8 minute read 31 Mar. 2021
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Why you must be bold to meet the needs and expectations of the changing consumer

Authors
Lisa Nijssen-Smith

EY Oceania Consumer Products & Retail Leader

Tech, media, retail and consumer focus.

Marc L’Huillier

EY Consulting Partner and Oceania Consumer Insights Lead

Consumer Insight Expert. Transformation Leader. Thinker. Writer. Father. Rugby Enthusiast.

8 minute read 31 Mar. 2021

Our latest EY Future Consumer Index finds people want a different future, even as COVID-19 vaccines roll out. Here are five ways leaders can meet consumers where they are headed.

In brief

  • Australians and New Zealanders are more optimistic than people in many other countries as concerns around health and the economy decrease, but it is a cautious optimism as they keep a close eye on the future.
  • Consumers want to fundamentally change their lives once the pandemic is over.
  • Companies now need to be bolder and accelerate their transformation.

Consumer products companies have adapted well to the COVID-19 pandemic. The consumption shift to the home, together with the increased importance of health and hygiene, has boosted growth and profits for many. The companies have changed much faster than anyone thought possible: 84% of consumer organisations conducted a comprehensive strategic and portfolio review in 2020[1]. After a tumultuous year, it could be tempting to take your foot off the accelerator, at least for a while. That would be a mistake.

The consumer you’ve adapted to serve today is not the consumer that will make you profitable tomorrow. As people around the world emerge from the crisis, they plan to fundamentally change how they spend money and live their lives as they emerge from the depths of the pandemic.

The latest economic data is showing the extent to which the economies in Australia and New Zealand are coming back to life, driven by consumer spend with the release of pent up demand. Concurrent with the spending, large tranches of Australians and New Zealanders confirmed in the Future Consumer Index (FCI), a global survey tracking changing consumer sentiment and behaviors across time horizons and markets, that they are trying to save more money than in the past (63% ‘saving more’ in both countries) to buffer for any headwinds. They do remain guarded, but there is a renewed energy as the future looks a little more certain. People’s concerns and what they value will continue to evolve, including:

  • Affordability becoming critical, with 65% Australian, and 76% New Zealand consumers saying price will drive their choices three years from now.
  • Purpose mattering more than ever, as 67% Australian, and 66% New Zealand consumers say brands must positively change the world.
  • Consumers embracing data sharing, with 53% of Australians, and 60% of New Zealanders prepared to share personal data for healthier product recommendations. 

Can you use your recent performance to accelerate the transformation of your business, to get ahead of the emerging needs identified in our research? It won’t be easy. It requires going beyond making your current portfolio more affordable, demonstrating the benefits of your products, innovating incrementally, and experimenting with direct to consumer channels. You must be bolder about meeting the needs and expectations of the changing consumer.

This article provides critical answers and actions to help leaders reframe the future of their organisations and identifies five steps to help you transform more quickly:

  1. Redesign your business around how people live, not what consumers buy
  2. Compete for shoppers wherever and whenever they are
  3. Rebuild your supply chain around the consumer
  4. Change your operating model to make it ‘asset right’
  5. Look at value through a wider lens
The COVID-19 crisis is continuing to have a transforming impact on the lives of consumers. While the boom in at-home consumption is unlikely to last, other consumer changes will only accelerate.

Consumers are expecting a longer road out

So, what’s changed since our EY Future Consumer Index last November? Despite the stabilisation and recent decline in the impact of COVID-19 as vaccines are increasingly released and administered, people are positive but reserved about what the future holds and resigned to how long it may take for things to become more stable and predictable.

Three months further into the pandemic, we’ve seen the proportion of people who believe it will take more than twelve months for the pandemic to be under control increase in Australia (42% in Jan from 34% in November). In New Zealand, the figure has held firm at 48%.

Australians and New Zealanders are continuing to say the pandemic has changed their life significantly, (47% AU / 35% NZ). Of most relevance to consumer products organisations is that many of these people believe change is here to stay. Seven in ten (73% AU / 71% NZ) of those who say COVID-19 has changed their life believe it will remain changed even after the pandemic has been brought under control. 

Consumers will continue to make deep and permanent changes to their lives. Some of these shifts have been forced on them, but many are the result of choices to live differently. Around one in three (36% AU / 33% NZ) Australian and New Zealand consumers believe post-vaccine life will be better than before the pandemic, and say COVID-19 accelerated changes they had always wanted to make (33% AU / 32% NZ), reflected in their attitudes around online shopping, product affordability, personal health, and sustainability. 

How consumer behaviour will change

Beyond the pandemic, consumer spending will reflect the different ways people expect to live their lives, how they will make choices, and what really matters to them. Most consumers will prioritise affordability or their health. Others will focus on environmental or societal purpose, but a minority intend to catch up on lost time and live in the moment.

