Retail and consumer products trends: The battle for customer loyalty has been saved
Retail and consumer products trends: The battle for customer loyalty
Empowered consumers are shaping the future of retail
As retail markets continue to face plenty of external pressures, the battle for customer loyalty among a more empowered consumer base is starting to heat up. In this article, we explore three consumer trends that are set to shape the future of retail and offer considerations for retail and consumer products companies as they plan their next steps.
- Three trends shaping the future of retail
- Metaverse “first movers”
- The rise of re-commerce
- Inflation and rising prices
Published June 2022
Three trends shaping the future of retail
Halfway through 2022—and a full two years since the emergence of COVID-19 in the US—retail and consumer products (RCP) companies are at a critical juncture in the battle for loyalty among increasingly empowered consumers. We see three consumer and retail trends shaping the future of retail that could determine RCP company success heading into the summer:
- The growing popularity of the metaverse among consumers and businesses is elevating early customer ownership to a level where it’s now an imperative for RCP organizations.
- The rise of re-commerce—buying used goods, renting, and shopping peer-to-peer or secondhand through the brand—is empowering consumers with adding purchase channels and contributions to a brand's loyalty pipeline.
- Continued inflation and rising prices may be the lever that challenges empowered consumers’ influence, but time will tell.
RCP companies that employ a strategic, operational approach that concurrently leverages these consumer trends and meets the needs of empowered consumers are likely to achieve positive bottom-line results in the coming months.
Metaverse “first movers” can establish new RCP brand loyalties
RCP companies have an opportunity to be first movers in a new retail market that’s estimated to be a $1 trillion revenue opportunity: the metaverse.1 Widely thought to be the next-generation internet, the metaverse is a form of digital interaction where connected, virtual experiences like banking, shopping, working, and socializing simulate those of the physical world.2 It’s the convergence of a cluster of maturing technologies, including augmented reality (AR), virtual reality (VR),3 cloud and edge computing, artificial intelligence (AI) and machine learning (ML), and networks (5G, 6G, fiber optics). Together, these technologies can create the experience of a three-dimensional environment in which users interact with their surroundings and engage in online communities as if they are in a shared space.4 These environments are further enabled by digital currencies, nonfungible tokens, and devices like VR headsets, AR glasses, and smartphone apps.
Billion-dollar investments and a rapidly expanding user base5 are positioning the metaverse to play a prominent role in the future of retail. By entering this up-and-coming retail market in the early stages, RCP companies can enjoy first-mover advantage and establish new brand loyalties that potentially could extend beyond the virtual space. This trend is akin to how large, online retailers gained a huge competitive advantage by riding the Internet’s early wave and revolutionizing the online shopping landscape.
RCP companies can derive near-term value from the metaverse’s growing popularity in three ways:
- Establish a new outlet to drive brand awareness. For example, a large sports apparel and equipment retailer recently filed several new trademark applications that indicate intent to offer virtual branded shoes and apparel in online and virtual worlds.6 This followed the retailer’s announcement that metaverse users could customize their online avatars with its branded apparel.
- Directly increase brand traffic. One of the world’s largest fast-food chains is establishing a restaurant in the metaverse that can sell both virtual and real-world food, with the option to deliver the latter to consumers’ homes.7 This move will cement the chain’s presence in the metaverse and provide an additional delivery channel for retail orders.
- Provide a unique, metaverse-only brand experience. Last year, a pop star presented a multi-day concert tour as a live in-game event,8 introducing her music to a huge gamer audience. Imagine retail companies building complex, extravagant virtual storefronts to give customers a targeted shopping experience that puts them inside the same digital worlds that the brand’s online and TV ads present.
The rise of re-commerce paves a profitable path to loyalty
As the metaverse widens the aperture of how, when, and where RCP companies interact with customers, the re-commerce market is also experiencing a resurgence. Re-commerce refers to shopping for used or secondhand products, both brand-to-brand and brand-to-consumer. Re-commerce can help companies retain and grow loyalty with customers already in their ecosystem.
