According to KPMG International’s Consumers and the New Reality report, a new consumer is emerging – one that is financially constrained, more advanced in their use of digital technologies, more thoughtful and selective in their decision-making, and keen to see Covid-19 as an opportunity to reset values in the world.
Based on data from over 12,000 consumers around the world, the findings revealed that the three most prominent purchase drivers influencing consumers’ decision-making are: value for money (63 percent), ease of buying (42 percent) and trust in brand (41 percent). Value for money is the single most important factor in decision-making as a direct result of the financial concerns that now affect consumers, with nearly half of respondents saying it is more important now than pre-Covid-19.
KPMG’s Head of Consumer, Industrial Markets & Manufacturing in Malaysia, Siew Chin Kiang, observed, “Consumers’ spend is impacted by both the decrease in disposable income and the psychological impact of Covid-19. We see new segments arise, separated by their need to group products and services into categories of necessity, with spending behaviors moderated by financial attitudes. Overall, four in 10 are financially worse off, with another 13 percent deferring major purchases.”
KPMG’s survey further found online purchasing and contactless payment options have become the norm for most consumers, with the desire for safe contact-free purchase options reinforcing this trend.
Nowhere is the combined impact of the evolving consumer trends more noticeable than in the retail sector, with physical retail most under pressure. In the brunt of Covid-19, many retail outlets have seen a decline in footfall and sales.
According to the Department of Statistics Malaysia, retail trade contracted by RM13.5 billion (-32.4 percent) in April 2020 compared to the same month last year.
Siew also observed that the pandemic has only accelerated key fundamental trends that were already influencing the sector, making it even more acute and urgent.
Citing KPMG’s Global Retail Trends 2020 report, Siew urged retail executives to focus on four main areas in order to build enough business resilience to see their companies through to recovery and sustainable growth:
Evolve your business retail model
Even before the upheaval, it was becoming increasingly clear that store-based retailing had passed its zenith. And while many physical stores will certainly return to growth, it is clear that the days of being able to drive growth through physical stores alone are over. Those with no existing online or delivery channel will struggle to survive this challenging time.
Hence, retail companies need to be adept to online fulfilment, home delivery, data analytics, AI, machine learning and process automation by partnering with platform companies. This difficult time has clearly demonstrated that online platforms are quickly becoming the shopping malls of tomorrow. Retailers need to be in the right malls — and, just as importantly, in the right location — to see footfall today and (very likely) in the new consumer environment.
Generally speaking, most retailers now have three main options 1) become a platform, 2) leverage platforms or 3) continue business as usual.
Consumers want to buy from companies who stand for something bigger than profits. KPMG’s survey found that consumers today place trust and loyalty with purpose-driven organizations. Trust is multidimensional and nuanced: trust that companies will continue to put the consumer’s needs first, trust that the consumer will be safe dealing with them and trust that their data will be secure and protected. In addition, younger respondents are concerned about a company’s environmental and social practices.
Smart retailers should use this critical period as a way to demonstrate that they live their purpose rather than just talk about it. They should showcase how well their brand embodies the purpose of their organization, identify where they can build trust and ensure that actions that erode trust are eradicated.
Rethink the cost of doing business
Retailers will have to relook at their cost of doing business even after the aggressive cost-containment strategies have been rolled out because the conventional forms of cost cutting approach are no longer sufficient in shoring up margins to rebuild the business.
Siew advised, “Retailers need to increasingly leverage data and analytics to assist in timely decision making of their stores, configurations and products. The most advanced will likely start to manage their customer experience and loyalty as if it were an asset, carefully nurturing and measuring their stock of loyalty in order to enhance its value and improve its resilience.”
Know your customers
Due to the pandemic, there has been a shift in consumers’ expectations who now care more about the availability rather than the breadth of assortment. Interestingly, many respondents claim to be more willing to use local suppliers compared with well-known global brands in the future; of those who will prioritize shopping locally, nine in 10 are more willing to pay more for local products.
“This certainly marks a great shift and push for the consumption of Made-in-Malaysia products, where local industries will be revitalized while also restoring the country’s economy. Organizations will need to align their supply chains to this growing trend for localization. This is more than just sourcing — companies will need to be demonstrably supporting communities, new community networks and being locally relevant,” added Siew.
He concluded: “Ultimately, business survival boils down to understanding your consumers and anticipating their needs. Retailers need to reinvent their business approaches, invest in secure digital methods of communication and payments, and explore wider range of models for gathering and analyzing customer data. This enables trust to be the bedrock of any relationship with their customers for the long haul.”