Executive Briefings

Future Consumer: How Shopper Needs and Behavior Will Impact Tomorrow's Value Chain

The consumer products and retail worlds are changing. And the speed of change is rapidly accelerating. To understand why and what the impact will be, Capgemini surveyed over 2,000 consumers. The objective of the "Future Consumer" research conducted by Capgemini was to gain a better understanding of consumer needs and behavior over the coming years. Of course, it is impossible to know how consumers really will behave in the future--they don't know this themselves. Nevertheless, it is important to understand the current preferences and intentions of consumers as a starting point for a new dialogue.

The research for this study was focused on the main consumer-related hypotheses from the vision report titled "2016: The Future Value Chain," published in late 2006 by the Global Commerce Initiative (GCI), Capgemini and Intel. That study assessed the future value chain for consumer goods and the forces that will shape it in 10 years time, and defined a unique vision of the total value chain from manufacture to consumption. A central element in this vision is the notion that consumers will drive the future value chain. In this context it is essential to have more factual evidence about the direction in which consumers will influence the value chain.

The new research explored the importance of topics such as health and wellness, product traceability, environmental issues, and the use of new/emerging technologies, and how these factors may impact the way consumers buy, receive and use products and services in the future. Improved knowledge into consumer buying behavior should help companies develop and execute more effective strategies in areas such as marketing and advertising, store formats, logistics and transportation, product installation and aftersales servicing.

The key findings from the "Future Consumer" research make it clear that consumer behavior is evolving and that retail and consumer products companies need to anticipate these changes in order to be part of, or even influence, the changes.

The importance of better understanding consumer needs and demands in the coming decade was underlined by the fact that respondents were largely dissatisfied with their existing shopping options. For example, just 9% of consumers said they were satisfied with their perishable food outlets. At the high end of the satisfaction scale were book and music stores, yet still only 19% of consumers were happy with these outlets.

Although physical stores will remain the channel of choice for most consumers in the coming decade (especially for food products), the importance of online shopping will grow. This is particularly true in the case of books/music and electronics: 38% of consumers said they expect to buy all or the majority of their books/music purchases online within the next five years; and 24% of respondents expect to buy all or the majority of their electronics over the Internet.

The anticipated growth in online shopping may lead to the emergence of new delivery models. For example, while the bulk of consumers want their online orders to be delivered to their home, close to 20% said they would like a neighborhood pick-up model, particularly for perishable food and DIY products. Here are some trends:

Sustainability and other environmental issues will increasingly influence shopping behavior: Sustainability aspects that were identified as most important to consumers in their future buying decisions were energy/water usage (named by 87% of respondents), waste reduction/management (85%) and sustainable manufacturing features (84%). Although sustainability was deemed to be important by most consumers, the majority was willing to pay only a small price difference for products that supported these features.

Consumers appreciate receiving personalized offerings, although this differs depending on the product category: More than half of respondents said they would value personalized offerings (such as special products and promotions that are focused specifically on the individual consumer and not available to everyone) for books/ music and electronics, but only about one-third would appreciate personalization for perishable food.

Health and wellness will be a growing factor in consumer buying decisions: More than eight out of 10 respondents said health and wellness issues (including diet and obesity care) would be important or extremely important to them over the coming years.

Consumers are becoming increasingly aware of a wide range of new and emerging technologies that can be used during the buying process--at home, in stores and on-the-go

Many respondents were familiar with technologies such as web ordering, blogs/web forums, in-store kiosks, payment via mobile phone and mobile alerts. However, it may take time before some of these technologies gain significant traction. A smaller percentage anticipated using the different types of technology in the future, compared with the percentage that had heard of the technologies. Overall, consumers are willing to share some types of information--but they are reluctant about sharing their contact details. About half of respondents said they would be willing to share with retailers and manufacturers information about their buying behavior and lifestyle, but only 36% were willing to share contact information. Many consumers who were willing to share information expected something in return, particularly special promotions.

The key findings demonstrate that consumer's behavior will change in the future. Will your business be able to anticipate and adapt to this change? Companies must rethink their strategies in a number of areas. Here's what it will take to be ready for the future consumer. The research has shown clearly that the underlying consumer hypotheses from the "2016: The Future Value Chain" report are valid. This means that-in line with the opportunity areas identified in the "2016" study-companies need to anticipate these changes across a number of dimensions.

Here are some recommendations:

Shopper Dialogue: Establish and maintain a true two-way dialogue with individual consumers. This will be the most valuable means to really understand your consumers. Anonymous consumer surveys will not be sufficient. Consumers will expect to have a true dialogue with companies-as long as it is relevant and brings them value. They will expect customized communication--and in return they will provide valuable information about their true needs and preferences.

Improve your face to the shopper--both in physical stores and online: This will require more frequent format and merchandise assortment changes to keep up with the pace of consumer change. Consumers are not satisfied with their stores (both brick-and-mortar and online) and shopping experiences. Current shopper concerns relate to things like product issues (quality, availability), accessibility and navigation, packaging and information labeling (for example, in relation to health and wellness, which is the number one consumer driver) as well as price perception.

