2022 marked the end of an era – the world (mostly) moved on from COVID, emerging with lessons and accelerated transformations. We can already start to see what headwinds will shape the year ahead: new standards for a redefined O2O world, a radically transformed social media landscape, and an evolving role for the metaverse. In a year that will undoubtedly be marked by transition and tough economic headwinds, those that will win will place focused investments around re-integrating the online and offline worlds – through commerce, the metaverse, social media, and more.

 

Jacqueline Alexis Thng
Samantha Papadakis

#1. New Meaning for O2O (“Online to Offline”)

Perhaps the most dramatic shift for brands in 2023 will be the continued re-joining of the digital and physical worlds. After years of brands working to bring online and offline together, COVID forced them apart. But in post-COVID hybrid world, O2O requires a rethink — from the circular, connected, seamless, omni-channel experience that we once strove for, to perhaps an even heavier focus on how online helps return consumers to the physical (commerce) environment. Behaviors shifted significantly towards online engagement under pandemic restrictions, with ecommerce rising over 55% between 2020 and 2022. Coming out of the pandemic, businesses must think about how to rebalance the omnichannel mix again, integrating emerging demand for in-person experiences with newly cemented online behaviors.

In China, brands are exploring new digitally-enhanced experiences to improve their in-store experience, with luxury brands leading the charge. Burberry, for example, invites shoppers to collect virtual currency through AR touchpoints around the store to pay for exclusive in-store experiences. This incentivizes shoppers to visit in-store for a promise of exclusive experiences that pay off (literally!), while also creating a new stream of data to better understand evolving shopper behaviors. 

In the US, retailers are adapting by building appeal for in-store visits through ‘click & collect’ offers, a service that now makes up almost 10% of all sales and is expected to continue to grow at 13%. Retailers like Nordstrom provide complementary click & collect and home delivery for in-store shopping. With the former, picking up from the store can often be more convenient, cheaper or faster for consumers, whereas the latter can allow consumers to test products in-person without having to carry it home themselves – especially convenient if the store doesn’t have quantity or type of inventory needed or if the consumer doesn’t have the capacity to take the purchase with them. The trend is also growing in Southeast Asia, with grocers like Fairprice offering similar services. 

In EMEA, brands are capitalizing the return to in-person experiences by infusing digitally-enhanced, interactive exhibits into traditional marketing experiences. For example, Grey Goose launched an omnichannel activation in Heathrow airport, integrating multisensory sampling with interactive AR experiences. By analyzing the interaction data, Grey Goose can better understand what aspects of the product most appealed to customers – learnings typically gathered from online interactions – while still connecting offline with customers in a new and fresh way. 

#2. A New Social (Media) Order

This year, social media companies globally experienced significant declines. FAANG stocks suffered their worst losses since founding, with an average loss of over 40%. The trend extended far beyond West as well, with Asia-based super apps experiencing significant challenges from regulatory pressures, slowing the likes of Tencent, Alibaba, Shopee and Grab after decades-long growth. 

In the past year the ad-driven business model has fallen further into question amidst increased data regulation, the decline of cookies, and shifting user behaviors. In its place, alternative commerce-led social experiences rose to the forefront. Most notably, ByteDance’s TikTok / Duoyin built a commerce-oriented model from the start, creating massive traction for livestreaming commerce among influencers and brands alike. In China, livestreaming commerce is projected to account for almost 12% of e-commerce revenue by 2023. Livestreaming allows customers to learn more about the product in an immersive, low-risk environment, while integrated data systems allows brands to track the performance and impact on the backend.

While livestreaming emerged as the increasingly popular alternative across most of Asia, the West saw the rise of other emerging trends, like the anti-social platforms. Apps such as BeReal rose to the top (53 million worldwide installs and 20 million daily active users as of Oct 2022), driving popularity with a focus on simplicity, a staunch anti-ad policy, and an experience that actually discourages the excessive scroll. The popularity of the app speaks to the demand for social media that prioritizes smaller social circles rooted in privacy over sponsored content, influencers, and algorithmic-fueled scrolling. 

#3. Less Meta, More Verse 

Metaverse headlines dominated 2022, from NFTs to pop-up stores, concerts, learning, and gamification. However, brand engagement appeared limited to marketing stunts and performative gestures — highly reminiscent of the early days of social media when brands were eager to lean into new platforms but were largely unsure of their role within the space. But those that came out on top did so by truly connecting the best of both physical and digital worlds around real consumer needs. 

The United Arab Emirates Ministry of Health and Prevention sanctioned the first medical customer support center in the metaverse, delivering care to patients for minor (non-emergency) medical and diagnostic appointments. This digital and interactive sensory experience goes beyond existing telehealth to provide an immersive care experience for patients regardless of if they are in the UAE or not.

Nike has also expanded its presence on the metaverse with NIKELAND, where it goes beyond games and real-life gestures to first-in-digital showrooms that allow users to try on Nike apparel and buy – truly the store of the future. 

Farzi Café, in India, joins many other F&B establishments in having both a physical and metaverse presence. However, unlike other establishments, Fazi Café’s metaverse location will allow users to play games and earn rewards that can be used to purchase actual food items at the restaurant’s physical location. 

JP Morgan Chase has built a lounge in the metaverse to highlight the bank’s thought leadership and proactively build the relationship with younger digitally savvy customers. The lounge will eventually operate as a bank in the virtual world, where it will facilitate foreign exchange with cross-border payments, support financial asset creation, and resolve customer issues.

Leaning into Headwinds with Resilience

How these trends come to life in 2023 will vary wildly by region, requiring different approaches. 

In East Asia, the economic outlook is characterized by pent-up consumer demand and hesitation around slow growth. In China especially, brands face a backdrop of dramatically slowed growth (a 30-year low, in fact) and rising social pressures. Brands that succeed will capitalize on pent-up demand by leveraging cost-effective ecosystems to meet consumer needs. 

Meanwhile, in Southeast Asia, countries are already experiencing an economic rebound from cross-border travel and state-backed investment especially in Vietnam, Indonesia, and Singapore.  Brands will win in 2023 from a continued focus on O2O strategies, balancing online and offline experiences to drive consumers back to the brand. 

And finally, across the globe in the US and Europe, the brands best positioned to beat rising inflation and increasing consumer uncertainties are those who have already begun adjusting with a test-and-learn approach – favoring smaller iterative growth moves over large, bold bets.  

Regional success invariably depends on a multitude of factors – ranging from opening borders to impending recession, from upward momentum of growth to downward pressures of uncertainty. We believe, however, that brands that focus on better understanding the new customers in a post-pandemic world, take advantage of the exciting evolution of O2O and invest ahead of the curve in the potential of metaverse will emerge stronger against those that take a back seat.