The Future of the At-Home Economy
The at-home economy boom is enjoying the lingering effects of a drawn-out pandemic, and the home remains a valuable space for brands to explore
The last time we wrote about the at-home economy, in June 2020, we charted its lockdown-triggered boom and applied a “Start, Stop, Continue” framework to discern the various consumer behavior trends that had popped up to help brands focus on the ones that will have staying power. At the time, we highlighted four rising trends in the “Continue” category: home entertainment, home cooking, home fitness, and omnichannel services. Over 15 months later, all four trends continue to show sustained popularity, even as vaccinated people have started to gingerly venture out of home.
As more and more people start to begrudgingly accept the fact that the Covid-19 pandemic is turning to an endemic, where the virus will remain constantly present but spread at a much slower and less lethal rate, the at-home economy continues to benefit from the lingering effects of a long tail-end of the pandemic. Entertainment brands continue to experiment with a shortened theatrical window and prioritize capturing viewers at home; food and grocery brands continue to invest in fast delivery and improving the home consumption experiences; home fitness brands like Peloton and Tonal continue to siphon customers away from gym memberships; and many brands and retailers are eager to enter the home space via omnichannel services that consumers can access without leaving their couches. All in all, home remains the center of gravity for most people’s lives in 2021 and, arguably, for the foreseeable future.
The Multi-Functional Home
Home is no longer just where we live and relax; the pandemic has transformed it into a multi-functional space, now doubling as our office, our gym, our fitting rooms, our dining and event space, and, for those with young children, our school. We have adapted and reconfigured our homes to fit these various functions, and the resulting sales numbers speak for themselves. Sales of office chairs increased by 74.8% in 2020, and leading home gym brand Peloton was estimated to have taken in $1.8 billion in sales last year, doubling its 2019 sales. Meal delivery services also reached new heights, as data from Bloomberg reveals that in August 2021, total sales for meal delivery services grew 15 percent year-over-year, with DoorDash leading with a 57% market share.
One direct consequence of cramming multiple functions into one physical space is a collapse of context, resulting in a disorienting sense of sameness and stagnation. The lucky ones with enough square footage to utilize can assign different functions to different rooms, but the rest of us, especially the city dwellers, had to learn to mentally compartmentalize their home space, often with the help of digital devices. Similar to the case of targeting the digital nomads, this collapse of context presents a new challenge for brands as it renders location data irrelevant (to a certain degree) and complicates their endeavor to reach consumers at the right time with the right message.
Location and time are no longer the only defining factors in determining context, and brands will have to learn to “read the room” before they barge into any digital channels with their messaging. No one wants to be reminded that they need to exercise or watch new TV shows when they are buried in back-to-back Zoom meetings, but a notification offering them a shortcut to reorder their favorite takeout for lunch may be much more appreciated.
Today, a lot of that contextual information is stored in the various apps on our phones: the calendar app knows when you’re in a work meeting or not; the activity tracking app knows when you start your daily exercise session; the food delivery app knows when your dinner will come, and the recipe app knows when you’re planning to cook. The one thing that currently has access to all this contextual information is the digital assistant, namely Siri for iPhone users and Google Assistant for Android users. Both Apple and Google have made great strides in leveraging machine learning to make their respective digital assistants more intelligent and aware of these contexts when making suggestions. The “Focus mode” that Apple recently launched along with iOS 15 offers iPhone users a straightforward way to customize their notifications from different apps based on context, be it work, personal time, or sleep.
If there is one thing that is as personal as our phone, it’d be our home. Yet, our home is not as smart, and it is not always aware of the shifting context in which it is supposed to function. The smart home movement is still in its infancy: although some 50% of U.S. households have bought a smart speaker, thus granting smart assistants like Alexa and Google Assistant an always-on presence at home, the rest of home appliances and gadgets are still waiting to become connected as they gradually go through their respective upgrade cycles. Five to ten years down the line, when our entire home becomes connected and the appliances can communicate with each other and with the smart assistants, the home will become far more capable at anticipating our needs and fulfilling its multiple functions, as our phones do today.
This is where ambient computing comes in. In our 2020 Outlook trend report, we identified ambient computing as a guiding vision for both Google and Amazon in their pursuit of “building the infrastructure that will deeply embed our digital lives into the physical world around us,” including and, for the most part, starting with our homes. Most of our existing smart home devices use either a mobile-based interface or a voice-based conversational interface, but ambient computing at home promises to free us from these conventional interfaces that demand our attention. Instead, everything should just work, thanks to their access to the contextual information they require to figure out the need they should fulfill in any given moment. The ambiance of our home will constantly shift based on the context and function it is facilitating at any given moment. Good vibes only, as the Gen Z kids say.