Take advantage of emerging technologies: Consumers will increasingly use all kinds of new, especially mobile, technologies during the buying process. These technologies will play a key role in marketing and communication and have the potential to significantly influence purchase decisions.

Information Sharing: Be transparent in your information management. Consumers appreciate companies that can accurately provide relevant information how and when they need it. Consumers increasingly research their purchases across various channels--and they expect this information to be readily available, adequate and consistent.

Manage consumer information (personal profiles) effectively: Consumers are willing to share information--as long as they can trust that this information is being treated in a respectful manner and is translated into relevant offerings and promotions, fully in accordance with consumers' wishes and needs (for example, in cases when a consumer is not open to a personalized approach).

Synchronized Production: Personalize your offerings--and be able to deliver. Consumers are increasingly expecting and appreciating personalized products and services. In some cases, this requires different scenarios to effectively and efficiently synchronize the actual individual demand with the capabilities to produce, customize, assemble, fulfill and/or service these demands.

Integrated Logistics/Home Delivery: Extend your distribution chain to the consumer's home. Consumers will increasingly order online, and they expect these orders to be delivered to their homes. This home-direct distribution model places some different requirements on the consumer products and retail supply chain, compared with the store-distribution model (for example, regarding delivery times), which companies need to anticipate.

Consider new integrated approaches for streamlining neighborhood services: A significant proportion of consumers are prepared to use neighborhood pick-up facilities for online orders. Consumers also indicated that they want additional services around the product (such as on-site guidance and installation). Based on a broader set of consumer needs, this could provide a basis for further integration of different services (for example, postal services, health care, social services, parcel services) into a new neighborhood services and distribution model.

Address sustainability in a serious manner--and communicate about it: Consumers are concerned about things like global warming and CO2 emissions--and they will take this into account when making buying decisions. A company's ability to offer its products and services in a sustainable manner will be input for both public opinions and personal judgments. But be aware that consumers are not willing to pay much extra for products that meet their sustainability requirements.

Be open to new ways of working--driven by consumers: Consumers appreciate the value of innovation and they are increasingly willing to take an active part in this process. Make sure that your solution and product development is driven by true consumer needs--and if possible involve consumers in your R&D process using new technologies.

Addressing these challenges will not be possible in a single step. This will be a long journey--and nobody really knows exactly where it will lead. But companies that start this journey well prepared, will find this out themselves--and consumers will help point them in the right direction.
http://www.capgemini.com

The consumer products and retail worlds are changing. And the speed of change is rapidly accelerating. To understand why and what the impact will be, Capgemini surveyed over 2,000 consumers. The objective of the "Future Consumer" research conducted by Capgemini was to gain a better understanding of consumer needs and behavior over the coming years. Of course, it is impossible to know how consumers really will behave in the future--they don't know this themselves. Nevertheless, it is important to understand the current preferences and intentions of consumers as a starting point for a new dialogue.

The research for this study was focused on the main consumer-related hypotheses from the vision report titled "2016: The Future Value Chain," published in late 2006 by the Global Commerce Initiative (GCI), Capgemini and Intel. That study assessed the future value chain for consumer goods and the forces that will shape it in 10 years time, and defined a unique vision of the total value chain from manufacture to consumption. A central element in this vision is the notion that consumers will drive the future value chain. In this context it is essential to have more factual evidence about the direction in which consumers will influence the value chain.

The new research explored the importance of topics such as health and wellness, product traceability, environmental issues, and the use of new/emerging technologies, and how these factors may impact the way consumers buy, receive and use products and services in the future. Improved knowledge into consumer buying behavior should help companies develop and execute more effective strategies in areas such as marketing and advertising, store formats, logistics and transportation, product installation and aftersales servicing.

The key findings from the "Future Consumer" research make it clear that consumer behavior is evolving and that retail and consumer products companies need to anticipate these changes in order to be part of, or even influence, the changes.

The importance of better understanding consumer needs and demands in the coming decade was underlined by the fact that respondents were largely dissatisfied with their existing shopping options. For example, just 9% of consumers said they were satisfied with their perishable food outlets. At the high end of the satisfaction scale were book and music stores, yet still only 19% of consumers were happy with these outlets.

Although physical stores will remain the channel of choice for most consumers in the coming decade (especially for food products), the importance of online shopping will grow. This is particularly true in the case of books/music and electronics: 38% of consumers said they expect to buy all or the majority of their books/music purchases online within the next five years; and 24% of respondents expect to buy all or the majority of their electronics over the Internet.

The anticipated growth in online shopping may lead to the emergence of new delivery models. For example, while the bulk of consumers want their online orders to be delivered to their home, close to 20% said they would like a neighborhood pick-up model, particularly for perishable food and DIY products. Here are some trends:

Sustainability and other environmental issues will increasingly influence shopping behavior: Sustainability aspects that were identified as most important to consumers in their future buying decisions were energy/water usage (named by 87% of respondents), waste reduction/management (85%) and sustainable manufacturing features (84%). Although sustainability was deemed to be important by most consumers, the majority was willing to pay only a small price difference for products that supported these features.

