or changing retailers to secure better discounts.

 

Respondents also indicated the categories where they plan to spend less in the next three months. The top categories for reduced spending include discretionary items like toys (21 per cent) and vehicles (12 per cent), as well as essential commodities like non-alcoholic beverages (19 per cent).