2021 should see businesses moving from survival mode to growth mode. Shifting customer behaviors and volatile markets may have created a fraught economic situation, but transformation through investment in technology has also created many new opportunities. Organizations that can digitally enhance their operating models will be best placed to stay relevant and succeed in a new era.
During a recent Financial Times webinar, Brian Gregg, senior partner at McKinsey & Company, Rodney McMullen, CEO of Kroger, Eve Williams, UK CMO of eBay and Rebecca Messina, former Global CMO of Uber, discussed the changes, challenges and opportunities retailers face in a digital-first world.
The end of business as usual
The global pandemic shattered the retail model, and dramatically altered consumer behavior as they unbundled from their ingrained habits, thrusting ecommerce into hyperdrive. The fact that homebound consumers migrated online en masse compressed a decade’s worth of e-commerce adoption into a matter of months. McKinsey’s latest US Consumer Sentiment research shows that a whopping 77 percent of consumers tried new shopping behaviors in the past year, and that they were primarily driven to it by a need for value, convenience, and availability.
Retailers have been handed a golden opportunity
The lockdowns accelerated online trends that already existed, and generated a tsunami of data on consumers’ new behaviors. It’s a once-in-a-generation opportunity for brands and marketers to win new customers and create loyalty. But they have to be able to understand what customers want and how they make decisions across the entire funnel. What these players do in the next ten months, as recovery begins, will set the gameboard for the next ten years. It’s going to take sustainable speed, so companies that surprised themselves with their ability to adapt in real-time during the pandemic need to now graft that speed into their DNA and turn it into a competitive advantage. They also need a future-ready business model that’s based on resilience, so they can absorb the next shocks and use them to build sustainable growth.
Brand loyalty took a beating, but some big brands prospered
A consistent insight McKinsey has found in our research during the past year was the amount of switching consumers did across brands, retailers, and channels. This is astonishing, but 75 percent of consumers told us they abandoned a brand they had previously used and trusted. That means three quarters of consumers are pretty much up for grabs now. We also saw that the average adult’s digital consumption in 2020 rose from one to three hours a day, which is a huge opportunity. The big brands that emerged strong from 2020 are the ones that were able to quickly adjust to this. They understood what was happening and changed their media plans early on to target consumers where they were spending time: online.
Consumers placed greater emphasis on corporate values
The pandemic really helped illuminate societal inequality and what’s going on with underserved populations. Although much of the brand-swapping in 2020 was driven by people looking for good value that they could get safely and conveniently, a growing number of younger and higher-income consumers were driven by other factors, like how they perceive a company’s response to the pandemic. We see this in our research, which shows that customer expectations of brands are shifting, and that a brand’s purpose and values are now key reasons for buying. For example, as consumers returned to stores and got used to masked shopping, they assessed retailers’ responses to the pandemic through the lens of in-store safety protocols and how much value they felt retailers placed on the safety of employees and shoppers.