One Design Insights: Retail and Consumer Goods

In our collective, consistent sea of uncertainty—from our cultural shifts to industry-specific flux and beyond—we must keep planning for the future that is unknown in hopes that when we get there we’ll be standing on solid ground.

We took a look at one of the most volatile segments of the current economy—Retail and Consumer Goods—and began to imagine how design could help to build a new experience framework that is strong and resilient in the face of current, and continuous, unprecedented uncertainty.

Below, we highlight trends and future opportunities based on concrete data and propose design strategies that can help our clients better prepare for the future.

By sharing these insights, design strategies, and brand experience tactics that respond to local and global industry trends, we hope to give some of our clients and colleagues the knowledge to help them better survive and thrive in our changing world.


Executive Summary

  • There is unprecedented uncertainty in the months ahead. But brands that focus on convenience at point-of-sale and brand values in services and experiences will lead the pack when we begin to once again see stability and growth.
  • As fifth-generation network technology (5G) networks take hold, a more robust and seamless Internet of Things (IoT)—the interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data without human interaction—will emerge with millions of interconnected devices, paving the way for less technology interfacing and more human interactions.
  • Younger generations of shoppers are particularly concerned with the transparency, sustainability, and ethics of brands. They're looking for alignment with their own personal values and see their purchases as an investment in that brand.
  • Current stability, future resiliency and success of brands will be built on data-driven strategic platforms with brand values at the core.
  • COVID-19 is affecting the culture of food in America, changing the way people plan, purchase, prepare and consume meals.

What we’re seeing

Current trends (2020–2021)

  • There is significant uncertainty in the months ahead. Consumer expectations are evolving due to the convergence of supply chain, digital technologies, and other innovations. With a possible recession and potential fallout from tariff tensions, COVID-19 continuing to loom, and increased pressure to actualize social equality, retailers should have a strategic plan that can handle adjustments when and as needed to help ride out any downturns, (Deloitte, 2020).
  • Consumer preferences continue to be consistent—price, product, and convenience are the most influential factors. While fair price and quality of products are critical factors, convenience specifically proves to be the leading factor in purchasing decisions. Whether in the store or online, consumers want a friction-free experience, from finding ideas and inspiration to making purchases, managing returns, and advocating for the brand, (Deloitte, 2020).
  • Consumers are already expecting brands to meet them where they are—to deliver an elevated customer experience with solutions tailored to their individual needs across the entire shopping journey. Eighty-six percent of customers said they would pay more for a better shopping experience, (Microsoft Dynamics, 2019). Things like same-day delivery, curbside pickup, and buy online/pick up in-store have become table stakes. Evolved brands will view the store as a marketing channel for brand-building (Coresight Research, 2020), and services/experiences play a lead role in creating memorable, not purely transactional, experiences. However, organizations with businesses models rooted in the sharing economy will see significant losses as concerns over health and contamination grow, (The New York Times, 2020).
  • Direct-to-consumer strategies and subscription service models will help companies gain a deeper understanding of the customer journey, paving the way for data-driven insights and actions. Data revealed across the customer journey will inform strategic digital investments in operations, business model transformation, and distribution channel management, therefore improving the overall customer experience and gaining consumer trust. However, given the substantial investment needed to break into subscription and rental markets, manufacturers will see the most benefit by partnering with established subscription service providers, (Coresight Research, 2020).
  • To win in the coming decades, fast moving consumer goods (FMCGs) need to embrace an agile operating model focused on brand relevance, (McKinsey, 2018). There is disruption in big brand product innovation and brand-building, starting with Millennials, who avoid mass-market brands in favor of newer ones that they see as healthier and those that tend to speak to them through a digital-first marketing approach. A sizeable opportunity exists for marketers to retain new buyers by engaging them with empathetic and informative messages that build lasting connections, (IRi Worldwide, 2020).

Impact of COVID-19

  • The use of automated storage and retrieval systems (ASRS) is increasing in popularity—particularly in packaging, warehousing and distribution operations—as processors look to reduce human error and labor costs across their supply chain networks, (Food Engineering, 2020).
  • Consumer adoption of technology-enabled commerce is likely to deepen and broaden permanently, even in segments like grocery which have to date resisted the large-scale migration from stores to online seen elsewhere. For example, a number of restaurants impacted by the pandemic have now decided to add a touchless grocery store service. The consumer appetite for digitally enabled retail models will continue to grow, (Accenture, 2020).
  • Consumer tastes are evolving. They are seeking functional foods like berries to boost immunity, and artificial proteins to replace potentially contaminated meats. These shifts in consumer preferences will likely outlast the quarantine and will perpetually remain a consideration, (FastCompany, 2020).
  • Radically different lifestyles and working patterns caused by self-isolation, social distancing and working from home mean consumers will prioritize spending on the essentials: food, health, hygiene, household cleaning, in addition to online entertainment and exercise services, (Accenture, 2020).
  • People everywhere are craving an emotional connection. Values-driven buying behavior accelerated by this crisis will become the norm. Brands that embrace the power of being human—and all of the uncertainty and vulnerability that comes with it—and provide a sense of community will be more resilient in the face of ongoing health concerns, (FastCompany, 2020).

