Six customer experience trends we’re tracking as retail and consumer goods respond to COVID-19
Omnichannel experience and customer-centricity matter more than ever as consumer behavior rapidly responds to COVID-19. Here are six key trends to keep you ahead of the curve.
By Rio Longacre
COVID-19 has only been in the United States for several months, but it has already had a significant impact on consumer behaviors. These changes have disproportionately affected retail and CPG brands, which have seen their businesses impacted negatively as a result of temporary shuttering of physical locations due to social distancing guidelines and rules requiring consumers to shelter in place.
While only time will tell how the crisis ultimately unfolds and what impact is has on both brands and consumers in coming years, these six key trends have jumped out that fall under the umbrella of Customer Experience. These trends run the gamut from loyalty strategy to first-party data, from digital transformation to a renewed interest in omnichannel experience and customer-centricity.
Trend #1: New consumer habits are forming — and many will stick
“Habits are formed by the repetition of particular acts … and contrary habits are formed by the repetition of contrary acts.” — Mortimer Adler, philosopher
They say old habits die hard — which is generally true. Witness the US’s continued use of the Imperial system or (still) ubiquitous use of cash. In the span of several short weeks, COVID-19 has upended many sacred cows: consumers are washing hands, wearing masks, telecommuting, baking bread at home, and shifting other behaviors at a startling pace.
Given store closures and shelter-in-place orders, it’s no big surprise that in the CPG world, more people are ordering groceries online. As recently as 2018, only 36% of consumers had ever purchased groceries online. A recent study from RBC Research showed than about one-third of overall consumers surveyed made their first online grocery purchase in the past month, potentially pointing to a momentous shift.
Trend #2: Digital transformation redux
Digital transformation (DT) describes how organizations move from current-state to one that uses digital technology to shift offerings and deliver enhanced stakeholder value. A digital mindset isn’t really about tools, websites, or getting rid of paper forms. Ultimately, digital organizations move fast, release iteratively, organize cross-functionally, and nurture a culture that encourages innovation.
Being more mature digitally means making moves like adopting digital collaboration tools, migrating key tools and data sets to the cloud, adopting D2C ecommerce systems, and driving demand gen through digital marketing.
According to Forbes, 70% of companies had a digital transformation in place or were working on one pre-COVID-19. Despite this fact, many entered the crisis woefully unprepared and, not surprisingly, have spent the past few weeks scrambling to catch up. Andrew Filev, CEO of Wrike, calls COVID-19 a “before-and-after moment” in DT. Suffice it to say, many brands are now revisiting or accelerating their DT programs.
Trend #3: Customer Loyalty becomes paramount
In most of the world, empty shelves and closed locations have disrupted brand loyalty. Not surprisingly, around two-thirds of US consumers have tried new brands after sheltering in place, with 79% saying they did so because a product was unavailable or out-of-stock. More troubling for brands, 30% to 45% of consumers indicate a willingness to stick with a new brand, pointing to permanent shifts in consumer behavior that may be difficult to dial back after the crisis ends.
In response to this trend and because many retail and CPG brands are struggling to maintain revenues due to COVID-19 closures and quarantines, many brand leaders see loyalty as a vehicle to build direct, enduring relationships with customers. Beyond the mechanics of points or tiers, loyalty has long proven an effective model for obtaining, engaging with and retaining customers, beyond the potential of an average or non-member customer
79% of US consumers are trying new brands as they shelter in place because preferred brands are unavailable or out-of-stock. And 30–45% indicate a willingness to stick with the new brand.
The good news: The number of consumers signing up to loyalty programs has been steadily increasing. The last week of March, for example, saw 26% more program sign-ups than the last week of February.
Trend #4: D2C ecommerce focus
Pre-COVID-19, the Retail Apocalypse and accompanying disappearance of storefronts as shopping malls close across America has posed a poignant threat to many brands. Indeed, adjusting to the eventual demise of the Baby Boomer retail model has proven especially challenging to brands centered around distributions through channel partners found primarily in department stores and shopping malls.
