Future Consumer Index: In crisis, but in control

Sustainability: consumers are holding on to their values

Many consumers are finding it hard to square their need to live affordably with their desire to live more sustainably, especially as they feel sustainable goods are too expensive. However, resilient consumers are not simply giving up their aspiration for sustainable living; they are trying to find more cost-effective ways of achieving them.

Many say they are making more of an effort to reduce waste and buy secondhand products. Consumers are taking control by optimizing for both economic and environmental benefits.

• 67% say the high price significantly deters them from buying sustainable products
• 87% are trying not to waste food
• 36% say they will buy more second-hand products
• 85% are trying to conserve energy
• 24% have stopped purchasing (or purchased less) from a brand that isn’t doing enough to help the environment

This wave of our Index also reveals that perceptions of sustainable goods and products have improved. A declining percentage of consumers view these goods as being of low quality and not durable. As importantly, they increasingly trust the information they get about sustainable products from the companies that make them.

Digital: Consumers increasingly value alternative experiences and products

The Index shows that a small but growing group of consumers is interested in exploring emerging technology and digital channels. Nearly one in 10 consumers have used digital currencies, experienced the metaverse, or purchased a virtual product.

Interestingly, this baseline level broadly reflects where e-commerce was five years ago. In 2017 it had a 10% share of retail, which has since doubled. That level of retail penetration was enough for some observers to predict the end of high street shopping. Is the consumer industry at a similar tipping point?

The pandemic experience made significant parts of daily life “digital first.” As they look to take more control of their finances, consumers are again turning to digital. For example, they are hedging between digital and physical experiences – substituting rather than sacrificing their lifestyles.

The adoption of newer forms of digital goods and services presents new opportunities for companies. Can they invest in digital in ways that differentiate their brand experience, drive innovation, capture more consumer data, test products digitally, or create digital product lines?

Trust will be critical. When it comes to using and protecting their data, consumers are extremely concerned about who they share their data with and want to understand how it will be used and protected. They are adding a safety-first element to their post-pandemic, always-on emergency mindset.

Four imperatives for business

1. Review operations and portfolios to deliver on affordability

Consumers are increasingly likely to trade down in order to get the products they want at the prices they can afford. In this inflationary environment, companies must consider how they can manage their product portfolio to optimize for better pricing outcomes.

Previous waves of our Index have shown how the pandemic has made consumers more willing to shift to private label. This gives retailers a chance to expand their private label offering. But brands also need to find alternative sources of supply, ingredients or components and experiment with other product attributes, such as packaging and packages sizes, to ensure that they can optimize most effectively for price.

This requires and enables greater supply chain and manufacturing resilience, but is also likely to be more than a short-term fix as price and income concerns linger.

2. Tailor sustainability strategies to provide cost-effective solutions

Consumers are increasingly price sensitive, but they are not willing to abandon their growing resolve to live and buy more sustainably. Many companies will need to adopt a new strategy, approaching sustainable products and services as a cost-effective option for the consumer, not a premium choice.

At the core of this mindset is a need to investigate models that keep products in circulation for longer, such as rental, reselling and repairing. This also forms a need to build scale into existing sustainability solutions, so they can become cost-effective from a procurement perspective.

For example, the hike in energy prices related to fossil fuel inflation can drive greater investments in alternative energies that enable scalable and affordable green energy – innovation out of necessity creating an opportunity to make a more sustainable product.

3. Rebalance engagement investment to accommodate new digital opportunities

The physical world will not suddenly become secondary to the digital realm, but the prominence of digital that spiked during the pandemic is likely to keep growing. This will give brands new ways to engage online and in the nascent, but developing, metaverse.

Brands that typically cut marketing budgets during times of economic turmoil now face the risk of further disintermediation from consumers who are becoming less brand loyal in their purchase decisions. To counter this companies must instead double down on their efforts to sharpen and define a distinctive brand proposition by exploring new and targeted ways to meet and engage with consumers across multiple channels. This includes experimenting with digital innovation as well as collecting and leveraging consumer data in ways that add value to physical and digital customer experiences.

But these efforts must be balanced against the consumer’s concerns around data privacy and cyber security. It’s not just important to safeguard consumer data; companies can build trust by showing consumers that they use their data in responsible ways that deliver tangible benefits.  

4. Set KPIs that reflect changing consumer values

This wave of the Index – and previous waves – underlines the extent to which consumer values are changing. People are less motivated by financial rewards; status is increasingly conferred by sustainable behaviors rather than wealth. Consumers are rethinking how they spend their time and are looking for ways to switch between saving time on the things they don’t like and spending time doing the things they love. Work needs are increasingly framed by flexibility and purpose rather than careers and salaries.

To meet these emerging values, companies must reconsider what their purpose is and the KPIs they want to set to achieve their goals. Traditional financial metrics such as growth, profitability, share price and shareholder returns are increasingly making room for non-financial metrics such as emissions, diversity and innovation. Companies must consider and review these metrics in the context of the consumers they serve and the people they employ, and develop new KPIs that embed non financial values into their business culture.