A decade in a day: How brands have adapted to the acceleration of 2020
The push for brands to take their services and products online has been growing for decades, but previously steady progress has been accelerated by crisis. With digital natives like Amazon already leading the way for customer experience innovation, it was no surprise when the core attributes of its business model propelled them to the forefront of panic buyers’ minds as local supermarkets were facing empty shelves. Speed, availability, and product range are no longer nice-to-haves, but crucial to stay in the game. Although consumer behavior can be unpredictable, we can see that expectations built from on-demand services are seeping into other industries. We now face an on-demand economy.
China has been forging the path for fast-paced consumption for years now, setting the best-in-class example for digitally led commerce. As APAC leads the world in smartphone penetration, companies are racing to keep up with the normalization of 24/7 consumption. As speed to market becomes a key differentiator, we can see a deepening divide between digitally enabled businesses and those that are not. Yet it’s not just CPG companies that need to embrace the wave of digital transformation – this is set to affect virtually all sectors.
Spotlight on supply chains
Supply chain fragility – whether real or perceived – has been exposed by profound disruptions this year. COVID-19 has resulted in a host of issues for procurement teams: volatile demand due to panic buying, product shortages, restricted capacity and shortages of labor and transit route blocks due to lockdowns, just to name a few. Building supply chain resilience will be a key concern for businesses navigating complex supply chains. Although governance, risk management and compliance are always major factors in supply chain management, ensuring end-to-end transparency is another key benefit of digitalization.
McKinsey highlighted that the supply chain is set to be one of two major areas on which AI will have a profound impact. AI can improve forecasting accuracy by 10-20%, resulting in greater efficiencies for businesses. There are also potential gains to be made for those companies that seek to improve their environmental impact, as waste, greenhouse gas emissions and use of resources can be monitored and reported more accurately. Unfortunately, a major obstacle that prevents many businesses from utilizing AI is the lack of training data necessary to effectively build machine learning models to make accurate predictions. Businesses should be working now to introduce a data-driven culture into their workplaces across all levels to ensure their teams are well-equipped to capitalize on the opportunities of the next decade.
New competitive advantages
Businesses from various industries are facing louder calls to capitalize on digital but are fearful of major investment during a crisis. We have seen multiple companies that have repurposed their existing talent to meet the needs of consumers. For example, stores such as Walmart have been cross-training staff to fulfil demands for curbside click-and-collect, distributing orders from stores with low footfall rather than overworked distribution centers. GAP have reskilled their sales assistants to offer contactless and hygienic store pick-up service, leveraging hygiene and safety as a competitive advantage rather than a hindrance. However, the extent to which these ‘make-do’ measures will support them into the digital future is questionable.
Short-term spikes or long-term shifts?
Focus on health and hygiene issues spiked during the onset of the pandemic, yet some businesses were already well set-up to respond to customer concerns. For example, contactless payment was already widespread due to the added convenience that it provides, and we saw uptake of the technology further accelerate throughout the pandemic due to the hygiene benefits delivered by its touch-free nature. The rise of brands like Peloton, which offers subscribers spin-class experiences from their own home, was already evident before we were all told to stay at home. These convenience-centered activities were perfectly positioned for the pandemic. Although curbside pick-up for groceries has skyrocketed, click-and-collect was already prevalent pre-pandemic. Companies that were already set up to deliver these services under pressure were the clear quick winners of the pandemic. Amazon, which was already known for prime delivery and its massive product range, was able to propel its ‘Go Grocery’ service forward, cementing its position as an online one-stop-shop.
Demand for contactless service has naturally reduced the possibility of in-person engagement with customers. For brick-and-mortar stores, this raises the question of how digitization can bolster their customer experience. Rather than going fully online, like Lord and Taylor will after its recent acquisition by the Saadia Group, companies can still implement a hybrid model by increasing digital touchpoints in their stores and offering a multi-channel experience. Digital point of sale materials (POSM) that can replace human sales assistants can offer customers help in understanding different product types and which best suits their needs. Digital POSM can add considerable value to customers at the point of purchase, arming them with the necessary information they need to make purchasing decisions, while also providing brands with more data about the information-seeking and purchasing behavior of their consumers
Digital POSM also helps brands use their marketing budgets campaign more effectively by responding to real-time analytics on how customers are interacting with various marketing messages. The ability to update messaging digitally can also cut down on the costs involved with printing in-store marketing materials, allowing brands to increase their speed-to-market and react in real time to external factors that may influence their key messaging.
Expedited eCommerce capabilities
2020 was a tipping point for ecommerce to well and truly become widespread across the globe, with many retailers and consumers who had previously resisted the pull of online shopping turning to the channel for the first time. With various lockdowns resulting in store closures, and job losses leading to lower discretionary spending, more and more consumers are seeking to minimize the time spent in-store while also ensuring they shop around and find the best price. eCommerce offers buyers price transparency and reassurance that they are getting the product that they want for the best available price, with low-cost players including Aldi, Nordstrom Rack and TKMaxx set to capitalize on the growing increase in price sensitivity. As sensitivity continues to rise, brand loyalty will inevitably lessen, improving competition and opportunity in the market.
With a combined rise in digitization and price sensitivity, we will continue to see customers go on multi-channel journeys. Going to a physical store to experience a product first-hand but then turning to your smartphone to see if you can seek out cheaper alternatives is a common approach. Even if price is not a customer’s main concern, there is no doubt that the rise of multi-channel shopping can negate the power of impulse purchases, with consumers often having multiple avenues available to them to buy the same product.
