Based on our research, we have identified three key actions for brands and retailers to meet the evolving needs of today’s consumer who is concerned about their financial situation, price-conscious, changing the way they make purchasing decisions and where they shop, and spending less overall.
Driving cost reductions and margin improvement by rethinking the way brands and retailers operate, how the supply chain is organized, and how to engage shoppers throughout their online and offline journeys
Identifying new revenue streams and growth opportunities through new initiatives and operating models
Managing the growing tension between the simultaneous need for affordability and sustainability
Costs across many dimensions including product, energy, labor, and shipping have increased for brands and retailers over recent months and years. It is important for brands and retailers to adopt technologies that support improved decision-making, thereby leading to operational efficiencies and more productive use of current assets and resources. In doing this, brands and retailers can then pass on that savings to consumers. These “cost-out” activities should be viewed to add value to the customer and employee experience, as opposed to just removing costs for the business.
Leverage technology in the assortment and planning process to ensure availability and affordability
Brands and retailers can use technology such as data and analytics, AI, and automation in their assortment and planning processes to optimize costs. For example, analytics can be used to reduce inventory, identify underperforming areas, and recommend solutions to increase space productivity. It can also be used to localize the right assortment mix for a specific store or online channel and enable auto reconciliation and dynamic correction of forecasts based on incoming, real-time data. Tesco suppliers can now cut production costs and reduce waste by selling or donating surplus stock or products to other suppliers through Tesco Exchange, a new online marketplace that matches suppliers who have too much of a product with other Tesco suppliers that need it.32 Retailers also need to provide clear communication to consumers, which includes personalized promotions within loyalty programs, information on the assortment mix, availability of products, pricing across entry-level and premium products, and the value customers receive from purchasing their product compared to a competitor’s product.
Automate warehouse operations
Consumers are expecting faster deliveries. Over one-third of consumers globally say that ordering groceries online with 2-hour delivery is important to them and 32% say the same for 10-minute delivery. The last mile is the costliest part of the journey for companies and accounts for 53% of overall shipping costs.33 As a result, many companies are trying to digitally transform their supply chains and adopt technologies such as automation, analytics, and robotics in their warehouses and autonomous vehicles and robotics in their delivery processes. As the volume of fast delivery increases, leveraging technology to optimize costs is critical.
Warehouse and sorting represent a significant opportunity to reduce costs through automation. For example, they can reduce fulfillment errors. When items are left out of an order by mistake, multiple packages have to be sent out to remedy the error, increasing costs and decreasing customer satisfaction. Returns can also be processed using the same automated systems. Depending on the type of automation used, our research on last-mile delivery showed that warehouse automation could potentially increase profit margins by 8% through higher throughput and lower fulfillment cost.34 Technologies that could be used to automate warehouse operations include:
Fully automatic, with a rail system in the warehouse where automated carts move and pick items
Semi-automatic, where robots lift the rack with the products and take it to be selected and parceled
Human-assisted, where the delivery carts give personnel direction to the rack where the item is stored, accompany them, and help in item identification.35
Enable autonomous delivery Delivery through autonomous vehicles is still at an early stage but has significant potential to transform the last-mile delivery cost model. Our previous analysis showed that it could potentially increase profit margins by up to 14%.36 In October 2021, the UK retail chain Ocado announced that it had invested £10m in self-driving tech startup Wayve in order to develop autonomous vehicles for grocery delivery.37 In April 2021, American pizza company Domino's launched autonomous pizza delivery with an on-road robot in Houston, Texas in partnership with Nuro, a self-driving delivery company.38 Walmart has also started using fully driverless trucking in its online grocery business, aiming to increase capacity and reduce inefficiencies.39
32 TESCO33 Forbes, “Managing the complexities of last-mile delivery,” September 2022.
34 Capgemini Research Institute, The last mile delivery challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability, 2019.35 Capgemini Research Institute, The last mile delivery challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability, 2019.36 Capgemini Research Institute, The last mile delivery challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability, 2019.37 Reuters, “UK's Ocado invests in Wayve for autonomous grocery deliveries,” October 2021.38 Dominos, “Domino's and Nuro launch autonomous pizza delivery with on-road robot,” April 2021.39 CNBC, “Walmart is using fully driverless trucks to ramp up its online grocery business,” November 2021.
