Is there a place in the post-pandemic “new normal” of retailing for traditional consumer brands?
The big consumer packaged goods brands have ruled retail for a century or more, brushing off challenges from an endless stream of agile newcomers and the rise of big-box stores. But nothing has disrupted the world of old-line CPG as much as the coming of e-commerce, led by that behemoth known as Amazon.com.
COVID-19 has served only to accelerate the acceptance of e-commerce for a wide range of goods, from groceries to furniture, leaving brands scrambling to retain their place in consumers’ hearts and pocketbooks. Now, with the pandemic finally showing signs of abating, two big questions loom: How much of consumers’ altered spending behavior over the last year is permanent? And can brands adjust to this new normal, whatever shape it might take?
For now, the answers are neither clear nor simple. “It depends,” says Jordan Cohen, chief marketing officer with What If Media Group, provider of a performance-marketing platform for merchandisers. Its data from March of 2021 showed just 16.9% of respondents having signed up for a grocery delivery service such as Instacart or Shipt during the pandemic. That’s despite the 60% who expressed worry about the safety of in-store shopping, in a survey by L.E.K. Consulting from April of 2020.
What If Media Group concludes that the shift to online delivery services was already well underway when the pandemic hit. And the trend shows no signs of tapering off. In the firm’s recent study, 57.9% of respondents said they currently subscribe to a grocery service, and 71.9% now purchase certain household staples such as toilet paper and Clorox wipes in bulk.
The implications for brands (despite the specific callout of “Clorox” in the survey’s question) are unclear, but there are signs that they might be in for a struggle. The data from What If Media Group suggests that brand is now “less important than it’s ever been, relative to value, savings and the immediate gratification when it comes to keeping money in your pocket,” Cohen says.
One “macro trend” is the increasing tendency of consumers to choose lower-priced generic products over traditional brands. Even luxury brands, which up to now have largely refused to offer discounts, are having to modify their thinking to get people through the door.
For everyday CPG items, that dilemma isn’t new. For decades, Walmart, Costco and other major retailers have positioned their own house brands right alongside the familiar offerings from consumer-products giants like Procter & Gamble and Unilever. And Amazon.com has done the same online, with its ever-growing line of Amazon Basics. But with the pandemic and resulting recession squeezing consumers, the lure of cheaper goods has become even stronger, both online and in physical stores.
That’s certainly the case for many who had previously resisted the lure of online shopping, especially for grocery items. “We’re finding that even as people are getting vaccinated and restrictions are loosening, the holdouts have been exposed to the benefits and convenience of e-commerce, discounts and next-day delivery,” Cohen says. “Now they’re sticking to it.”
Traditional assumptions about consumer behavior are being challenged by current trends. Cohen says even What If Media Group was surprised to find that younger consumers, in the 18-29 bracket, tend to be the most brand-loyal. At the same time, Amazon is disrupting traditional notions of brand altogether — to the point where it becomes the one recognizable and compelling brand in the minds of consumers. “In general,” Cohen says, “people are looking for speed, convenience and value.”
Brands, of course, are fighting back. Their chief weapon, Cohen says, is aggressive discounting. At the same time, they’re seeking to establish a more direct relationship with consumers, instead of being intermediated by retail outlets. Tools to that end include getting consumers to sign up for e-mail newsletters, allow promotional text messages, and receive notifications of special offers.
“There’s a big push to collect user data,” Cohen says. “Before, CPG has primarily been a brand type of advertising play, but increasingly it’s also becoming a direct-response one, using data-driven marketing. It’s critical for brands to not just market according to a vague notion of the consumer, but to actually have my e-mail address, phone number and permission to communicate with me.”
Interestingly, and against expectations, many brands have upped their traditional advertising budgets significantly over the past year. Faced with the prospect of eroding customer loyalty, they’re determined not to fade away on any platform, whether that be the brick-and-mortar store or cutthroat world of online shopping.
“This is definitely not the death of brands,” says Cohen. “It’s just a shift in how they approach people.”