The evolving path to purchase
If you drive to a shopping mall, you are more likely to buy a product when you see it to justify the time spent getting to the store. First Insight found that in 2019 people spent more in-store than online, and usually went to physical stores already knowing what they wanted to buy. For those who prefer to browse across channels, you might first look on the company’s mobile app, check other options on your computer, and then decide to purchase it in person next time you are in town. If companies do not build their marketing approach around the multi-channel customer journey, they risk ignoring key elements of a customer’s experience. The journey should be borderless, with companies delivering personalized service regardless of where the customer chooses to make contact. A major barrier to many companies from achieving this is siloed data systems, which do not keep all value drivers in the loop.
Marketing budgets will be one of many areas of businesses that will be squeezed as a result of falling revenue. However, investing in data management and analytics systems can bring brands greater effectiveness and ROI. Identifying key business objects and select data streams will allow brands to invest in the channels that bring the most conversions. More data on the customer journey will allow brands to deliver key marketing messages at the moment that they will have the most impact and create data-enabled personalized and contextualized experiences. To do this successfully, brands will need to gain a holistic knowledge of their customer segments and the platforms that build direct customer relationships.
Experience is king
The growing benefits of online platforms raises the question – what do physical stores still have to offer? Brick-and-mortar stores will need to raise the bar to create an equally engaging customer experience. As mentioned previously, there are elements of digitalization that can augment an in-store visit. From digital POSM to augmented reality, we can see examples of ‘phygital’ becoming more popular. Although the pandemic has highlighted how convenient and reliable online shopping can be compared to in-store, many people will miss the human experience of interacting with products and people in stores. By breaking down the barriers between physical and digital, brick-and-mortar stores can strive to deliver the best of both experiences.
The rise of social commerce
A growing opportunity for customer engagement is in social commerce. This is by no means a new field. China’s e-commerce platform Pinduoduo launched in 2015 and is built on the concept of customers getting a better price if they can rally together a large enough team of buyers. The thrill of getting the best price and the social interactions are the driving factors of its success. Both Duo Duo (by Pinduoduo) and Taobao Live (by Alibaba) allow merchants to get even closer to their customers by live streaming products and using their creativity to combine video content with shopping. These platforms have built on a similar psychology to social media influencers. The trust that consumers have for streaming hosts and influencers encourages them to make the purchase, where a simple print or recorded advert might not have.
Facebook launched its ‘Shops’ page this year on both Facebook and Instagram. While influencers have long been advertising products on their pages, the new function means that followers can go straight to the products that they are being shown, and order them to their front door without ever leaving the app. Such a frictionless experience optimizes the organic reach that social media personalities were already leveraging for brand collaborations.
However, there will still be some audiences who distrust paid advertisements, even from influencers that they like. User-generated content can fill this gap, by offering non-monetized recommendations and discussions of products and brands. The “shops” function will also encourage platform users to share product pages and reduce the hurdles to the point of purchase. This is an example of customer-led innovation, where brands and platform users were already using Instagram and Facebook for a certain purpose, but Facebook has now fully integrated this into one of their services to maximize their involvement in these transactions.
Brand purpose matters more than ever
Throughout 2020, consumers became acutely more aware of the values that drive the brands they interact with. Climate change and sustainability were brought under the microscope, led by the bushfires across Australia at the beginning of the year and accelerated as single-use products became the norm due to hygiene concerns throughout the pandemic outbreak. As a result, brands were challenged as to how serious their sustainability commitments really were.
Purpose-led brands, such as Patagonia, Lush and Beyond Meat, which all take a pro-sustainability stance, are most likely to maintain these practices, but for companies who were only interested in the odd photo-op, sustainability initiatives have fallen from the priority list. This not only damages the environment, but also brand identities. Tokenism is transparent and consumers are less likely to stay loyal to brands that fail to show real commitment to stakeholders.
With multiple events across the globe also bringing light to important issues of racism, diversity and inclusion, customers looked to their brands to both speak out about these important issues while also ‘walking the walk’ in their own business practices. Nike quickly released a 60-second anti-racism video following the death of George Floyd, and Johnson & Johnson put $100 million towards a program to eliminate health inequities for people of color which were highlighted by the pandemic. Today, brands are recognizing the importance of taking a stance on important issues. Brands can no longer afford to sit on the fence when it comes to major social issues, especially if they want to build real brand affinity and long-term loyalty amongst consumers.
The road ahead
While it’s unclear how long the effects of COVID-19 will last, we can see that many of the trends that appeared through this year will lead to long-term lasting business changes. After the SARS outbreak of 2002-2004, the economic and social climate in China intensified the adoption of eCommerce, and it continued on a sharp upwards trajectory to give rise to the market leaders that we see today. While there will certainly be a divergence of consumers who have realized that shopping online can be far more personalized and convenient than in-person, and others who cannot wait to leave their homes and resume person-to-person interactions, it’s clear that brands wont go back to the old ways of doing things, and a ‘phygital’ retail mix is here to stay.
Agile and reactive
McKinsey recently noted that [behavior stickiness = forced behavior x satisfaction]. Whilst some of these trends have been due to consumers coming to the realization of new possibilities, others are out of necessity and will be rebelled against once it is safe to do so. Rapid, global shifts in consumer behavior have highlighted the importance of an agile and reactive approach with the most successful brands leaning on data to understand in real-time where, when, why and how their customers are interacting with their business. As we move throughout the next decade, underpinning business decisions with real consumer data will become increasingly important, and so too ensuring a strong sense of brand purpose sits at the heart of business operations for brands across all sectors.
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