Month: August 2022
Consumer Behavior Trends in 2023: How B2C Companies Can Adapt a Digital Strategy
Trends in consumer behavior
Shift to value and essentials
Consumer sentiment varies greatly across countries affected by COVID-19. Consumers in China, India, and Indonesia are consistently more optimistic than consumers in the rest of the world, while consumers in Europe and Japan remain less optimistic than average about their countries’ economic conditions.
With the exception of Italy, economic optimism has decreased across all European countries as the number of confirmed COVID-19 cases has risen since late July 2020.
Differences are also reflected in consumer spending intent by category. In most countries, consumers intend to continue directing their spending to basic necessities while reducing most discretionary spending. However, in China and India, spending is recovering not only on food and household goods.
Chinese consumers are planning to increase spending on discretionary categories such as travel and clothing, suggesting that China is further down the road to recovery than other countries.
In India, consumers reported higher spending intentions in 2020 across various categories as they prepared for festivals (like Diwali) and the wedding season, which runs from October to December.
Perceived value versus real value has become the dominant factor in buying decisions and manifests itself in two key behaviors:
- When shopping, many consumers buy less and strive for better quality.
- Other consumers are more price sensitive and more likely to buy their favorite products where they’re offered at the lowest price. This price sensitivity also encourages consumers to be more willing to try different products in order to save money, leading to more sales of private label products.
Big brands vs direct to consumer (DTC)
Until now, DTC has been considered disruptive to well-known brands. However, prior to the pandemic, major retailers began investing in their versions of the DTC model.
This process is expected to accelerate due to the increased market demand for products. For example, PepsiCo created direct website access for consumers of its snacks, eliminating the need to go to a third party.
Existing DTC brands that thrived before the pandemic will continue to do so, while those that were struggling before the pandemic began may not make it. Collaboration between DTC brands to expand their audiences will be critical to their survival.
Live streams & social commerce
Starting in China, brands are now live streaming everything from fashion shows to product launches across multiple platforms.
Influencers have also used live streaming in China to advertise and promote products, providing consumers with a different experience and interacting with user-generated content. Considered a great success especially with Gen Z, this strategy was quickly replicated in Europe and North America.
Social commerce has allowed transactions to be completed in social networking applications, making the shopping experience more convenient for consumers. Instagram has been a leader in this category with its Stories donation stickers and its recent shop feature.
Omni-channel
Large ecommerce players have begun to move away from disparate online and offline experiences, making these experiences hyper-connected via smartphones and physical stores. For example, customers can try on a product virtually, then go to the store, view it, and buy it in person.
We see some retailers modernizing their brick-and-mortar stores to comply with coronavirus restrictions, but these changes are also being implemented to support multi-channel consumer behavior after the pandemic.
Ecommerce adoption skyrockets amid COVID-19 pandemic
Ecommerce reached $517.4 billion in 2019 according to Deloitte. As B2C businesses seek to meet this demand, consumers are gaining access to a wider range of competitive products and entirely new business models: grocery delivery services and subscription models for non-perishable household items, for instance.
As consumers stayed home during the pandemic, there was a corresponding rise in online shopping and consumer expectations of retailers. During the pandemic, the number of online customers in most consumer categories grew by more than 10% according to McKinsey.
“Consumer attitudes, behavior and shopping habits are changing, and many of these new ways will continue after the pandemic.”
— PwC
This is especially true in those growing ecommerce categories where online activity has traditionally been low.
The embrace of social progress
Consumers are more educated and socially aware than ever. They have frequent access to social and cultural information as well as news and are adapted to the real-time capabilities of connected digital environments. This encourages retailers to do more than just sell products, as Deloitte describes:
“The current trend based on our research shows that businesses are using purpose to create deeper connections with consumers, do more for the communities with which they work, attract and retain talent and are achieving greater results and impact in the process.”
For example, millennials are more likely to pay more for products that have a lower negative impact on the environment, and they’re more likely to buy products from companies that actively address social issues that matter to them. Companies whose policies and technologies respond to these tendencies are better positioned for long-term success, especially in the face of global crises like climate change and COVID-19.
Investments in expanding and fortifying homes
Fear of crowds will last longer than the pandemic itself. In the United States, the crowded public school system forces wealthy families to pay for private alternatives such as home tutors and additional childcare. Around the world, wealthy urban parents working remotely are moving (at least for the time being) to suburban and rural areas that offer more space for their families.
Right now, 41% of consumers in the UK and 29% of consumers in the US and France prefer to live in rural areas due to the pandemic. These consumers will invest in faster internet speeds and better personal technologies.
