Globally, a different retail customer has emerged with new behaviours and decision-making criteria. In KPMG’s Responding to consumer trends in the new reality report, our research details findings from 75,000 consumer survey responses taken over four months, from May to September 2020, across 12 countries. The evidence arising from the research points to a rapid shift in how customers view their world: such is the level of change, it demands an equally rapid response from retailers’ approach
in their markets. We will explore the four key themes emerging from our research and how retailers need to respond to the changed consumer. We will also unpack the actions required by retailers and their prioritisation to navigate the complexities of the new reality. A generation of change has occurred in just a few months, and leaders will need to navigate upheaval across many factors, forcing the sector to reconsider the approach to their route to market. There are four critical macro trends expected to shape how these considerations need to be made. 1. Economic impact Covid-19 has had a polarising effect on consumers’ finances. Some have been directly affected, while others will have been less impacted and will be building their savings. For example, 45 per cent of customers still claim to be financially comfortable. Retailers will need to better understand the needs of each of the consumer groups via segmentation driven by AI and psychometrics. Personalisation not only of communication but also of developed products will be the key to meeting these needs. Consumers are also consistently looking for more competitive pricing, presenting challenges in a market with a prevalence of discounts and special offers. 2. Erosion of trust The outcomes of Covid-19 for retailers have been unbalanced, with some types of retails doing well, such as grocery and home goods. Our research shows that net trust vs pre-Covid has grown by one per cent in grocery and dropped by two per cent in the non-grocery segment. Success depends more on communicating and demonstrating commitments to consumer safety, on top of actions taken. Social safety is still a top-of-mind concern. Non-grocery retail chains have been perceived as not putting customer safety first. To convince customers to spend, retailers need to show a clear purpose to community safety. This is especially relevant for financially vulnerable consumers, who feel even less trust for brands across sectors. 3. Rise of digital The switch to a delivery-focused model has been challenging due to changing costs of doing business. Online delivery carries a lower profit margin, and retailers’ ability to adapt to the new reality has been affected by their infrastructure and available capital to invest. With this in mind, retailers that are succeeding in this space are doing so off the back of years of investment in direct-to-customer infrastructure. For those small- to mid-scale operations, consolidation of infrastructure will likely be necessary for these brands to succeed. “Clients have said that they have been fast to grow online sales via existing online services but building supply chain capability and meeting fulfillment expectations from customers has been a real challenge,” said Robert Pool, sector head of Consumer and Retail at KPMG. 4. Home is the new hub The shift towards regionalisation and “shop local” campaigns has presented challenges for retailers, such as the decline in consumer use of larger department stores. However, for those brands better able to understand their customer segments and identify the differing needs of those consumers, there is a significant opportunity. Consumers are seeking an individualised approach to value for money and ease of experience. Brands with the ability to reach customers in or close to their homes, and those willing to consolidate infrastructure to more easily enable this will likely be the success stories. This is an opportunity for further growth, with consumers willing to spend more on locally sourced products. Consumers will also be spending more time in the home, and retailers will need to rapidly understand new consumer preferences and trends for types of products: a new view of what is essential and non-essential. Our research shows that the top purchase drivers remained consistent. Value for money remains the most important factor for all consumers, irrespective of the financial segment. Ease of purchase remains a close second, driven by the rise in online shopping. To ensure success through these times of rapid change, organisations must continue to articulate their commitment to customers’ safety and more deeply understanding the needs of the new consumer. This was originally published in the Australian Retail Outlook 2021, powered by KPMG. To download the report, click here.