Forecasting (~2021–2025)

  • 5G network technology will enable us to engineer the connection of millions of devices across the world to provide a richer experience to the customer. Some estimates predict that the improved connectivity from 5G will likely add $12 billion in retail revenue by 2021, (Deloitte, 2020). In retail specifically, 5G will directly affect digital engagements, analytics, IoT, AR/VR, and even drone technology by providing the connectivity boost that can enhance these capabilities exponentially.
  • The purpose and utility of retail stores will continue to evolve. Legacy players—traditionally anchor stores in shopping malls—are finding it necessary to shrink their store footprints. Some of those retailers are even shifting the purpose of the brick-and-mortar locations, launching merchandise-free retail experiences, (Retail Dive, 2020). And yet, direct-to-consumer brands are pressured into opening brick-and-mortar locations because the cost of customer acquisition when operating solely online is so high, (Retail Dive, 2020). Physical and digital brand experiences are merging in ways that will reshape the purpose of physical brand presence in the next 3–5 years.
  • Buy online, pickup in-store (BOPIS) services will help retailers compete, and potentially even outperform e-commerce giants like Amazon. This service has numerous advantages—49% of consumers stated that in-store pickup is quicker than at-home delivery. Established retailers also see a substantial reduction in cost compared to home deliveries. Target CEO Brian Cornell noted that the retailer's costs drop 90% when customers utilize BOPIS, (Retail Dive, 2020).
  • Brands and retailers will lean into sustainable promises by providing more detail on the sourcing and composition of products than ever before, as sustainability and transparency play a larger role in consumer decision-making, (Coresight Research, 2020). Fifteen percent of Gen-Z shoppers said they are dedicated to reducing the amount of waste they create, in addition to reducing their carbon footprints and single-use plastic consumption, (Retail Dive, 2020). Consumers are seeking more sustainable, hands-on, tangible experiences, which is bringing food production ever closer to the home. Local is going hyper-local, (Consumer Goods, 2020). And as consumers become more environmentally conscious, adapting a circular model (promoting rental, resale, and other reuse opportunities) may also become particularly fruitful for retailers.

Futurecasting (Beyond 2025)

  • Consumers are searching for and shopping at extremes of value. They are either looking for propositions that are tremendously accessible and affordable, or propositions that are deep, memorable, and worth paying much more for, (CMO by Adobe, 2017). Retail and FMCG leaders will focus on deep, memorable customer experiences, optimizing them to best fulfill the needs of their audiences. It’s not about designing the aesthetics of the experience—it’s about designing the elements and interactions that create the experience, (CMO by Adobe, 2017).
  • There are technologies on the near horizon that could revolutionize retail, like the IoT. Connected homes, cars, products and packaging will be “smart”—objects with embedded technology that connects to a network—and look after our consumption. Virtual, augmented, and mixed reality could impact what we define as an online store. Soon, you could walk into a virtual kitchen where a world-renowned chef is cooking, and shop within that experience. We won’t need stores for product distribution, but we will need stores to learn about brands, try new things, and have fun. The physical store will become a form of experiential media whose purpose is to sell not products, but the idea of a brand, (CMO by Adobe, 2017).
  • Our retail future will be much more digital than today, but will look less digital and feel far more human. The next era of digital retail will be less about phones, devices and screens, and more about a seamless, intuitive, human experience. Brick and mortars will be “smart” and responsive. Visual computing—software that can see and interpret the surrounding environment—will take off, turbo-charged by AI. Technology will be less visible—but far more empowering. For consumers, retail will be frictionless and effortless, (WPP, 2018).

Recommendations

  • Create a strategic plan that insulates you from the turbulence of a recession and provides a solid foundation for future needs. Focus short-term goals on stability and resilience, and then plan a long-term vision for growth and prosperity.
  • Develop audience personas, customer journeys, and a service design map to better understand the end to end customer journey, as well as to identify opportunities for optimization or digitization. Design ways to reduce friction in the shopper journey, provide additional products or services that consumers are seeking, and increase brand loyalty. Provide additional convenience in the areas most aligned to your brand promise and values.
  • Envision the future state of customer interaction with your brand through an experience design process. Imagine new models for retail spaces, branded immersive installations, optimized BOPIS experiences, customized or personalized products and services, and memorable pop-ups.
  • Consider the end-to-end product life cycle. Design a product lifecycle for the circular economy, considering the net-positive or negative impact on society and the planet.
  • Focus your brand position and messaging on your vision, mission, purpose, and values. Consider integrating digital-forward activations, health/safety considerations, or emphasizing smaller, closer, and newer in branded experiences and communications. Your brand is no longer just what you look like. Your brand is what you do, how you act, and ultimately, every partner in your supply chain.

Potential outcomes

Organizations that adapt to the “new normal” will be in a much better position to be resilient through economic instability, and will lay the groundwork for growth as the economy once again stabilizes.

Understanding the customer journey in detail will provide insight into the best opportunities for disruption—and down the line, could help pinpoint the most informative data sets along that journey.

Revisiting brand and business strategies at this time can lead to clarity on investment approaches, operations adjustments, and key consumer messages that will help to build brand loyalty among primary audiences. Mindful design of the service experience will elevate some brands above the rest, tweaking systems so that they are simultaneously more efficient and more human. And designing for transparency within a circular economy will prove to your customers that you are as committed to the future as they are, building their trust in you.

If these observations, insights, and trends speak to you, we would love to continue the discussion. Please reach out to your team at One Design, or write to info@onedesigncompany.com for more information.

One Design Company is a research-driven design and development studio. For over a decade, we’ve explored the intersection of experience and technology—where powerful brands come to life. Want to learn more? Let’s chat.

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