32 TESCO33 Forbes, “Managing the complexities of last-mile delivery,” September 2022.34 Capgemini Research Institute, The last mile delivery challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability, 2019.35 Capgemini Research Institute, The last mile delivery challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability, 2019.36 Capgemini Research Institute, The last mile delivery challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability, 2019.37 Reuters, “UK's Ocado invests in Wayve for autonomous grocery deliveries,” October 2021.38 Dominos, “Domino's and Nuro launch autonomous pizza delivery with on-road robot,” April 2021.39 CNBC, “Walmart is using fully driverless trucks to ramp up its online grocery business,” November 2021.
Brands and retailers must identify new revenue streams and growth opportunities through initiatives, such as expanding into new channels to reach customers. One way to do that is to leverage the power of social media influencers.
Divert marketing spend on key influencers when targeting Gen Z and Millennials Influencer marketing is growing into a powerful tool to reach new and existing audiences. An effective influencer strategy enables marketers to connect with customers in ways that other forms of marketing and advertising cannot accomplish. This starts with choosing the appropriate influencer for the appropriate target audience. Brands and retailers must select an influencer who is a natural and authentic fit for the campaign and for the needs and preferences of the target audience. Selecting an influencer for a Gen Z shopper will look very different than for a Boomer shopper given their different browsing and purchasing behaviors. Brands and retailers should focus on the connection the influencer has with his or her followers and the relevance to the brand rather than solely the number of followers the influencer has. Apart from authenticity, correlating the type of business and the goals of the business with the influencer’s lifestyle also remains as an important criterion when selecting the “right” influencer. In our current research, 70% of consumers buying products on social media said they trust influencers when they use the product and share their own experiences and reviews of the product. When influencers show a credible affinity for the brands and products they recommend, it can have a positive impact on their audiences. In 2021, L’Oréal used influencers that customers could relate to within their campaigns as opposed to celebrities to build greater trust in the brand. They partnered with five of the UK’s most influential YouTube beauty vloggers, who together have a combined audience of 5.5 million followers. This helped cement L’Oréal’s position as a digital beauty brand.40
Diversify content strategy to the needs of different consumer segments to optimize conversionUnderstanding the demographics and psychographics of audiences is very important in influencer and creator marketing. Understanding which segment of a company’s customer base interacts with which platforms is also very important. In our current research, nearly 61% of Gen Z consumers discover new products through social media and 48% through social media influencers. Thirty-two percent end up buying these products on social media. This behavior is quite in contrast with Gen X or Boomer shoppers due to their varied browsing and buying behaviors. Therefore, brands and retailers must offer experiences and content that support two divergent sets of needs within the same channel. Häagen-Dazs, an American ice cream brand, partnered with New York City influencers to create content and events targeted to Millennials, marketing their ice cream as an essential part of summer. The campaign generated 14.3 million impressions and 27,400 social engagements.41
Brands and retailers need to focus on co-creating content closely with the influencer to convey the right message to the right audience about their brand and products. Social media viewers have short attention spans. Creating videos that are 15-30 seconds long or even shorter while keeping the messages simple and clear is important. Nineteen-year-old Carrie Berk, a verified content creator across several social media channels with a monthly engagement (views, likes, and comments) of more than 70 million, says: “Viral content has three key elements: a great hook, a strong message, and an understanding of what the audience wants to see.”42
40 eTail Canada, “L’Oréal Canada's influencer marketing strategy,” 2022.
40 eTail Canada, “L’Oréal Canada's influencer marketing strategy,” 2022.41 Influencer marketing hub, “15 influencer marketing examples to power your influencer campaign planning,” October 2022.42 Capgemini Research Institute, Conversations for Tomorrow Edition 4, The new face of marketing, 2022.43 The Grocer, “Boots freezes prices on 1,500 own-label products until end of the year,” June 2022.
41 Influencer marketing hub, “15 influencer marketing examples to power your influencer campaign planning,” October 2022.42 Capgemini Research Institute, Conversations for Tomorrow Edition 4, The new face of marketing, 2022.43 The Grocer, “Boots freezes prices on 1,500 own-label products until end of the year,” June 2022.
Brands and retailers must manage the growing tension between the simultaneous need for affordability and sustainability.
