The future of brands is changing. In my previous blog article, I described how several start-ups are disrupting the existing landscape whilst big players are adapting to a new shopping environment.
Author: Thomas Hagmann, Partner, EY-Parthenon, Strategy
In order to be one step ahead, we have launched the FutureConsumer.Now initiative, aiming to help business leaders understand the consumer demands of the future and making organizations fit for a very different future. Several areas of change have been identified, among them the new consumer behavior delineating a divergence between buying and shopping. Buying will develop into an AI-driven transactional chore, whereas shopping will develop into an individualized, data-driven experience that a consumer actively invests time in. But what does this mean specifically for brands today? How can existing brands prepare for this new shopping versus buying environment?
If the future consumer distinguishes between shopping and buying, there will be many direct consequences for any consumer goods player. Companies need to move beyond protecting the business they have and instead put more focus on creating the business they want to become. One such topic will be mastering the new ecosystem, which will evolve. Today, company roles are defined within a linear value chain. Tomorrow, as consumer expectations become more sophisticated, operations will need to be flexible and demand-responsive, with companies needing to coordinate their new ecosystem: a fragmented network of partners and suppliers to deliver personalized solutions efficiently and in real time.
In addition, companies will have to analyze their product portfolio and decide if their brands fall into the category of shopping or buying. Subsequently, a whole new operating model will be required, as specific brands should focus either on marketing to AI-driven bots or to experience-hungry consumers. Similarly, the buying process should become as frictionless as possible, allowing automation to do most of the work with generic offerings framed by price and efficiency. On the other hand, brands that will have strong identifiers for consumers should rethink their strategy, to adapt to a new ecosystem created between the consumer, the retailer and the consumer goods manufacturer in this highly individualized process. Different business models should therefore be deployed across a company’s portfolio. In the future, different product categories will demand different brand loyalty and thus drive various shopping behaviors. We have created a framework for each, detailing their specific requirements.
Specifically, four distinct business models emerge through the relationship between brand loyalty and shopping behaviors. First, the “immersive shopper and brand experiences” model, where consumers place a high value on both the brand and the shopping experience. Second, “seamless retail execution”, where brands do not matter but the shopping experience does. Third, “bots over brands”, where neither shopping nor brands matter and bots will do the buying. And fourth, “traditional channel destruction”, where brands are of importance but buying is to be automated. In the “immersive shopper and brand experiences” model, consumers have more time to invest in each experience, whilst brands resonate and attract shoppers, thereby expressing “who we are”. Traditional retail models evolve to be more immersive and experiential and brands will differentiate through endorsers, quality, trend and their own ecosystem. Retail execution will have to be approached differently, with implementation of “the perfect store” based on individualized data from highly involved consumers. The shopper experience will be at the center in this new environment. Meanwhile, in a “seamless retail execution”, a convenient point-of-sale execution is critical, where optimization connects a product with a buyer through solutions such as click and collect. Sales are driven by experiential retail whilst store logistics will have to rely on a just-in-time system. Here, the channel mix will be crucial, with pure players pursuing their efforts through e-commerce, while also allowing Direct-to-Customer channels. For “bots over brands”, bots curate purchasing and drive brand decisions. Shoppers value advanced personalization and/or lower cost, whilst manufacturers balance scale from mass production with the value of personalization. Trade spend should be focused on promotions, discounts and on influencing bots, as retailers find success with private labels. Additionally, 3D printing and home production will emerge. Finally, in “traditional channel destruction”, bots will understand the importance of prioritizing the brand during the buying process, with brands being responsible for the customer experience. Brand spend moves to digital in order to educate and inform the purchasing bot, whereas trade spend is focused on advertising and driving brand awareness.
So, what does this mean for consumer goods players? If we look at the extremes of this matrix, “bots over brands” and “immersive shopper and brand experiences”, there are several key questions that companies need to ask themselves in order to prepare for future scenarios.
- How will you determine which products differentiate and which are generic for which consumer grouping?
- How can you place your marketing and business model to target bots for some products and individuals for others?
- What services will you provide that can successfully enhance your products?
- How will brand promises be kept if consumers do not share the data necessary to quantify an outcome?
FutureConsumer.Now. The future of tomorrow really starts now. Is your company ready for it? And what will this future look like? That’s why at EY we have started the FutureConsumer.Now Initiative. FutureConsumer.Now is a global EY program that is helping business leaders understand the future consumer, so they can shape their business for tomorrow. It is built around a series of global hackathons held in Berlin, London, Los Angeles, Mumbai and Shanghai. Business leaders, future-thinkers, and EY professionals came together to explore eight hypotheses about the changing consumer. Then they defined and modelled 15 future consumer worlds that might emerge. Find out more at www.ey.com/futureconsumernow.