World Consumer Trends
In a book Treasure Hunt: Inside the Mind of the New Consumer by Michael Silverstein author shows us alarming news for the retail. Middle markets are continuously shrinking, and not only in categories where downscaling and upscaling use to be familiar, but almost at everything. Cars, apparel, food, household goods, furniture, all getting hit with some main players like Nestle and Craft having their mid segment brands continously losing market share. For a long time Maxwell house had their stable position in consumer minds, but with raising adaptation levels at both sides of the spectrum, they are becoming obsolete. Newcomer store brands with budget offering give same if not better quality and the upscale market is out of the reach.
But now, where does saving and spending sprees go? Traditionally it would have seemed that budget options are there for consumers that are forced to budget. I remember well that in basic economics lectures we were told that as soon as we earn more, we start to spend accordingly. Not so much these days, now you can meet CEO shopping for detergents in a Euro store and a cleaning lady buying clothes at Brown Thomas (luxury brand retailer). Consumers save on the things they need for the things they want, quality of the product is mandatory and not only it has to be constant but continuously improving. If you are in the middle it should make you think, where are going to be in five years, are you going to offer commodity or experience, are you going to invest in shrinking your margins, or in building positive brand associations.
The new generation seems to look to delay their marriage, spending more on dining out and experiential travel. Try to count how many of your friends have been to India and Thailand. Alcohol consumption is dropping, and leisure club memberships are rising. Coffee time is becoming something to look for with abundant upscale coffee houses. Online retail allows us to show for bargains in the comfort of our own home and most of it is available because many save on food with Lidl, for apparel with Primark (Penneys) and consumer electronics with Amazon. And this is across all market segments; we are slowly becoming very good at saving to spend on things we want.
Digital Omnipresence is not only an option.
For many years Xtravision had a monopoly over entertainment rental market in Ireland. Depending heavily on their distribution networks, they were held hostage as forecast markets outside of the country slowly transformed how we consume entertainment. In one hand there were severe piracy issues launched by Napster and MegaUpload. In the other, suppliers of the entertainment condemned digital distribution as it was believed to feed into the black market. In the United States, much earlier to the problems faced by the Xtravision, Blockbuster, also chosen to stay away from the digital had Netflix creeping from behind. In a considerably short time, it bankrupted not only Blockbusters but also almost every single movie rental brick and mortar store in nearly every English speaking market. Netflix offered one million dollar merger with Blockbuster to handle digital wing but were laughed out of the room. And Xtravision watched it all in slow motion.
To reach critical mass, Netflix needed every household to have multiple computers, good internet connection and last ten years brought us smartphones, tablets, and unlimited 4G data. Post 9/11 public showed preference to stay safe at home, 2008 financial crash lead to the reduction in disposable income and cross-market adaptation of data mining meant that customers were matched with their exact needs.
In a brilliant book “The Long Tail: Why the Future of Business is Selling Less of More” explored another trend. Mass produced everything, music, holidays, retail is making less money than that a long tail of niche offerings built to exact customer needs or brand associations.
Pivotal point for Irish online retail.
To compete retailers are forced to act fast. Tesco started their online grocery delivery, Debenhams and Lifestyle Sports educate consumers and slowly building a habit of conspicuous consumption online with trained staff using shops as warehousing and distribution centers.
The government threw grant money at online retail for SMEs, but a mistake in methods meant that adaptation rates will still be low and merely be expecting that consumers switch was naive. Just having a beautifully built opera house is not going to guarantee Standing Ovation. By the way opera houses still pays for professional encouragement (it is an actual job) just to let an audience know when to clap playing a bit with the psychology of human behavior. But that bit is for another article.
As online sales grew with popularity of the Ebay and Amazon, more advanced and expensive products became available. Entirely new content segment supporting retails was created with consumer reviews filling informational gaps in a buying journey of the consumer. It raised awareness while creating entirely new markets. It gave enough information where to buy and what was product performance after some use, guiding them at their own pace past consideration with a digital carrot right into buying. Combined with 100% satisfaction guarantee adapted by a good few online retailers dream became a reality. Amazon was taking considerable losses to allow those trends to become a norm instead concentrating on distribution streamlining that would put KanBan to shame.
And when your consumer has to go to the usual shops, and they are often disappointed. So here Irish retail was, competing for the money of the consumer solely based on likeability of their staff (hiring local staff and seniors) monster size supply chain with favorite designs (Primark absorbs River Island) and other few giants with operations worldwide getting their economies of scale.
Then Irish trade organization published the report about Irish consumers spending their money in the UK; they forgot to mention that it could have been Amazon to blame mostly. But what it actually forgot to say was, why did consumers suddenly started trusting online retailers, buying products in some cases they have no clue about.
As mentioned previously, as online retail grew so did demand for the information, trying to find answers to the questions previously answered by retail staff. It gave consumers excitement with unboxing videos, comparisons with between similar products and even some retailers did or do try to provide information relating to products it all seemed to be a bit off.
What retailers did not understand at a time that simple text did not contain instant gratifications for the consumer. Buying process got longer, and unless retailer had a way to incentify consumer to generate content about products, their necessary information approach is not going to produce results. So consumers went to YouTube looking for that information, and then YouTube started paying advertising fees to creators merged with affiliate marketing trend paved by Amazon content came in such quantities that no one man marketing team could keep up.
It’s not so new.
Custom publishing is not a new concept. Retailers (Sears) were one of the pioneers in custom publishing, the name that got lost in years, and a more recent title of content marketing was adapted. The only difference at those times; there were few content distribution platforms, and the audience were more eager to consume content provided as fewer options. The perfect storm of affordable equipment, content management, and distribution platforms liberated information, while completely smashing inefficient traditional media houses at their own game.
Now it is easy to spread the message, but harder to navigate ever-changing digital distribution channels and keep up with increasing expectations of the content consumer as user-generated content in some cases overthrowing traditional media houses in creativity and in-depth knowledge of the modern buying patterns. If you can’t think like your consumer, partner with someone who is making their mission to become an advocate and medium for both consumer and brands that are filling your shelves.