Consumer dynamics
From the rise of rental business models to social commerce, NFTs to VR, the industry is a product of this time.
But as consumers rein in discretionary spending and spending power is weakened by rising inflation, which demands and preferences will defy the downturn?
Consumer confidence in the state of the UK economy has plummeted to
This is lower than when lockdowns were introduced in 2020.
Source: Deloitte
Social commerce sales are set to triple by 2025, generating
in sales in the US alone
Source: Shopify
Sustainability matters
Sustainable products and business practices matter to consumers – but only if they are real.
Sustainability-conscious buying is here to stay. Climate change events and social justice unrest has cemented consumer desire for ethical, environmentally-friendly products and responsible business practices. This is not a trend only for eco warriors.
A recent survey found that 32% of US and UK consumers would pay more for the same product if it came from an ethical brand. Ethical funds, investment in businesses focused on tech for good and retailers who can demonstrate their commitment to producing ethical products will be well placed for future growth.
Take the expediential rise of pre-owned platforms. Even five years ago there were only a handful of preloved retail platforms – now there are a swathe of available choices. And digital businesses like Neighbourly and OLIO are using technology to enable business and communities to come together for good.
Businesses do have to be careful though – when promoting sustainable products they need to be able to back up their environmental claims with evidence or run the risk of greenwashing and reputational damage as a result.
of consumers say brands need to be transparent about the environmental impact in producing their goods and services.
Source: Switch
Creating experiences
Physical locations have an important role to play, even in the digital consumer economy. But a rethink is required to provide experiences that will attract consumers – better connecting digital and IRL worlds.
Despite consumers increasingly moving online, there's still fondness for the high street. A PwC survey conducted during the pandemic found that although people had visited their high street less frequently than pre-pandemic, almost two thirds of respondents (62%) agreed that local shops and high streets are central to a sense of community.
But trade is anything but brisk. The total retail footfall in the UK for June declined by 10.5% on a year-on-three-years (Yo3Y) basis according to data from the British Retail Consortium (BRC). And with a worsening cost of living crisis tightening spending, businesses face an even greater uphill struggle.
If they want to attract consumers, they need to rethink the purpose of their real estate to create memorable experiences. According to research by Dojo, one in three of us seek out memorable experiences most of the time – and we're prepared to pay 28% extra when we find it. We're already seeing evidence of this move to create the memorable. Some smaller businesses are avoiding the long-term costs of real estate by focusing on unique pop up shops. Other, larger brands are exploring IKEA-style showroom locations where consumers can browse and then buy online.
Businesses are also experimenting with innovative technologies to ensure frictionless experiences. Amazon's Style store has palm-enabled payments and touchscreen dressing rooms, Crew Clothing has ditched tills for handheld tablets to let consumers pay anywhere in the store and Uniqlo’s self-check outs use radio frequency identification to eliminate scanning.
The personal touch
The digital consumer economy contains multitudes. Mobile, social, VR and in-game retail are increasingly important sales channels, and understanding where and how individual customers want to buy is key to success. But do businesses have the capabilities to deliver more personalised experiences?
Personalisation has been discussed as the next big shift in attracting and retaining consumers, with Switch recently finding 50% of consumers are interested in tailored shopping content, and 72% will only respond to personalised marketing messages.
Businesses have historically used third-party data to analyse what consumers want, but are they prepared for a cookieless world? With consumers increasingly wary about their personal data and tech companies taking steps to prevent cookie tracking, businesses need to shift strategy. This should include prioritising the gathering and analysis of first-party data and improving data analytics capabilities.
While developing these capabilities, businesses would also do well to focus on increasing overall convenience for all their customers.
This can include:
- offering multiple payment options
- expediated delivery and home delivery of products traditionally bought in store
- one-click purchasing to avoid losing customers on their buyer journey.
Source: Gallup
More than
of respondents reported shopping across at least three channels over the last six months, with one in three saying they’d used a virtual reality (VR) channel.
Source: PwC