Work and home roles will disappear, the internet will become a lifeline, and growing anxiety will impede economic and social progress. CMOs need to prepare to adjust their marketing and product strategies to meet the changing needs of households.
Consumers will exchange data for better experiences
Deloitte notes that consumers are more interested in B2C businesses that are willing to forge meaningful, targeted connections with their customers and are better able to respond to their unique needs.
According to Deloitte data, the majority of consumers (86%) trust companies with their personal information if those companies show that having that data allows them to improve their quality of service. Consumers are more likely to participate in or partner with companies to develop new products and services.
It is in these unique changes — the adoption of ecommerce, social awareness, and the expectation of personalization based on personal data — that B2C companies can find future business benefits.
But realizing these benefits depends on the ability of companies to use targeted strategies and apply the right technologies to implement them.
Gaining a competitive edge with new digital tools
Fortunately for aspiring B2C companies, digital transformation has given consumers the opportunity to experiment with new brands and products more than ever before.
According to PwC, 50% of consumers are trying new brands and products even during the crisis. By using the right technology, companies can embrace these changes and leverage these opportunities for long-term customer loyalty and growth.
Customer experience automation
Today, automation is an inevitable part of growth and a growing need for businesses as consumers expect smart technology capabilities from their favorite brands. These technologies and the experiences they provide will differentiate consumers’ favorite brands from others.
Retailers can use customer data and artificial intelligence technologies to provide customers with personalized and immediate experiences, reducing customer service wait times and allowing consumers to make progress without human assistance. Automating loyalty programs, discounts, and sales will foster more equitable and lasting relationships between B2C brands and their customers.
Data collection and predictive analytics
Consumers are more likely to share personal information for more personalized interactions with their favorite brands. Retailers who invest in tools that help them collect data and interact with customers are more likely to meet customer needs and wants over the long term. But retailers must be willing to share information about how and for what purposes they use customer data at any given time, as expectations of today’s consumers are growing.
Also, retailers should use this data to align their brands with broader initiatives that their customers care about, such as social movements or global health initiatives. For example, food brands that join initiatives to end world hunger may find that consumers are more likely to buy from them than from competitors offering similar goods and services — and consumers may even participate in those initiatives.
Enhanced ecommerce capabilities
Consumers are becoming more comfortable with online shopping across a variety of categories, and brands must leverage more dynamic and sophisticated ecommerce capabilities to improve the customer experience.
This can include personalization features for engaging customers, AI-assisted in-page search to help customers find the products they want, and AI-powered chat or customer service that ensures customers receive answers and results without leaving the ecommerce site or app.
Merchants that are able to identify the unique needs of their customers and implement technologies that effectively meet those needs without causing friction or forcing customers to cross-channel are more likely to retain their ecommerce buyers than those that aren’t.
Hyperlocal and on-demand purchasing
Because small businesses were forced to close during the COVID-19 pandemic, the priority of local shopping has increased for two reasons. First, communities want to support their local businesses and local economies where possible. Additionally, when global supply chains are put to the test, purchasing locally can be the faster option.
Consumers are changing their buying behavior by purchasing from wherever they can access products fastest, forcing businesses large and small to rethink their supply chains and business models. For example, businesses may offer consumers to click and pick up items from inventory in existing stores rather than from foreign countries.
Holiday outlook
Consumers around the world are cutting holiday spending in 2021, even in countries that have shown signs of recovering their spending intentions over the next few weeks. The only exception is China, where more consumers report year-over-year spending increases than spending cuts.
The shift to digital and omnichannel technology will dominate during the holiday season, with 30 to 60 percent of consumers worldwide reporting an intention to move to online shopping during the holidays.
Final thoughts
- According to Deloitte, the majority of consumers (86%) trust companies with their personal information if those companies show that it allows them to improve their quality of service.
- According to PwC, 50% of consumers are trying new brands and products even during the COVID-19 crisis. By using the right technology, companies can embrace these changes and leverage these opportunities for long-term customer loyalty and growth.
- Right now, 41% of consumers in the UK and 29% of consumers in the US and France prefer to live in rural areas due to the pandemic. These consumers will invest in faster internet speeds and better personal technologies.
- Retailers can use customer data and artificial intelligence technologies to provide customers with a more personalized and immediate experience, reducing customer service wait times and allowing consumers to make progress without human assistance.
- Today, automation is an inevitable part of growth and a growing need for businesses as consumers expect smart technology capabilities from their favorite brands.
- Consumers are changing their buying behavior, purchasing products wherever they can obtain them the fastest. This is forcing businesses large and small to rethink their supply chains and business models.
