Four transformative business models for retail and consumer goods

Consumers are increasingly demanding a better shopping experience from retailers. Chris Donnelly, global retail lead at Accenture Strategy, reflects on how traditional retailers are under pressure to transform as UK consumers demand new shopping experiences.

Consumers have never had it so good. The rise of digital means that they now have more channels, choice, purchasing control and market influence than ever before. Where customer loyalty exists, it is now underpinned by a tacit understanding that retailers and consumer goods companies must provide ever more personalised, convenient and compelling digital experiences. 

The problem is that many consumers are not getting these type of experiences from industry incumbents. Instead, they are going elsewhere – and traditional players have reason to be concerned. The most exciting growth in consumer industries is not coming from the traditional high-street players that have historically been the bedrock of local communities, but from smaller, agile companies offering experiences that often blend technology and human interaction in compelling ways. And the gap between those who ‘get it’ and those who don’t is widening.

The tell-tale signs of change are here; store closures and liquidations have become commonplace for traditional retailers that have failed to move to digital’s drumbeat. Online disruptors continue to steal market share by introducing innovative new services and experiences designed to surprise and delight customers. And they’re being well received. Take Amazon’s latest launch of the shoppable social network ‘Amazon Spark’, or its smart home device ‘Amazon Echo’. Consumers are being taken on a journey from inspiration to consumption, and it is working.

Recent research also found that UK consumers have a strong appetite to try innovative new services – even some that are not in existence today. For instance, 34% of UK consumers are already open to allowing intelligent devices in their homes to ‘think for them’ and make purchasing decisions on their behalf. Another 39% would allow companies to collect their personal data via intelligent devices in return for a better experience or financial reward.

The growing sophistication of consumer demands will challenge traditional retailers and consumer goods companies to evolve and innovate, driving huge growth in digital commerce. For incumbents to secure their future relevance, now is the time to rethink their purpose and adopt an innovation-led strategy. 

An analysis by Accenture for the World Economic Forum found that companies operating in consumer industries could unlock enormous value over the next decade by accelerating digital transformation. The key to success will be the adoption of new, digitally-driven business models that will enable companies to offer consumers the shopping experiences they crave. 

The following four transformative business models have the strongest potential to transform digital commerce, and are already being welcomed by UK consumers:  

Sharing economy

This is essentially the next-generation rental market where consumers use a product as needed rather than actually owning it. For instance, 36% of UK consumers said they would rent a fashion item for an occasion and then return it, instead of purchasing it outright. ThredUp is a US player which allows consumers to send clothing they want to sell in a sealable bag. They then run those items through an algorithm and are ultimately able to resell 50% of the items with the rest going to charity. For those who worry this will reduce demand for new products, it appears these models enhance ‘closet velocity’ in houses who embrace them. 

Personalisation economy

Think of this as ‘surprise me subscriptions’, where experts curate products tailored to an individual and automatically deliver it to their door. 29% of UK consumers said they’d use this subscription for clothing, where an expert selects items on their behalf based on previous shopping preferences and purchases. Companies like Stitchfix use a mix of highly developed analytics and style consultants to create very specific recommendations to their consumers. Their return rates are falling by the day. All these innovations are likely to become widespread in the UK in the next few years.

Replenishment economy

Automatic replenishment is when smart sensors detect when a consumer goods product is running low and automatically reorders and delivers it to your door. Over half (52%) of UK consumers would be interested in subscribing to services that replenish items like laundry detergent. Another 46% might use it to reorder fresh food items. These services are giving consumers the convenience they crave while removing the mundanity out of household shopping. 

Services economy

Also known as ‘do it for me’ services. This is when consumers outsource the heavy lifting of household chores to others – 37% of UK consumers would consider this sort of service for their laundry, by getting someone else to do the ironing and folding. 

Consumer demand will ultimately influence the market, and we’re likely to see a transformation in both the high-street and the last mile space – on how goods are delivered to consumers – which has the potential to create ever broader ranges of goods and services. 

With growing UK consumer appetite for new purchasing experiences and enormous market value at stake, that might very well be the motivation that incumbent organisations need to get going.