The last 18 months have had a seismic effect on drinks consumption occasions and shopping practices. Those changes are here to stay and FMCG companies need to move fast to adapt to online purchasing, home delivery and a decline in retail shelf-space.
GlobalData’s latest report, ‘Future of Work in Consumer – Thematic Research’, reveals that consumer-facing companies have been forced to deploy digitalisation to manage the surge in home delivery and on-demand services in most markets. Much as drinks brand owners have trumpeted their growth in e-commerce sales in 2020, the speed of these burgeoning trends must not be under-estimated.
“COVID-19 has changed attitudes and priorities around the work-life balance,” notes GlobalData consumer analyst George Henry. “Instructions to stay at home and socially distance have accelerated growth for e-commerce platforms, to the detriment of bricks-and-mortar retail. According to GlobalData’s ‘Retail Intelligence Centre’, online penetration accelerated from 10.3% of all retail sales in 2019 to 13.3% last year.
“Moving forward, retailers in the consumer space need to find innovative ways to address the shift to digital.”
For home delivery, automation is on the rise. Online food ordering and delivery platform DoorDash is experimenting with autonomous robots, a method likely to gain further traction due to demands for contactless deliveries even after the pandemic. According to GlobalData’s 2018 Q4 global consumer survey, 47% of global consumers find online orders being delivered by automated devices ‘somewhat’ or ‘very’ appealing. This rose to 59% among Millennial respondents.
“Appealing to young digital natives, which are likely the consumers driving structural adaptations in shopping habits, is key as this is the segment most receptive to long-term changes such as contactless drone delivery,” says Henry. “Delivery robots are a prominent innovation due to bottlenecks caused by an excessive number of vehicles on busy urban streets. Automated delivery seeks to reduce these risks and helps companies save significantly on costs in its last-mile logistics – the most expensive link in the supply chain.”
On a revenue basis, many established retailers are having to reassess their positioning, including re-evaluating the value of having flagship stores in city centres. In the UK, for example, high-end department store operator John Lewis has set aside GBP400m to invest in becoming a residential landlord. Prompted by the sharp drop in customer footfall, the company expects 40% of its profits to come from activities outside of retail by 2030.
“Plans to dramatically reduce floor space are a direct reaction to the drop in consumer footfall and uptake in online shopping,” adds Henry. “As economies begin to return to some degree of normality, offices will remain valuable locations for companies that have seen staff experience fatigue over home-based work.
“COVID-19 has prompted retail outlets to reassess changes in consumer attitudes over the past year, and how best to optimise physical space in a world of increasing digitalisation.”