18 months later: a few thoughts for retailers and consumer companies
Retailers and consumer companies are experiencing a whirlwind from every direction.
Covid-19 is extending its reach with no real end in sight. Consumer habits are changing completely because of the pandemic. New consumers are arriving in the form of Generation Z, with high demands for hyper personalization and their search for a genuine connection to brands. Many retail brands also have massive real estate footprints which no longer add value to consumers whose shopping patterns have changed.
With this torrent of rapid change not stopping anytime soon, Retail & Consumer brands need to act fast.
Last year around this same time, companies were still feeling the first punch of the pandemic and it was not pretty. With one year of experience under their belts, successful companies, those who either had their digital transformation in place or reacted fast, not only did not lose money, but they also came out with better results. Companies like Walmart, Home Depot, Costco, and Nike are seeing some of the best financial returns in their history. Other companies, mainly the ones that started too late, are regretting their lack of speed in reacting to the constant changes challenging them.
To keep ahead, brands need to focus their strategy on facing this ‘new order.’ The good news is that after more than a full year of an intense pandemic, certain changes have emerged as set patterns, allowing companies to build them into their plans.
The physical store is dead, long live the physical store.
Retail needs to reconfigure the purpose of the physical store. It is true consumers are coming back to brick-and-mortar locations, but not for the old reasons.
For retailers, multiple sources of data indicate that having people at stores is a must. According to NPD Group Inc, in-store impulse purchases happen at least 50% more than what happens online. Also, purchase returns are less in the physical world, 8% compared with 25% online, according to Forrester Research. And that is just a few reasons.
The problem, however, is that no one wants to go to a traditionally focused store anymore. Consumers do not want to deal with a pushy seller, or worse, no attention at all. Instead, consumers want to enter a store to connect, feel and think in a way that is simply not possible when purchasing online.
Physical stores that did not change with the times were destined to die. Those stores that remain must be repurposed with the customer in mind, otherwise more brands will disappear.
The ´war for the customer’ is expanding
Before the pandemic, money spent on food had a 50/50 split between groceries and restaurants. Because of the pandemic, this shifted to a 70/30 rate, with grocery stores winning a new share of the customer’s meal planning.
These changes in consumer spending habits have meant some companies have seen a sudden increase of 40% on their revenue line. And they will do almost everything to keep that margin, making what is going on in the retail world a Godzilla vs. King Kong fight. Major brands and restaurants that were already behemoths are in a powerful battle over the food market.
This is not only happening in the food world. Many other sectors are experiencing a complete transformation because of Covid-19, and most changes will not revert to what existed before even long after the pandemic subsides.
Businesses need to plan accordingly. In the center of this fight is knowing what really customers care about. More than any other time before, companies really need to know their customers.
Good brands are still ahead
Those that started their digital transformation before the pandemic had an exceptional year. Retailers that were slow to react simply sped up what was coming for them soon anyway.
If there is just one lesson that companies learn from this period, it is that whatever their digital strategy is, it is already a fight against the clock.
Importantly, to get ahead and stay ahead, companies need to understand that digital transformation is a term of the past. What exists now is more of a digital integration; there is no bi-modal mode anymore. Digital needs to be integrated into every business strategy now. Not later. Now. Otherwise, it might be too late.
They are here and they represent the largest global population
Generation Z, those born from 1996 to 2010, became the largest generation in 2019, representing over 30% of the global population. That is about 2.4 billion people. With the elder ones turning 25 this year, most Retail & Consumer brands will run to adapt for this new wave of consumers.
One dominant characteristic: they look for experiences first, product second.
If companies do not make a priority to have a genuine relationship with customers, they will end up having absolutely no relationship at all with them. At the center of every relationship is the genuine interest of making the other person’s life better, and companies simply cannot do that if they do not know the person they are trying to connect with. Long gone is customer segmentation within the population. Now, it is about hyper personalization for the individual customer. Caring about the customer as a person, not what group or type they represent.
