By Bob Stec
From TheRobinReport.com —
The facts from 2017 are in! We have officially moved from an economic engine in which the retailer possessed the power and the consuming masses followed to an environment that is clearly controlled by the consuming public itself. The scales of supply and demand have rebalanced as global supply exceeds our ability to consume it all. The advent of technology has further empowered consumers in their research, experience and purchasing roles. Technology now allows consumers more access to more information in a more timely manner with 24/7 availability. Consumers of all ages are responding to this newfound power by voting on a daily basis on what they like and dislike, want and don’t want, expect and demand — in exchange for their consumable dollars.
The Pull Economy
In this new pull economy, consumers buy what they want, where they want, when they want and leave the excess and unwanted products by the wayside. How much the pull economy has taken away from traditional brands, stores and channels is estimated in 2017 alone by numbers ranging north of $4 billion dollars in terms of volume moved from traditional channels to digitally native options. And the shift is growing. However, it would be a huge miscalculation to simply label this as a channel shift or a technologically enabled shift. There is much more at play in this sea change than technology and channel.
There are two major factors driving this new economy:
- The shift in buying power from the traditional boomer generation that has dominated the consuming sector for decades to the younger more individualistic generations.
- The movement of the market composition from a mass grouping of homogeneous buyers into a highly segmented, individually distinct set of segments that demand and expect the focused attention of brands, stores and channels.
These two major trends have been, and continue to reshape the consuming landscape for all product categories from commodities to luxury and even ultra-luxury. These trends are driving the shifts in channel as well as the use of emerging technologies. It is the understanding of these trends, and the ability to strategically address them that will sort out the winners and losers in 2018 and beyond. To this end, it is important to understand the key value and values drivers emerging as a result of this shift in power and influence.
Value and Values in the Pull Economy
There are four major sources of value creation that bear significant weight in this new pull economy. All four are major drivers in how this new consumer views and evaluates value.
- The first is brand/product relevance. The positive level that a brand/product is viewed as “for me” is critical. The more general the appeal (athletic), the lower the relevance. The more specific and focused the appeal (hiking), the greater the relevance to the target consumer. This consumer mandate makes it difficult for more broadly positioned brands to gain and sustain traction in the face of specific demands. In a fragmented market with such a large number of specialty preferences, more focused brands will have more success than those with a broader approach.
- The second source of value is product curation. The previous age of variety has given way to an age of “less is more” and “quality versus quantity.” Younger consumers, losing their enamoration with disposable fashion, are developing a “best of” mentality that seeks enhanced product quality, sustainability and longevity. They desire to be offered a thoughtfully designed and artfully developed product complete with value-added features. These add-on attributes represent something specific to them and their needs/lifestyle rather than facing an impersonal choice in an overwhelming sea of choices. Today’s savvy consumers prefer to spend their time selecting from their personally curated “best of” products rather than paging through endless thumbnails of similar products with indiscernible differences.
- The third major source of value is authenticity. Today’s consumer seeks what is real, genuine and original. They highly value “story” but only if it is an authentic narrative. Credibility is major and this consumer sniffs out artificial very quickly. For example, there are multiple outdoor brands (Patagonia, et al.) created and manufactured by enthusiasts, that walk their talk. They design products to meet the needs of other outdoors enthusiasts who provide input on their products. Their business model thrives on authenticity. The value created by being transparent and authentic is difficult to match: It creates a sustainable value advantage over a manufacturer simulating the lifestyle, regardless of price.
- The final source of value is inspiration. Consumers in the new pull economy want to be inspired by products and brands. This is a major departure from the boomer generation who was motivated by aspiration. This major generational difference makes it very difficult for traditional brands/stores to transition to the new consumer who wants to be his or her best self, reflected in everything from sourcing and manufacturing to the brand promise.
The Pitch Perfect Package
What does success look like in the pull economy? A brand that is focused on being relevant to their target with an authentic story; offers a curated product assortment of innovative products; and inspires the consumer to be his or her best self. Applying this value-creation formula to a relevant channel strategy, supported by the right enabling technology, will only raise the potential for success.
When comparing the strategic focus and operating model of many traditional brands/stores to the pull economy values, it becomes fairly easy to see how the analogy of “square peg, round hole” can apply. The consumer has shifted and the market needs to follow. The patterns of success are emerging and 2018 is a pivotal year that will reveal who will be able to adapt and who will continue to fail. The consumers in the new pull economy will be the ultimate judges.
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