While geographic differences around affordability, health, sustainability, social impact and experience define our consumer segments, these issues concern all consumers globally:

  • Affordability: Six in ten Australians and New Zealanders (60% AU and 61% NZ) plan to be more aware and cautious of their spending in the longer term and (65% AU and 76% NZ) say price will be the most important purchase criteria for them three years from now.
  • Health: Over in one two (55% AU and 52% NZ) want to make healthier choices in their product purchases in the longer term; (34% AU and 39% NZ) say health or ‘what’s good for me’ will be the most important purchase criteria for them three years from now.
  • Sustainability: 45% AU and 40% NZ will prioritize the environment and climate change in how they live and the products they buy; for 24% AU and 26% NZ sustainability will be their most important purchase criteria three years from now.
  • Social impact: Over one in two (51% AU and 58% NZ) will be more likely to buy from companies that ensure what they do has a positive impact on society; 36% AU and 31% NZ will buy more from organizations which benefit society, even if their products/services are more expensive.
  • Experience: 33% AU and 30% NZ will be less inclined to get involved in experiences outside the home on account of health and safety concerns; 59% AU and 45% NZ have changed the way they stay entertained. 

A CEO agenda for the future consumer

A significant period of business transformation is currently underway – 89% of Oceania organisations that responded to the Global Capital Confidence Barometer acknowledge they are undergoing a significant business and technology transformation programs[2].  Yet they may want to be even bolder. Here are some key actions for CEOs to meet consumers where they are headed:

1. Redesign your business around how people live, not what consumers buy

CEOs have long talked about putting the consumer at the center of their business. Few have come anywhere near achieving this. One reason is consumers have been reluctant to share the data required; another is companies have lacked the capabilities to make the right use of it. The pandemic has driven an explosion in the sharing and use of consumer data: for example, 60% of New Zealanders and 53% of Australians will share data in exchange for healthier product recommendations.

Consumer products companies need to become listening organisations, using powerful analytics and AI to manage a repository of data that provides a single version of the truth for each consumer served. A listening organisation has the agility to meet constantly changing consumer needs, and can adapt products and services for segments it wants to engage.

2. Compete for shoppers wherever and whenever they are

There has never been more ways to reach shoppers, or more brands scrambling for their attention. During the pandemic, 58% of Australians and 52% of New Zealanders have changed the way they shop. This will continue, but only 36% of companies are currently investing to accelerate the digitization of customer journeys and business processes[3].

If you don’t understand all the possible ways your business can engage with shoppers and how to optimise each one, you’ll struggle to win. Capitalising on the changing way people shop requires tracking and connecting with people across social and digital media and within your own channel ecosystem.

3. Rebuild your supply chain around the consumer

Channel shifts, stockpiling, store closures, and border issues have wreaked havoc with the consumer goods supply chain over the last year. And 50% of companies expect the supply chain to be the part of their business that changes the most over the next 12 months[4].

The supply chain of the future can act as an engine for growth and a key competitive differentiator. But it must be agile, flexible, efficient and resilient. It also needs to be digitally networked, so that visibility improves. Leaders should reimagine their supply chain operating model. There are strategic choices to make about what gets done locally, regionally and globally; how warehouses and manufacturing sites best fit into the chain; how to create real-time, end-to-end visibility and monitoring; how to rationalize SKUs; and how to reduce environmental impact and waste.

4. Change your operating model to make it ‘asset right’

Many consumer products CEOs have experimented with outsourcing and partnering during the pandemic, often as an agile response to supply-chain disruption. This should continue and accelerate, as it’s the only way to meet changing consumer expectations with the speed and efficiency the future demands, without taking on excessive risk.

You need a clear vision of which capabilities give you differentiated value and where you want to outsource or share value creation with an ecosystem of partners. This is the ‘asset right’ model that will give you the ideal blend of in-house, outsourced or partnered capabilities. Today, while 72% of consumer products leaders are making significant investments to develop and manage their business partnerships[5], 82% have not yet clearly defined their role in future ecosystems[6].

5. Look at value through a wider lens

As channels and occasions blur, companies need to look beyond siloed profit measures and at the wider impact on their business. For example, consumers have embraced home delivery, but they don’t like paying for it. It is their number one frustration with online shopping. Given the rapid growth of e-commerce since the beginning of the pandemic, the business case for re-evaluating your e-commerce model to create profitable cost to serve has never been more important. The fact that most consumers are willing to share personal data makes the e-commerce business case even stronger.  

While such activities viewed in isolation may not make sense, they’re essential to your success when you look at them in the wider context. They create immense value outside their direct profits (or losses). So,look again at all your capabilities and take a ‘systemic approach’ to profitability.

Summary

A crisis is a great opportunity for change. Companies have changed, but they can’t stand still. Those that are bold now will sustain the gains they’ve made and shape a more profitable future.

About this article

Authors
Lisa Nijssen-Smith

EY Oceania Consumer Products & Retail Leader

Tech, media, retail and consumer focus.

Marc L’Huillier

EY Consulting Partner and Oceania Consumer Insights Lead

Consumer Insight Expert. Transformation Leader. Thinker. Writer. Father. Rugby Enthusiast.