Consumers appreciate receiving personalized offerings, although this differs depending on the product category: More than half of respondents said they would value personalized offerings (such as special products and promotions that are focused specifically on the individual consumer and not available to everyone) for books/ music and electronics, but only about one-third would appreciate personalization for perishable food.

Health and wellness will be a growing factor in consumer buying decisions: More than eight out of 10 respondents said health and wellness issues (including diet and obesity care) would be important or extremely important to them over the coming years.

Consumers are becoming increasingly aware of a wide range of new and emerging technologies that can be used during the buying process--at home, in stores and on-the-go

Many respondents were familiar with technologies such as web ordering, blogs/web forums, in-store kiosks, payment via mobile phone and mobile alerts. However, it may take time before some of these technologies gain significant traction. A smaller percentage anticipated using the different types of technology in the future, compared with the percentage that had heard of the technologies. Overall, consumers are willing to share some types of information--but they are reluctant about sharing their contact details. About half of respondents said they would be willing to share with retailers and manufacturers information about their buying behavior and lifestyle, but only 36% were willing to share contact information. Many consumers who were willing to share information expected something in return, particularly special promotions.

The key findings demonstrate that consumer's behavior will change in the future. Will your business be able to anticipate and adapt to this change? Companies must rethink their strategies in a number of areas. Here's what it will take to be ready for the future consumer. The research has shown clearly that the underlying consumer hypotheses from the "2016: The Future Value Chain" report are valid. This means that-in line with the opportunity areas identified in the "2016" study-companies need to anticipate these changes across a number of dimensions.

Here are some recommendations:

Shopper Dialogue: Establish and maintain a true two-way dialogue with individual consumers. This will be the most valuable means to really understand your consumers. Anonymous consumer surveys will not be sufficient. Consumers will expect to have a true dialogue with companies-as long as it is relevant and brings them value. They will expect customized communication--and in return they will provide valuable information about their true needs and preferences.

Improve your face to the shopper--both in physical stores and online: This will require more frequent format and merchandise assortment changes to keep up with the pace of consumer change. Consumers are not satisfied with their stores (both brick-and-mortar and online) and shopping experiences. Current shopper concerns relate to things like product issues (quality, availability), accessibility and navigation, packaging and information labeling (for example, in relation to health and wellness, which is the number one consumer driver) as well as price perception.

Take advantage of emerging technologies: Consumers will increasingly use all kinds of new, especially mobile, technologies during the buying process. These technologies will play a key role in marketing and communication and have the potential to significantly influence purchase decisions.

Information Sharing: Be transparent in your information management. Consumers appreciate companies that can accurately provide relevant information how and when they need it. Consumers increasingly research their purchases across various channels--and they expect this information to be readily available, adequate and consistent.

Manage consumer information (personal profiles) effectively: Consumers are willing to share information--as long as they can trust that this information is being treated in a respectful manner and is translated into relevant offerings and promotions, fully in accordance with consumers' wishes and needs (for example, in cases when a consumer is not open to a personalized approach).

Synchronized Production: Personalize your offerings--and be able to deliver. Consumers are increasingly expecting and appreciating personalized products and services. In some cases, this requires different scenarios to effectively and efficiently synchronize the actual individual demand with the capabilities to produce, customize, assemble, fulfill and/or service these demands.

Integrated Logistics/Home Delivery: Extend your distribution chain to the consumer's home. Consumers will increasingly order online, and they expect these orders to be delivered to their homes. This home-direct distribution model places some different requirements on the consumer products and retail supply chain, compared with the store-distribution model (for example, regarding delivery times), which companies need to anticipate.

Consider new integrated approaches for streamlining neighborhood services: A significant proportion of consumers are prepared to use neighborhood pick-up facilities for online orders. Consumers also indicated that they want additional services around the product (such as on-site guidance and installation). Based on a broader set of consumer needs, this could provide a basis for further integration of different services (for example, postal services, health care, social services, parcel services) into a new neighborhood services and distribution model.

Address sustainability in a serious manner--and communicate about it: Consumers are concerned about things like global warming and CO2 emissions--and they will take this into account when making buying decisions. A company's ability to offer its products and services in a sustainable manner will be input for both public opinions and personal judgments. But be aware that consumers are not willing to pay much extra for products that meet their sustainability requirements.

Be open to new ways of working--driven by consumers: Consumers appreciate the value of innovation and they are increasingly willing to take an active part in this process. Make sure that your solution and product development is driven by true consumer needs--and if possible involve consumers in your R&D process using new technologies.

Addressing these challenges will not be possible in a single step. This will be a long journey--and nobody really knows exactly where it will lead. But companies that start this journey well prepared, will find this out themselves--and consumers will help point them in the right direction.
http://www.capgemini.com