Megatrends in digitalization, demographics and technology are not just reshaping future consumer habits; they’re changing our entire world. In the new reality, industry lines give way to fluid ecosystems.
Let’s imagine the ecosystem of the future. The future consumer lives in a smart home, in a smart city. They probably work remotely, but they still need to get around for business, leisure and for travel. A seamless network of driverless, electric cars meets tomorrow’s mobility requirements, and also allows for efficient transportation of goods. This safe, comfortable and personalized mobility offering renders ownership of a vehicle obsolete. It’s today’s sharing economy multiplied a hundred times.
Convergence is doing more than redrawing industry lines; it’s shaping entirely new ecosystems. Systems that themselves are constantly and rapidly shifting. Successful companies will need to submit to this unescapable fluidity as traditional industry boundaries give way to synergetic collaboration. Tomorrow’s leading brands aren’t just anticipating future consumer needs – they’re actively innovating and creating needs. The automotive industry, for example, is developing new business models in readiness for technological progress and a shift to sharing. Embracing change, agility and true innovation is a powerful strategy to secure a place in the complex, interconnected value chains of the future.
Spoilt for choice
Where we used to talk about distinct industries – transport, telecommunications, education, utilities, retail, health care, construction – we’ll have a fluid ecosystem. The future consumer is used to seamless service, supported by data-driven technologies: The coffee machine arranges its own refills, insurance premiums are adjusted dynamically based on real-time health data and an algorithm knows what you’ll want for lunch before you do.
Amidst all the automation, choice will also stand out as one of the defining priorities of the future consumer. It’s likely that the next generation will be even more discerning than today’s. After all, the balance of power between seller and buyer, brand and consumer has long since tipped in favor of the consumer. Successful manufacturers will continue to engage with and retain consumer through exceptional customer experience.
Choice is not just about the range of products and rapidly increasing personalization options available. It’s also about delivery and returns options, ease of payment. While technology can facilitate some of these aspects, physical interaction with goods currently remains of central importance for many consumers. That’s why we still see so many brands maintaining look-and-feel shops and showrooms despite floundering floor sales.
IoT reducing returns
Given the high rate of returns – around a third of items purchased online versus less than 10% for those bought in-store – ecommerce players are rethinking ways to reduce returns. In fashion, retailers provide multiple photos or even videos as well as very detailed product specification. For example, by providing a model’s height and clothing size, consumers may be able to visualize better how a garment will hang on their own frame. Add in a detailed size guide and shoppers can define their preferred fit and select items that flatter their figure and shape. In the future, augmented reality may enable brands to engage more with the consumer and aid even better decision-making, resulting in increased satisfaction and reduced rates of return.
Although returns are part and parcel of commerce, retailers are keen to avoid abuse of the system. The fashion industry is for example converging with tech to reduce the impact of “wardrobing” – the practice of wearing items once before returning them for a refund. Data-driven technology can help track and distinguish wardrobers from genuine returners. This high-tech approach is best combined with low-tech, high-visibility tagging. As augmented reality and other interactive visual technologies come of age, it’s conceivable that much of the real-world contact with the consumer could be replaced by AI-powered simulations. This is another way that the IoT could help reduce the rate of returns.
Infrastructure needs to deliver
Advanced logistics capabilities feature prominently in convergence stories, with fresh perspectives shaking up traditional models.The University Hospital Zurich is the first in Switzerland to send blood samples for lab analysis via drone. Beyond health care, drone delivery caters to tomorrow’s need-it-now consumers and is likely to be a powerful differentiator in the battle for market share. As examples, Google subsidiary Wing Aviation LLC recently received approval to operate drones to deliver small consumer goods in rural communities in Virginia, and Amazon is also said to be on the brink of drone delivery. The race is on to develop models that keep costs low and satisfaction high.
Key takeaways from delivery trends
Another sector that has benefited from convergence with logistics is the lucrative takeaway market. It has grown and evolved rapidly in recent years, with an increasing trend towards home delivery. Or delivery to the office, library or lake. With geotracking already established and widely accepted for personal mobility services, consumers are embracing the convenience of extended food delivery options, deciding what, where and when.
Takeaway delivery providers are feeding this appetite by expanding their offering. In the UK, for example, JustEat and ASDA have teamed up to offer basic groceries, personal hygiene products and selected medicines. This blurs the boundaries of grocery and takeaway delivery and is also an example of how retailers can anticipate and respond to changing habits by converging with other industries. Other examples include various supermarkets’ “dine-in” deals – convenience food to prepare at home as a budget alternative to takeaway delivery. Also food and beverage giants like McDonalds – teaming up with Uber Eats – step into the delivery market.
Some final thoughts
Technology is a convergence staple, appearing as an enabler in many new business models. One advantage is that it lowers the bar for new market entrants. For example, by converging technology with banking, Facebook is launching its own cryptocurrency, Libra, one of several recent tech challenges to the traditional banking system.
Although digitalization is an important driver of convergence, it’s not the only one. Health care, life sciences and food are converging to create nutritional therapies – right on trend as personalized medicine takes off. And when health care and retail collide, you get medical services from the comfort of your local supermarket. These examples show that convergence is as much about habits and behaviors as it is about technological change. Companies that successfully identify and respond to new consumer habits already do well in today’s markets. Those that create new consumer demand – and actively shift consumer behavior – will be the ones that find their place in the ecosystems of the future.
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.