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In the 13ᵗʰ edition of the EY US Future Consumer Index, consumers reassess feelings on AI, consumer experiences and private label products.
In brief
- Have consumers moved on from the AI hype, or are companies still behind the 8-ball in mastering it to expectations?
- Have consumer experiences become eroded, or are consumers not getting the experiences they desire or expect?
- Has the store brand moment passed, or has it normalized so much that consumers no longer delineate between brand and private label?
The last year can be summed up for consumers by a few main trends. ChatGPT popped on the scene, making GenAI the innovation that every company, business leader and consumer had to master. The ladies – Beyoncé, Barbie and Taylor Swift – defined our summer, fall and winter experiences. And let’s not forget the economic pressures that, though consumers continued to spend through as indicated by increasing credit delinquencies and depleted savings, had us finding ways to stretch our dollar.
In the 13th edition of the EY US Future Consumer Index, consumers reassess how they really feel about the trends that defined the last 12 months. Our previous edition found consumers redefining affordability, loyalty and trust in the age of AI. While those themes still ring true, the shininess of AI may be wearing off, at least for consumers. And it doesn’t stop there, with preference for experiences and private label also tapering. Are these trends losing their luster, are retailers and brands just not living up to consumer expectations, or has the hype cycle simply leveled out?
Consumer expectations and the AI trust gap
AI is fundamentally changing the face of consumer products and retail, with use cases that span the business, from the consumer-facing experience to back-of-house supply chain dynamics. And retailers and brands are investing significant time and money into this new technology. However, while the increments are small, consumer trust in AI-generated things has slipped. With an innovation like this, you expect the trajectory to continue upward, so even slight declines warrant a second look.
What’s even more interesting are the discrepancies between global and US consumers. Americans say that they have more of an understanding of AI but trust it less than global consumers. Twenty percent of US consumers have a good understanding of AI, slightly down from 22% in May. By comparison, only 18% of global consumers say the same.
So what’s the story? Have consumers moved on from the AI hype, or are companies still behind the 8-ball in mastering it to consumer expectations? Our inaugural Consumer Products and Retail Executive Pulse, which surveyed over 250 executives in the retail and CPG industries, may provide some clarity. An overwhelming 99.6% of executives say that they are experimenting with GenAI in some capacity. However, of the nine in 10 executives who are increasing investment in technology in the next year, only 31% say that AI/ML or GenAI is where those dollars will go.
Perhaps due to the sheer massiveness of the opportunity, many retailers and brands haven’t moved from experimentation to true, strategic investment. This may explain why consumers have not yet seen the benefit in their experience. To be successful with AI, retailers and brands must first assess readiness and define their strategic roadmap and governance structure across the organization.
Download the EY Consumer in Practice playbook on generative AI for actionable guidance for a strategic path forward to deploy GenAI responsibly, with a focus on enhancing efficiency, decision-making, experience and revenue.
Experience erosion or shifting consumer expectations?
Following a steep decline in the spring, Experience First continues to drop as a top priority for the future and has fallen to the second to last spot among the five future consumer segments. Additionally, less than half of US consumers say that they will spend more on experiences in the future, down from 49% in the last FCI survey. Have experiences become eroded, or are consumers not getting the experiences they desire or expect?
It may just be a shift in need. At the same time as Experience First started its decline, Health First began to climb. This could point to a convergence of health and experience, as consumers increasingly want health and wellness experiences as part of their overall consumer journey.
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73% of consumers will be more aware and cautious about physical health in the future |
84% of consumers are currently concerned about their physical health |
74% of consumers are currently concerned about mental wellbeing |
40% of consumers say that their most important purchase criteria in the future will be healthy/good for them |
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For those retailers and brands that are looking to differentiate, the store may also be a key area to address. Forty-one percent of US consumers say that they will shop online and visit only stores that provide great experiences.
Whether it’s store experience, health, price or something else, consider your value proposition to consumers and which consumer expectations are most important to address that align to your brand.
Consumer expectations shift private label to standard fare
Has the store brand moment passed, or has it normalized so much that consumers no longer delineate between brand and private label? In one breath, US consumers have pointed to less of a willingness to purchase a store brand product across categories since our last survey. And only 30% say that they are switching from brands to private label, down from 36% in May. At the same time, more (38%) are buying store brand products more often, up from 30% in May.
Making sense of this inconsistency, my assertion is that consumers are no longer arguing brand versus private label. Rather, brand and private label are now playing on a level field, and quality, value and trust are what’s driving purchase decisions. This is especially true as 48% of consumers say that brands are not very important in purchase decisions, 69% say that private labels satisfy their needs just as well as brands, and another 57% say that private labels are increasingly better-quality products.
Retailers and brands must look holistically at their merchandising strategies, addressing private label as part of a comprehensive picture. Questions to answer include the following: Where is there a gap with your target consumers? What specific product categories are right for private label? What are the implications to the operating model across processes, systems and organizational structure to support the execution?
As consumers constantly adapt to shifting market dynamics, new technologies and evolving ways to engage, the relationship with retailers and brands will be anything but linear. Emerging innovations, like GenAI, may become new and then table stakes within a matter of months. Consumer expectations may accelerate slowly and then all at once. It’s no longer enough to simply keep a pulse on the changes in consumers as they come; retailers and brands must assess the strategic value of responding to new trends and changing consumer expectations.
Summary
As consumers constantly adapt to shifting market dynamics, new technologies and evolving ways to engage, the relationship with retailers and brands will be anything but linear. Emerging innovations, like GenAI, may become new and then table stakes within a matter of months. Consumer expectations may accelerate slowly and then all at once. It’s no longer enough to simply keep a pulse on the changes in consumers as they come; retailers and brands must assess the strategic value of responding to new trends and changing consumer expectations.
How EY can help
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