Revaluate pricing strategies to provide affordable options With today’s high inflation and soaring energy bills, consumers are struggling to meet their basic needs for food and other essential items. Around half of consumers we surveyed (45%) are worried about affording food or other basic household necessities. Consumers are expecting retailers and brands to come forward and help them through this difficult time. Sixty-seven percent of consumers say that brands and retailers should accept lower prices for the products that they need to survive (i.e., essential items like food, medicine, fuel, apparel, and utilities). Brands and retailers must empathize with consumer concerns by keeping prices fair and consider how they can reduce their operational costs to be able to pass on cost savings to the customer via promotions, discounts, price freezes, or other means. Many businesses have already risen to the challenge and have come up with innovative ways to help their customers. Beauty retailer Boots has committed to freezing the price of over 1,500 Boots own-brand products “to ensure they remain affordable” at least until the end of the year.43
Offer loyalty programs with strategies that simultaneously help customers with their cost of living and ensure higher customer lifetime value The current situation is a unique opportunity for loyalty if the loyalty program incorporates smart mechanisms that help customers through the crises – beyond purely transactional benefits, which are table stakes for any loyalty scheme. The most effective loyalty programs will offer additional, smart ways for loyal customers to reduce their spending, such as tasty and/or healthy recipes that save money. As part of its nearly $90 million program to support customers and staff over the next year, UK supermarket group Asda launched an “Essential Living Hub,” an online money-saving advice site to help parents struggling with the cost of living. The hub includes tips on energy saving, buying, and cooking smarter and ideas for free family days out.44The majority (70%) of consumers highlight that they would want brands and retailers to provide more discounts to help them purchase essential items, such as food, medicine, fuel, apparel, and utilities, and they are also expecting to receive bigger discounts as a loyal customer. Brands and retailers should factor this into their loyalty program strategies to meet consumer expectations during this challenging economic time. The brands and retailers that anticipate and meet consumer expectations will likely be rewarded with customer loyalty in the post-crisis period, as we found that 74% of consumers plan to purchase more products or services in the future from companies that help them through this difficult time. Indeed, many retailers are tapping this opportunity by offering higher discounts to their loyal customers. Thrive Market, an online grocery platform that offers $5 monthly memberships, launched a discount destination hub for cost-conscious consumers in October 2022. Members have access to the new Thrive Rewards program, which compiles deals across the site into one location. Thrive Market promises members they will make back their annual membership fee in savings or receive a credit for the difference.45 Supermarket chain Asda rolled out a new loyalty program, “Asda Rewards,” through which customers can earn pounds, building up a “Cashpot” to spend in-store or online.46
Exercise social responsibility to help impacted segments of societyConsumers would value a brand or retailer going beyond their current capabilities to help society come out of this crisis. In our survey, 68% of consumers say that companies need to do more than they are currently doing to help society. Various brands and retailers are extending themselves to help their communities. In June, Asda launched the “kids eat for £1” offer in Asda cafes and has since served more than 330,000 children’s meals.47 Retailers such as Coop, Aldi, and Asda have increased pay for all their store-based employees. In an effort to reach underserved populations, Aldi donated 700,000 meals to charities, food banks, and community groups during the school summer holidays through a partnership with Neighbourly. 48 Boots donated 50,000 products including soap, deodorant, toothbrushes, and feminine care products to the Hygiene Bank, a UK charity providing essential products to low-income households and people living in poverty.49
44 Asda, “Our new money-saving hub offers tips to help parents during the summer holidays,” July 2022.45 Modern Retail, “Something that adds value beyond just the discount: Thrive Market is testing out new rewards program,” October 2022. 46 Asda, “Asda confirms shoppers nationwide can now access its loyalty program,” August 2022.
47 Asda, “Children can eat for just £1 at Asda,” July 2022.48 Aldi, “Aldi to donate 700,000 meals to charities over school summer holidays,” 2022.49 Boots, “Boots supports National Hygiene Week with The Hygiene Bank,” October 2022.
44 Asda, “Our new money-saving hub offers tips to help parents during the summer holidays,” July 2022.45 Modern Retail, “Something that adds value beyond just the discount: Thrive Market is testing out new rewards program,” October 2022. 46 Asda, “Asda confirms shoppers nationwide can now access its loyalty program,” August 2022.47 Asda, “Children can eat for just £1 at Asda,” July 2022.48 Aldi, “Aldi to donate 700,000 meals to charities over school summer holidays,” 2022.49 Boots, “Boots supports National Hygiene Week with The Hygiene Bank,” October 2022.