Another interesting way in which our homes may evolve to fulfill their multi-functional roles is to rely on AR and VR technologies to “remake” our home environment, or allow us to access an entirely virtual environment made for particular functions. Facebook has already launched Horizon Workrooms, which allows Oculus users to be transported into a virtual conference room from wherever there’s good WiFi. If our physical spaces at home won’t be enough to shapeshift to fit our needs, perhaps we’ll retreat into the digital world where the environment can transform at the snap of a finger.
For brands, effectively reaching customers at home now requires a heightened awareness of the context of when your messages are reaching them. Traditionally, most brands have relied on TV advertising as the primary channel to reach audiences at home. Today, mobile commands an increasing amount of consumer attention, no matter where they are. In the future, all smart home devices may provide valuable cues to what at-home consumers need and offer a new way for brands to add value to their customers’ domestic life. And the best way that brands can do that is through services designed for the home.
Room Service for the Home
As home remains the center of gravity for the foreseeable future, brands that used to operate outside of the at-home context are experimenting with different ways to enter it. Last year, many small businesses, especially restaurants, quickly pivoted online when stores were shut and in-door dining was suspended, and some travel brands started developing virtual experiences to keep their audiences engaged. Moving forward, more brands should be exploring opportunities that are unlocked by the rise of at-home consumption, and creating products and services that consumers can access at home, as easily as they could order room service at a hotel.
Most products today are still designed for conventional retail distribution. Yet, as ecommerce continues to grow its share, more products are being shipped directly from the warehouses to the home. In New York City alone, there are more than 1.5 million packages delivered every day, allowing people to get the products they need without venturing outside. Therefore, more and more products are being designed for delivery and at-home consumption. Shipping economics have incentivized decreasing the volume and weight of the goods manufacturers ship. That means simpler and smaller packaging, but also product innovations that may reduce the weight of the products themselves.
For example, incentivized by the need to reduce shipping weight and carbon footprint, the “just add water” category of CPG products is on the rise. In their conventional form, many household products are mostly composed of water — something that comes out of faucets in every household. Therefore, CPG brands can save on shipping costs and make a positive environmental impact by designing products that consist of the active ingredients in distilled or dehydrated forms. Some examples of this innovative approach on the mass market today include Drinkfinity, a Pepsi brand that sells flavored water pods; Blueland, which sells cleaning supplies in tablet form; and Unilever’s Cif ecorefill cleaning concentrate, which allows consumers to refill and reuse their Cif spray bottles.
Beyond designing products for at-home use, product brands can also offer services related to their products to create a winning brand experience. For example, IKEA acquired TaskRabbit to integrate furniture assembly service into its offering, and one could easily see how it could turn the home decor consultation service the company currently offers in select stores into something that all IKEA customers can access virtually. Best Buy’s Geek Squad service brings tech support into the living rooms and offers a similar type of home service to add value to its brand, and its recent ventures into at-home healthcare, especially in senior care, indicate a strategic expansion aimed at leveraging its existing customer relationships and technical know-how to capitalize on the growing home economy.
Over the past decade or so, new technologies have enabled services that allowed a larger sector of the population to outsource domestic labor like cooking, cleaning, and laundry. Every chore we need to do at home is now easily done with a few taps on our phone, provided that you can afford the services. A lot of these domestic chores are tied to their own category of CPG products and household appliances, which opens a way for brands to enter the home with a service. Tide, for example, already runs a drop-off laundry service that enables customers in select markets to get their clothes cleaned on demand via a Tide-branded mobile app. New brand opportunities will start to emerge as more companies begin to explore the home as a new context for their products and services.
An interesting and consequential side effect of this shift towards creating products and services for the home is that at-home consumption becomes a new category of media moments that await activation. Whether it’s through QR codes, visual search, or innovative packaging, brands now have a plethora of options to surface branded content via physical products or established digital touchpoints at the moment of engagement. This not only enhances the brand experience, but also solves the aforementioned “collapsed context” issue and ensures brands are always reaching customers with relevant messages when they want to be engaged.
