As the aforementioned channel trends are amplified by the COVID-19 crisis, we have begun to enter a new phase of retail. It’s one that is constantly shifting – a fluid space where the lines are blurred between home delivery, ecommerce, in-home and OOH. This is Liquid Retail, and competition is fiercer than ever.
Two unknowns will redefine FMCG and retail: future levels of unemployment and distancing. The amount of employment across markets will dictate the extent of disposable income and the consequence of this will be more (or less) downtrading. Lower employment will see an accelerated phase for development and private label, and a price war between retailers coming under increasing margin pressure.
The second unknown, distancing, will also have big implications. A return to lockdown measures and more time spent at home will mean further development of e-commerce and home delivery. It will also mean category shifts towards more home cooking and a decrease in personal care. A further element is the expectation for people to move outside of cities for reasons of safety and quality of life. If these factors are combined, we will see a world of less demand and more competition.
If there is less consumer demand, retailers will need to rethink ranging and their shelves based on category essentials. Price and promotional strategies will need to be reviewed, with more value-sensitive shoppers in mind. Private Label demand will increase as a consequence and retailers will need to ensure their offer in this space has clear value benefits, to retain shoppers and drive margin.
Manufacturers will need to adjust their product portfolio to cater for new behaviours. They will need to define specific actions based on new routines in personal care and beauty, price elasticity and packsize. A clear understanding of promotion mechanics will be needed in order to optimise trade actions, while in store price communication will be critical to attract shoppers.
On the other hand, with more competition comes the need for retailers to accelerate their digital transformation. This is no longer just an option, but a necessity. They have a fantastic opportunity to broaden their horizons and win share against restaurants through the provision of ready-to-eat meals delivered at home. For discounters, building a full ecommerce strategy is critical—even more so if new lockdown restrictions come into place. For manufacturers too, the need to accelerate investment in e-commerce is obvious. A window is opening to develop comprehensive D2C options, while also proposing solutions for older and rural targets who are spending significantly more time online.
In Latam, were we are having the longest quarantine across all regions, we see a slowdown in consumption due to the recessive times.
