The unprecedented nature of COVID-19 disruption has left a lasting impression on both consumer behavior and business environment, requiring consumer product companies to undergo structural changes, said the latest EY study “COVID-19: Revival Strategies for Consumer Products Companies in India”. The study was conducted as part of the EY Future Consumer Index (FCI) series that tracks changing consumer sentiment and behaviors across time horizons and identifies new consumer segments that are emerging globally with over 1,000 respondents from India.
The study suggests that although many companies have found ways to manage short-term disruptions during the pandemic, they need to revisit existing business models to maintain relevance and withstand future disruptions. While early lockdowns in India helped contain mass transmission of COVID-19 as compared to other nations, it severely impacted economic activity. With India now on its path to recovery, consumers are adapting to the new normal, indicating a gradual shift to cautious optimism.
According to the EY Future Consumer Index, 80% consumers will be more cautious about their physical and mental health. While 36% are changing their brand preferences in support of local businesses, 75% consumers will pay more attention to the environmental impact of the product they purchase. Amidst such changing dynamics, 77% consumers will save more in long term and 35% will consider authenticity as their top priority while shopping five years from now.
Pinakiranjan Mishra, Sector Leader, Consumer Products and Retail, EY India, said, “Companies need to prune their portfolios, innovate faster and alter communication to cater to changing consumer preferences. There is a need to revise product formulations to include more natural and eco-friendly ingredients by using recyclable, reusable or compostable packaging. However, brands must emphasize on their local presence to capitalize on the growing ‘local for vocal’ trend.”
The channel dynamics would change significantly with exponential growth in online as consumers are likely to shy away from going to stores for a long time. Challenges such as limited online capabilities restricting the availability of products to consumers during times of the pandemic, lack of sufficient investment in capabilities that allow agile transitioning between channels, moving from offline to online as the need arises and limited direct delivery capability to serve consumers’ growing online demand might occur. Hence, companies need to bolster direct-to-consumer offering and partner with online platforms to quickly bring their products to consumers. They must also build their own e-commerce platforms or tie-up with marketplace to ensure product availability during uncertain times.
“Rapid shift to online shopping has forced business leaders to ensure that their companies are continually challenging their assumptions about what the digital consumer wants, how they want to purchase it, and what it takes to meet those needs,” Mishra.
According to the study, companies also need to redesign workspaces and revinvent talent management strategies to enhance capability and agility. By deploying digital collaboration tools to build an agile remote working model, defining new KPIs, creating new strategic roles, such as chief insights officer, by upskilling and hiring people with strong digital acumen, businesses could witness a rise of online engagements and emerging consumer-facing technologies.
There is a need for companies to boost their digital transformation efforts to simplify operations, increase agility and build consumer intelligence. Use of data analytics and forecasting models to capture and analyze consumer data quickly for agility and leveraging advanced technologies such as RPA to automate repetitive tasks and cloud, AI and IoT to integrate supply chain will improve efficiency. Thus, building digital capabilities would entail investment in relevant technologies and data analytics to understand consumer sentiments, while also creating demand-responsive supply chains to withstand any future disruption.
A strict control on cost base and optimizing working capital will be imperative for businesses to continue even during unforeseen business conditions. It will also help them unlock sufficient funds in hand to bridge capability gap by M&As, optimize portfolio, expand presence and gain additional capabilities quickly to stay relevant in the market. It is clear that companies that want to stay relevant through the crisis and into the future must be equally bold about the depth and pace of their own transformation.