The entire way we shop is changing from start to finish. This transformation is creating a new ecosystem of the consumer experience with implications affecting pricing, production, brand strategies and beyond. In combination with my talk with Don Abraham, in our latest 15-minute Future Ready episode, explore the how’s, the what’s and the when’s retailers will need to thrive in an era of continuous change.
What disruptions should brands in the retail industry be prepared to address in the next 5 years?
New Macro Realities: There are multiple disruptions and dynamics retail brands need to consider: previous pandemic and governmental regulations, ongoing inflation, and wage increases, and now disruptions to supply chain, including packaging, containers, and shipping.
We see that two thirds (66%) of shoppers are feeling their budget stretched every month after paying for essentials, Kantar’s Shopper Sightlines Report, February 2023. Retailers need to continue to spend the time to accurately understand which audiences they need to target.
Are these audiences the same as you have been targeting pre-pandemic?
What are the items that should be on your brand's agenda?
The Digital Playground: Retail media space continues to grow. Per the latest ANA Retail Media Network Report, January 2023, it is projected that retail media spend will be $60 billion in 2025, and over $100 billion in 2027. Big players in the space, like Amazon and Walmart, may need to rethink their strategies as new entrants continue to expand.
At the same time, advertisers are having budget reviews as brands are emphasizing the need for ROI of campaigns, not only sales but on brand growth. This is because advertisers cannot dedicate specific buckets to brand growth versus sales growth independently so easily as before. Those advertisers able to deliver great ROI will be ahead of the game in this newly crowded space. This also gives retailers the opportunity to use their loyalty data and customer data to leverage these advertising requests. It is not the time to cut corners, quality data is as important as ever.
How are brands in the retail industry preparing their brand (and/or their consumers) for future disruptions?
New Social Contracts: ESG expectations for retailers are increasing, especially with younger generations.
- 93% of consumers expect retailers to conduct appropriate business practices
- 90% are expecting better and healthier products for households
- 89% are expecting retails’ practices that protect the environment
- 78% expect retailers to address social issues
Brands need to consider how they can differentiate themselves through a sustainability agenda. Kantar BrandZ shows Amazon, the category leader, improved its equity perceptions in the core market, the US. This improvement was driven by differentiation as Amazon is seen, among other things, as more sustainable.
What will commerce look like and how will it play out in the next decade?
A Shopper Reset: We see an evolving loyalty equation in the retail industry now, which will continue to become a new tension for brands. Shoppers are rethinking what retailers purchase from, and their brands of choice.
Kantar’s 2023 Retail Outlook Survey shows about 50% of retailers plan to or are raising prices. Compounding these increases with the tension of shoppers not having enough disposable income, retailers need to bring brand and experience together when looking to boost loyalty, especially when it comes to potential subscription programs. The goal should be to align the entire organization with the ways consumers themselves evaluate your brand. Is my customer experience aligning with my brand promise?
Brand equity can be built on customer experience. Loyalty is one of those things that is earned, and earned again, because consumer motives change constantly.
- How do you earn it?
- What variables are there?
- How do you keep up the experience when customers are stepping foot in stores anymore?
Despite a boom in e-commerce over the past few years, the pendulum is moving back towards the center as we see the department store model’s public risk ease up. These brick-and-mortar stores need to really figure out where they stand when it comes to boosting loyalty. We see Walmart investing heavily in sustainability to appeal to the eco-conscious consumer. Or Aldi, investing $60 million to reduce their own prices, reinforcing their value proposition and quality, which is going to impact Walmart’s market share in the long run.
Brands have experienced going direct to consumer, which offers different challenges, may it be more of a cost, or affecting consumer loyalty. This balance equation is pulling retailers back in and potentially turning back the clock yet again, escaping the ‘death of brick and mortar’, which has been prevalent the past few years.
How can industry leaders begin to embed resilience in their business models and ways of working today?
Share of Life: Retailers are evolving from just focusing on specific products and services to a more experiential based platform to gain a higher share of a shopper’s life, not their wallet. Retailers are trying to disrupt shoppers with not just merchandising but also more digital interactions, providing more of a tailored learning experience, embedding the brand into a shopper’s lifestyle.
For example:
- Walmart investing in health and wellness for associates and customers.
- Walgreens is linking their bonus cash rewards program to fitness and rewarding shoppers for achieving their health goes through the Walgreens app which synchronizes to your tracking devices.
- Amazon buying a primary care provider in One Medical
- CVS, Walgreens, Walmart are trying to invest in more affordable healthcare for consumers.
For more information on how industries should be preparing for the future. Find our Future Ready page here.