One of the big debates during the pandemic was whether new consumer shopping behaviors would be permanent or whether consumers would revert to old shopping behaviors once they felt safe to venture back into public. McKinsey & Company analysts conclude, “For most US consumers, the answer seems to be ‘both.’ Two years into the pandemic, people across the country have discovered that they like shopping online, but they’re also going back to brick-and-mortar stores. They’re venturing out of their homes again, but they’re continuing to spend money on home improvement. And — in what could be boon or bane for manufacturers and retailers — today’s consumers are quite willing to abandon their once-preferred brands in favor of new ones that offer value or novelty.”[1] Most retailers seem to agree with that conclusion and, as a result, they have invested a lot of time and money into bolstering their omnichannel operations in order to serve consumers where and when they shop.
The Omnichannel Consumer
One retail sector that witnessed a dramatic rise in online purchases during the pandemic was the grocery sector. Analysts from Chicory note, “The grocery shopper’s path to purchase from digital to in-store and other online environments has always been obscure.”[2] Yes, consumers can be difficult to figure out. In some ways, the grocery retailers share much in common with other retailers. For example, a Chicory survey found, “BOPIS (buy online, pick up in-store) is the fastest growing and most popular method of fulfillment for online grocery shoppers.” That’s true across the retail sector. BOPIS, sometimes referred to as “click and collect,” is popular with most omnichannel consumers. Journalist Agatha Aviso reports, “While BOPIS had been offered even before the onset of COVID-19, it is the pandemic that boosted it a remarkable 106.9% during 2020. Future forecasts indicate that BOPIS retail sales will increase steadily — above 15% annually.”[3]
Although consumers appreciate the convenience of having purchases delivered directly to their doorstep, that option is not socially satisfying. Humans are social creatures and we long for social experiences. Physical stores can help satisfy those yearnings. And, as Mark Shmulik, an analyst with Bernstein Research, observes, “We’ve got over 100 years as a society of going into a store to buy something. That muscle memory doesn’t just switch off because you were forced to buy things online a couple of times during a pandemic.”[4]
The Omnichannel Retailer
According to analysts from McKinsey & Company, “Offering a compelling omnichannel experience used to be the bleeding edge of retail. Now it’s a requirement for survival.”[5] While that may sound hyperbolic, they explain, “More than one-third of Americans have made omnichannel features, such as buying online for in-store pickup, part of their regular shopping routine since the pandemic, and nearly two-thirds of those individuals plan to continue.” Just as importantly, the generation receiving a great deal of marketing attention nowadays — Generation Z — is made up of omnichannel shoppers. The McKinsey analysts report, “Younger buyers are the most enthusiastic about new ways of shopping. Most Gen Z consumers don’t even think in terms of traditional channel boundaries, our research shows, and they increasingly evaluate brands and retailers on the seamlessness of their experience.”
The McKinsey analysts offer this word of caution, “Before retailers rush to expand their omnichannel capabilities, they need to step back and consider the underlying drivers of value for their specific business. Otherwise, with multiple approaches and technologies to choose from, and acute margin pressures, retailers can invest in the wrong thing and quickly fall into a downward spiral that can destroy value. Omnichannel excellence requires a laser-like focus on value creation.” The question is: Should retailers focus on technology or on consumers? Most experts agree a consumer focus will result in the greatest value. McKinsey analysts explain, “Many retailers have leaped to embrace tech-enabled, flashy innovations like smart mirrors, Bluetooth beacons, and in-store kiosks to create differentiation. But without a proper grounding in customer needs or determining how these investments will create and sustain value at scale, retailers sometimes end up with what amount to shiny objects that drain capital expenditures.”
Kristen Groh, consumer products industry lead at Publicis Sapient, agrees with that assessment. She writes, “Consumers expect brands to understand their unique lives and needs and respond with customized solutions. If the experience they encounter on their journey is poor, or if they can’t find the brand they are looking for, they won’t hesitate to switch brands.”[6] According to Groh, the first step in mastering omnichannel operations is having access to the right data. “It is critical for CPGs to have access to customer data,” she writes, “allowing for creation of more personalized experiences, as well as better products and ultimately a smarter business overall.”
Although a lot of omnichannel attention is rightfully focused on fulfillment, another area where data can help add value is in trade promotion optimization. The Consumer Goods Technology staff notes, “Measuring trade promotion effectiveness has never been a straightforward task, but today’s abrupt digital shift has tangled the webs and tightened the knots for unprecedented complexity.”[7] They add, “As many consumer goods companies adjust to the pandemic-prompted digital acceleration, figuring out how to allocate the right products to the right channel is just one challenge — spending money to create demand has become an even greater task. Much of this is hardly new: When it comes to in-store trade promotions, companies have long struggled with defining events, determining SKUs that should be promoted, designating price points, and determining the funding associated with them — not to mention identifying value and the ideal way to track performance.” As a result, Bob Debicki, Senior Director of CPG and Retail at Anaplan, told the CGT staff, “You need a system of insight.” I couldn’t agree more. During the pandemic, Enterra Solutions® created the Enterra Global Insights and Decision Superiority System™, an expansion of the Enterra Trade Promotion Optimization System™, to help clients deal with the complexities referred to by the CGT staff. The results speak for themselves. Enterra’s applications have derived greater than a 1,000% annual ROI.
Concluding Thoughts
Groh insists, “When done right, improved [omnichannel] experiences drive a data exchange that can deliver real value for the business across three areas: knowing consumers and deepening the engagement; building and selling better products and services; and understanding and running a smarter business. … For CPGs to thrive in the future, it’s time for them to take ownership of the experience they are delivering to their consumers. The proper data strategy, technical capabilities and operating model are critical to that success.” McKinsey analysts add, “Retailers must become expert at anticipating from one season to the next what products and services will excite consumers. Now they have to bring that same sensibility to omnichannel. Those that set a clear ambition with a clear path to value will not only de-risk the present but will secure their future.”[8]
Footnotes
[1] Kari Alldredge, Tamara Charm, Eric Falardeau, and Kelsey Robinson, “How US consumers are feeling, shopping, and spending—and what it means for companies,” McKinsey & Company, 4 May 2022.
[2] Chicory, “Chicory’s New Consumer Survey Decodes the Omnichannel Shopper’s Path to Purchase,” Cision PR Newswire, 21 April 2021.
[3] Agatha Aviso, “13 Buy Online, Pick Up In-store (BOPIS) Statistics for Businesses in 2022,” Fit Small Business, 13 May 2022.
[4] Peter Rudegeair, Charity L. Scott and Sebastian Herrera, “The Pandemic Was Supposed to Push All Shopping Online. It Didn’t.” The Wall Street Journal, 16 April 2022.
[5] Holly Briedis, Brian Gregg, Kevin Heidenreich, and Wei Wei Liu, “Omnichannel: The path to value,” McKinsey & Company, 30 April 2021.
[6] Kristen Groh, “How CPGs Can Evolve For an Omnichannel Commerce Experience,” Consumer Goods Technology, 21 April 2021.
[7] Staff, “Tech-Driven Revenue Planning in an Omnichannel World,” Consumer Goods Technology, 31 August 2021.
[8] Alldredge et al., op cit.
