Millennials and technology are redrawing consumer goods market
Millennials’ values and shopping behaviour, as well as their income development and the technology they wield, are redrawing the consumer goods market. A new survey highlights that while consumer goods companies remain, in part, out of touch with the expectations of the group, they are, in the mid-term, well on the way towards creating an omnichannel experience for the millennials generation.
The millennial generation is quickly becoming a driving force across a range of industries as more and more of the group becomes economically active. As it stands, the group encompasses around 2 billion consumers. The groups also has its own diverse set of values and expectations, which, next to the rapid development of the technology that they leverage, is set – according to recent reports – to disrupt a range of industries and their business models.
In a new report from KPMG, the firm considers a host of aspects related to the changing, and challenging, conditions for companies seeking to engage with consumers. The report, titled ‘Seeking customer centricity: The omni business model’, involves a survey of 400 executives, across 27 countries, as well as a survey of more than 7,100 consumers from 19 countries.
Millennial demand
The study finds that millennials pose both a challenge and an opportunity for companies. In terms of opportunities, health and wellness comes at the top of the list, at 33% of respondents seeing it as an opportunity, against around 17% that see it as a challenge. The expectation that brands are socially and community conscious comes in at around 30% saying it is an opportunity vs. close to 20% that see it as a challenge. Shopping experiences that go beyond products is seen as an opportunity by more than 30% of respondents and a challenge for slightly more than 20%.
On the other side, the group's lack of disposable income, as income inequality more heavily penalises this group, is seen as a challenge by more than 30% of respondents, while less than 20% see it as an opportunity. Additional challenges are seen in so far as the group is less influenced by advertising (26%), and are more often willing to just browse than buy (25%).
The research highlights that, in many instances, companies are lagging behind the changes in consumer sentiment – both in terms of recognition as well as in terms of implementation. 50% of respondents recognise that there needs to be better in-store service and experience, although 34% have responded to the need. 45% say that they believe customers are demanding more detailed and transparent product information, while 51% have responded to the customer demand. Customers too are recognised as wanting to shop online to find the lowest price, something to which 27% of respondents have responded. Additionally, 34% of respondents believe consumers are making purchasing decisions on ethical and environmental considerations.
However, while some of the priorities are in line with growing changes in expectations from customers, the scale of the change in other categories may be underestimated by companies. Peter Freedman, Managing Director of The Consumer Goods Forum comments: “This report provides further evidence of the pace of disruption that the industry is experiencing from the pervasive influence of millennial consumers, social media and omnichannel business models. So much so, that sometimes industry executives may struggle to keep up with their consumers. According to this report, over 75% of shoppers now say their top buying criterion is detailed and transparent product information – yet only 42% of industry executives think transparency is important. Additionally, over half of consumers rate environmental and ethical considerations as very important to their purchase decision, a proportion again underestimated by industry executives”.
The omnichannel
One of the specific focus areas of the report is the rise of the omnichannel business model. One of the key drivers for the business model, according the analysis, is the expectation from millennials and their growing influence on consumer goods companies (54% of respondents). Besides millennials, emerging markets too are seen as a positive driver for a range of integrated channels through which to access goods (63% of respondents). Additionally, the increased availability of retail channels, consumers using more devices and increasing consumer access to the internet are seen as positive for respondents at 58%, 49% and 48% respectively.
The number of omnichannel businesses are, among the survey group, expected to increase significantly over the coming two years. As it stands, 7% of surveyed businesses are single channel; 25% are multi-channel, but not linked; 41% are multi-channel, with some linkage; while 19% are seamlessly integrated; and 7% are fully omnichannel. By 2018, the number of fully omnichannel businesses will reach 31%, while 43% will be seamlessly integrated multi-channel businesses.
A number of challenges remain, however, in the trajectory towards full omnichannel. Top of the list is access to the appropriate technology, as cited by 33% of respondents, followed by cultural challenges, cited by 31% of respondents. Problems integrating the front-end and back-end is cited by 30% of respondents, while 28% say they have issue with the integration of distribution and logistics.
Of least concern in the implementation of the omnichannel business model is the retention of customer spend as the platform evolves, cited by 19% as a challenge, accountable omnichannel director, cited by 20% as an issue, and measurement and understanding of omnichannel ROI, cited by 20% as an issue.