From live video to AR experiences, from mobile games to Alexa skills, there is no shortage of formats with which brands can choose to engage the at-home audience. Early adopters like Jack Daniel’s and Fruit Bliss have both added AR-experiences that are activated via QR codes on product packaging to enhance their brand storytelling, and brands should also consider the functional angle when activating these media moments. Instead of repurposing your existing media content, consider the utility value you can provide to consumers at home that will enhance their enjoyment of your products. The more useful your content is to the customers, the more likely they are to engage, thus offering you a greater chance of delivering a multi-sensory brand experience at home.
Influenced by the advent of the sharing economy, some futurists have proposed a return towards communal living where people living in the same neighborhood or community will share amenities and collective access to services that would be costly for individual households to maintain. While that seems unlikely to happen at scale in the U.S. any time soon, the ongoing migration of people from metropolises into smaller cities and suburbs will create more living space for people to reconfigure their home life. Research indicates that a sense of community is usually stronger in less densely populated areas, and there may be new opportunities for brands to leverage these new media moments to create valuable, shared experiences that may enhance that sense of community.
Home as a Key Commerce Channel
Ever since the days of QVC and mail catalogs, home has been a sales channel. With the booming at-home economy, home shopping is poised to go through a transformation and become more integrated into the future of our smart home systems.
Given the prevalence of shoppable formats today, it makes perfect sense that the aforementioned at-home media moments would also be converted into sales opportunities. An AR experience activated via QR codes could also be used to direct customers to place another order, and live video demos could be deployed to recommend related products. For example, L’Oréal’s has already tested AR try-ons with its Makeup Genius app, and its recent acquisition of ModiFace, an AR startup that specializes in cosmetics, could further pave the way for establishing AR try-on as a sales funnel. Omnichannel services beget omnichannel retail opportunities, and brands would be remiss not to explore them in the context of the home.
New discovery tools and shopping experiences will take off at home first because it’s less awkward to try new things in the privacy of the home. Even before the pandemic, many D2C brands have relied on the “try-at-home” model to sell directly to consumers, often via monthly subscriptions. Google recently expanded its shopping searches with Lens, its visual search tool now integrated into every search bar, and enabled in-store inventory checks designed for at-home shoppers to easily discover new products and make direct purchases. The various AR try-on experiences launched by the likes of Instagram and Snapchat aim to bring the stores into the home, further eliminating the need to go to a physical store.
From here, home commerce experiences could easily be extended to new devices and interfaces as more smart devices are added to our homes. All smart home players are aware of the enormous opportunities this expansion would capture, and Amazon is unsurprisingly the one best positioned to lead this growing market. The ecommerce giant already runs a delivery service that leverages its own smart locks to allow delivery persons to put groceries ordered via Amazon Fresh directly into your fridge. Now, Amazon is reportedly making a smart fridge that, among other functions, will be able to monitor your grocery buying patterns and automatically add routinely purchased groceries items to your shopping list when they are running low. Putting two and two together, it is not hard to foresee a future where every Amazon household is supported by a semi-automated home commerce infrastructure that ensures home essentials are always in stock.
Another direction in which home commerce is moving is a deeper integration into the services that, pre-pandemic, were typically only accessible in person, particularly within the healthcare space. Theoretically, the popularization of telehealth services would also make some people consider switching to online pharmacies to take care of all their healthcare needs without leaving home. In reality, this is of course hindered by various factors such as insurance policies and laws preventing the sharing of patient data. Still, most over-the-counter medicines have been widely available to purchase online, and some D2C brands such as Hims are bringing prescription drugs into that realm as well, via virtual consultation in the states where the regulations permit.
Whichever direction in which home commerce develops, it is evident that the platform that operates our smart home ecosystem will have a big influence on our purchase decisions. As tech companies race to control the future interface of the home, the question of smart home interoperability will be at the forefront of the debate that will determine the openness of the home ecommerce infrastructure. The recent roll-out of the Matter, a universal protocol that would let any set of smart devices interact with one another, is being supported by all major players in the smart home market, yet commerce interoperability between different smart home systems remains an underexplored topic that will surely warrant more discussions down the road.
Want to Learn More?
The home is undergoing a fascinating transformation that will continue to influence how we interact with brands and how we make purchases. Even as the pandemic gradually morphs into a more manageable endemic, the pressing challenges of climate change and eco-disasters may continue to force many of us to anchor our lives at home. We here at the Lab are closely monitoring the disruptions happening at home. To start a conversation around the various trends shaping consumer behaviors at home, and discuss how your brand can explore these new opportunities, reach out to Josh Mallalieu at josh@ipglab.com.
