Key takeaways

  • Disruption from COVID-19 has thrust the world of consumer markets headlong into the future.
  • Brand relevance and environmental, social and corporate governance will be of increasing importance.
  • Digital transformation of physical stores and supply chains will be necessary to build flexibility and resilience.

The COVID-19 pandemic continues to create significant challenges for a variety of business sectors. With new waves of infection, vaccine distribution disruptions and lockdowns in countries around the world, the way that people live, work and shop has not only changed, but those changes have become solidly embedded.

At the beginning of the crisis, many industry trends accelerated as people rapidly adapted their behaviours. Consumers flocked to online shopping in greater numbers, buying groceries, and other goods for delivery or curbside pickup. Now, many months after this behaviour emerged, the future of consumer markets can be seen more clearly, and is evident in five distinct trends:

1. The store of the future

Shops as we know them will continue to evolve. Ongoing migration towards all things digital will be spurred on by the influence of innovative retail giants and convenience of experience instilled by companies in other sectors. It will be necessary to meet consumers where they are, be it online, in brick-and-mortar stores or on social media.

The line between retailers and manufacturers will continue to fade as direct-to-consumer pathways gain a foothold. The consumer market value chain is becoming increasingly intertwined and manufacturers will have more opportunity to appeal to consumers directly with digital tools.

For the consumer, store browsing will continue to be complemented (and even usurped) by the online discovery experience, where product information and feedback from reviews and influencers offers ease to the beginning of the customer journey. Frictionless retail, where a transaction experience is as hassle-free as possible via easy payments, omnichannel service, enabling technologies and contact-free (near instantaneous) delivery will be an increasing expectation. For retailers, a digital-first, end-to-end approach will be needed to meet such expectations.

While physical stores won’t go away anytime soon, the experience that customers receive will be everything.

2. Brand relevance

Consumers keep resetting — and raising — their expectations around the brands they choose to embrace. They want purpose-driven brands that mirror their values and beliefs, and companies that demonstrate social consciousness in practical, tangible ways. The pandemic has only broadened their world of concerns, and behind-the-scenes issues such as paying suppliers, honouring pensions and giving employees COVID-related sick leave are suddenly front of mind when making purchasing decisions.

Both consumers and employees value companies that put people over profits and demonstrate that they’re good corporate citizens. Indeed, research has found that 71 percent of respondents agree that if they perceive a brand is putting profit over people, they’ll lose trust in the brand forever.1 Brand trust is increasingly on par with traditional considerations such as quality, value and convenience when it comes to purchasing. Measuring and quantifying return on experience will help drive value.

Consumers and employees also want the companies and brands they embrace to engage and advocate on issues that affect them, going further than their traditional remit to solve larger societal problems such as racial injustice, gender inequality and environmental protection.

3. The digital supply chain

Supply chains are under pressure as consumer behaviours and expectations change dramatically and trends such as omnichannel shopping and multiple fulfilment points make it harder to predict and shape demand. Other factors are also affecting supply chains, including the pandemic, extreme weather, labour shortages and the rise of economic nationalism. Even after the pandemic and related crises end, complex issues will continue to challenge supply chains.

End-to-end visibility will be the number one factor for effective supply chain management. A clear understanding of the location and status of inventory and the movement of stock, and an accurate view of customer demand will be needed. And supply chains will need to be responsive and flexible.

AI and other analytical tools will provide the foundation for high-functioning digital supply chain, giving powerful competitive advantages in a world where having the right products available at the right time and speedy product fulfilment are essential. The digital supply chain will connect all relevant internal functions — such as merchandising, category management, store operations, finance and tax — and integrate supply chain partners, customers and innovation partners. This connectivity will form a self-guided ecosystem that can operate with near autonomy, making ‘smart’ decisions related to procurement, production, warehousing and logistics.

Additionally, this digital supply chain will also be more customer-centric, using AI to sense and link supply and demand and dynamically self-adjust supplying fluid data and the ability to address logistical challenges.

4. The future of food

Many of the trends shaping the future of consumer markets will have a pronounced effect on the future of food. Even before the pandemic, consumers were demanding healthier and more sustainable wellness and food products, restricting certain food groups and taking supplements. PwC consumer research reveals that half of global respondents said they are including more plant-based foods in their diet in an effort to eat more sustainably, a trend expected to accelerate and intensify.

As in other areas of retail, consumers are demanding accountability and transparency on a range of environmental, social and corporate governance (ESG) issues in the food industry, including reducing packaging waste, supply chain transparency and fair labour practices. All participants in the food value chain will need to meet these unrelenting expectations.

Many consumers will also gravitate towards locally sourced products, largely for their sustainability and perceived value — and they’ll be willing to pay a premium for these items.2 Mass-produced food will still have a place, as customers will always value price, consistency and availability, especially when buying certain goods.

The future of food will also be characterised by increased personalisation — even hyper-personalisation — even as some customers become ambivalent towards data collection and tracking practices. Finally, changing business models are also reshaping the industry, with grocery and consumer packaged goods companies rethinking their place within a larger digital ecosystem.

5. ESG ascendence

Regulators and boardrooms will also continue to put pressure on an ESG focus. C-suite executives, shareholders and governments are making it clear that ESG initiatives are non-negotiables, not just ‘nice to haves.’ Leaders will need to reinvigorate value creation in response, acknowledging it relies on resilience and societal contribution as much as financial productivity. Governments are also leading the way on environmental issues spearheading programs to help companies adopt more sustainable practices.

Although leading companies aren’t waiting to be regulated into compliance, with many taking action on their own, it’s conceivable that the pandemic might spark additional regulation in markets related to sustainability or other ESG matters. Considering the essential nature of the grocery supply chain, governments and regulators might start to see the supply chain as a piece of public infrastructure that warrants further scrutiny and regulation. If so, supply chains built on cheap, temporary labour, as well as offshoring and zero-hour contracts, are likely targets for reform.

Being truly authentic in the commitment to responsible practices, and embedding ESG goals and ideals into the day-to-day operating fabric and culture of the organisation — along with embracing it as a business imperative — will be necessary.

Preparing for the future

The COVID-19 pandemic is not over, and its long-term effects are only beginning. As companies look to regain equilibrium and compete in the consumer markets future, there may be a need to focus first on recovery.

A threefold approach could help. First, businesses should repair any damage, identifying any weaknesses that have become apparent and accelerating trust-building activities with customers and employees. Next, rethink the organisation itself. Adjust direction if needed, evaluate the brand and store concept and improve fulfilment experiences. Establish ESG priorities. Finally, reconfigure operations via technology investments, improvements around supply chain flexibility and resilience through digital transformation. If necessary, update channel strategies.

The consumer markets industry was already experiencing large-scale disruption before COVID-19. The pandemic served as an inflection point — intensifying and accelerating some trends while pausing others. Despite the lingering uncertainties and aftershocks, such events can serve as a clarifying moment when it comes to embracing new opportunities.

The future is now.


For further insights into the future of consumer markets and examples of those brands already capitalising on the above trends, download the PwC report Preparing for tomorrow’s consumers today: The future of consumer markets.

 

Donna Watt

Contributor

Donna Watt

Donna is a partner and the National Retail & Consumer leader at PwC Australia

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