In 2019, more than 10,000 stores closed across the country, reported the Washington Post. As the Retail Apocalypse has grinded on, online sales have simultaneously surged, surpassing brick-and-mortar department store sales close to a decade ago and accelerating ever since.
Over the past few weeks, COVID-19 has dramatically accelerated the effects of the retail apocalypse by shuttering retail locations and limiting opportunities for brands to sell in traditional environments. Furthermore, it’s safe to say many of these merchants will never reopen, even after the crisis winds down.
For brands that sell through channels, the stakes have thus raised dramatically. Given this stark reality, it should come as no surprise that the D2C model looks increasingly appealing to brand leaders. In 2020, eMarketer forecasts digital D2C sales will grow by 24.3%, to $17.75 billion.
This silver lining comes with a couple caveats: As sales shift from nice-to-have to must-have products, many D2C brands may find themselves on the wrong side of the equation. Furthermore, disruptions to global supply chains are likely, presenting scarcity issues for many of these same merchants.
Trend #5: Continued rise of the CDP
With channels shuttered and consumers sheltering in place, brands are realizing the importance of establishing direct relationships with consumers and gaining a 360-degree view of their behavior. Over the years a variety of Marketing Technology (MarTech) solutions have sprung into existence, including the most recent entrant, the Customer Data Platform, or CDP.
The CDP is essentially a purpose-built solution that seeks to unify customer data and unlock its power for marketers. In addition to consolidating and normalizing first-party data, which can then be appended and enriched by second- and third-party data sets, CDPs tend to have strong identify resolution and management capabilities.
The real power of CDPs lies in their ability to unlock the power of data and make it both available and actionable for the marketing value chain. Marketers need some kind of CDP-like solution if they wish to align first-party data to the Consumer Journey and enable personalized experiences.
Given the challenges posed by COVID-19, many organizations are doubling-down on methods to centralize analytics and decision-making. A recent article on Forbes reported 53% of CX Leaders are currently investing in CDPs, and 45% in real-time decision engines, as a result of COVID-19.
Trend #6: Omnichannel gets new momentum
Omnichannel is not a new term — it’s been around the industry for a while and has been pushed aggressively by pundits for a close to a decade. In recent years, some brands had begun to sour on the concept, questioning the value of online transactions in light of their supposed deleterious effects on both in-store sales and overall profit margins.
COVID-19 has urgently breathed new life into the idea of omnichannel. Look around and you will see brands experimenting with tactics like curbside pickup, BOPIS, frictionless shopping, and so on.
“Necessity is, of course, the mother of invention … the necessity imposed by COVID-19 looks to be the mother of long overdue omnichannel invention,” reports Stuart Lauchlan on Diginomica.com.
Criticisms aside, the concept of omnichannel was never truly in jeopardy. That ship sailed long ago. If anything, omnichannel was misunderstood or poorly interpreted. In the end of the day, omnichannel is really about customer-centricity — giving people what they want, when they want it, in the manner most convenient to them. It was never about simply adding more channels, adopting solutions like clienteling, or pushing more customers online. The necessity posed by COVID-19 has laid bare this fact for all to see.
When looking at what’s going on in the industry, without exception the developments we’re identifying pre-date the COVID-19, some by many years. Taking a macro view, COVID-19 has acted more as an accelerant than a catalyst — amplifying pre-existing consumer trends while placing incredible pressure on brands to respond, quickly and efficiently.
Rio Longacre is an executive with two decades of leadership and experience in the digital space across strategy consulting, technology services, data, and media planning. He’s a frequent thought leader and subject matter expert in customer experience management, digital business transformation and marketing / advertising technology. Reach him at riol@slalom.com.
Slalom Customer Insight is created by industry leaders and practitioners from Slalom, a modern consulting firm focused on strategy, technology, and business transformation.
