Retail and CPG’s consumer conundrum
Much has been written about the over-reaction to the changing landscape in retail but the fact of the matter is that retail is stronger than ever. In fact, retail industry spending through the first third of 2017 rose 3.6% compared to the same period last year. So, what is causing so many store closings and a general cloudiness over the industry? A shifting landscape in how consumers define convenience – driven largely by Amazon.
Over the last decade, ecommerce’s “delivery to your door” model (led by Amazon) has fundamentally shifted the perception of convenience. The beauty of Amazon’s model is their ubiquity with convenience, particularly for items that are not needed immediately. This level of convenience is one that traditional brick-and-mortar retailers have struggled with because prior to ecommerce retailers defined consumer convenience by proximity to a store. Retailers’ focus on proximity and space, as a proxy for convenience, led to over-retailing where the United States now has 7.3 square feet of retail space per capita vs. 1.7 square feet per capita in other nations such as Japan and France. Consequently, retail store and footprints continue to shrink as ecommerce further defines convenience. Retailers and CPG companies will have to re-think how to drive foot traffic to stores, and meet consumer expectations for convenience, if they are to be successful in this new world order.
At Conlego, we’ve thought about the tension along two different dimensions -- product and service -- to define how retailers and CPG companies can understand their positioning and more closely align with consumers. Convenience doesn’t need to be the largest consideration if a company thinks through it’s in-store experience and its product or assortment, particularly at a category or brand level.
Two very different examples:
- Are you selling a Sonos speaker system to a consumer? The customer has done hours of research so how do you add value and create a memorable experience for them beyond the simple transaction.
- Are you selling toilet paper to a consumer? The customer doesn’t want to think about the purchase and wants the product in the most convenient way possible at the best price.
Conlego helps companies develop strategies that help them reach their growth and profitability goals through this lens. Identifying customer preference allows for the creation and development of strategy and, therefore, relevant programs and tactics that align with consumer tastes.