With summer on the horizon and the pandemic showing some signs of tapering, consumers are expected to travel more frequently. That should be good news for RCP companies, who are hoping for a revenue bump as customers purchase vacation and warm weather wardrobes. In addition to traditional sales channels, RCP companies should consider embracing re-commerce as a means of creating a profitable path to customer loyalty. Since 2019, shopping for secondhand apparel surged by as much as 55%.9 This momentum is expected to continue, with used apparel sales set to reach $77 billion by 2026.10
A few companies have started to capitalize on relatively nascent peer-to-peer resale marketplaces. In 2021, a major online marketplace known for unique and creative goods acquired a community-powered fashion marketplace for $1.6 billion.11 While peer-to-peer digital resale continues to thrive, the model in which brands resell their own secondhand products is even more successful. If RCP companies can own the re-commerce interaction with empowered customers, they can keep their brand at the forefront. This retail trend also aligns with how consumers increasingly prefer to shop. Among the variety of sustainable methods of shopping—including brand-owned re-commerce, rentals, subscription boxes, and peer-to-peer marketplaces—65% of consumers across all generations prefer brand-or retailer-operated re-commerce.12
Recently, a footwear retailer introduced a newly integrated resale platform that allows customers to trade in their lightly used shoes for store credit, part of the retailer’s strategy to reduce its carbon footprint.13 As further testament to the rise and imperative of retailer-operated re-commerce, a start-up that works with brands to resell their own second-round products recently received $8 million in new funding.14 The startup also helps build and maintain these websites.
Inflation and rising prices may challenge empowered consumers’ influence
With US inflation sitting at a 40-year high15 and prices rising on everything from daily necessities to luxury goods, empowered consumers’ ability to drive adoption of the metaverse marketplace, re-commerce, and other consumer and retail trends may be challenged in the coming months. RCP companies may be reluctant to invest in new consumer marketing and engagement technologies, especially when they’re being driven to increase product prices to counter the effects of pandemic overhang, sluggish supply chains, workforce shortages, and geopolitical conflicts.
Ironically, consumer discretionary spending has increased over the past few months, but that behavior counterintuitively exacerbates pricing pressures. Retail and consumer products companies may be interpreting this spending as price elasticity when consumers may not yet realize the impacts of inflation on rising product prices. Time will tell if RCP companies will be able to maintain demand for their higher-priced products, or if consumers begin to view continued price increases as a way for companies to improve profit margins and react accordingly once current market stressors subside.
1 Facebook parent Meta’s bet on the metaverse may never pay off (yahoo.com), February 9, 2022.
2 What’s All the Buzz About the Metaverse? | Deloitte US, March 2022.
3 Extended reality, the convergence of augmented, virtual, and mixed realities.
4 “A whole new world? Exploring the metaverse and what it could mean for you,” Deloitte, April 2022.
5 The Metaverse is a $1T opportunity after users increase 10x: Grayscale report (cointelegraph.com), November 25, 2021.
6 Nike is quietly preparing for the metaverse (cnbc.com), November 2, 2021.
7 McDonald's Files Trademark for Metaverse Restaurant That Delivers Food (businessinsider.com), February 10, 2022.
8 Fortnite’s Ariana Grande concert offers a taste of music in the metaverse | TechCrunch, August 9, 2021.
9 Gen Z Is Driving Growth In New Shopping Formats—But Are Retailers Paying Attention? (forbes.com), March 5, 2022.
10 With used apparel sales set to reach $77B in 5 years, more retailers join in, ThredUp finds | Retail Dive, June 23, 2021.
11 Etsy, Inc. - Etsy to acquire global fashion resale marketplace Depop, June 2, 2021.
12 Gen Z Is Driving Growth In New Shopping Formats—But Are Retailers Paying Attention? (forbes.com), March 5, 2022.
13 Allbirds to offer shoe resale with “Rerun” platform | Vogue Business, February 17, 2022.
14 Resale startup Archive scores $8 million in new funding (morningbrew.com), January 25, 2022.
15 CPI Inflation Climbed 7.5 Percent in January, the Fastest Rise Since 1982 - The New York Times (nytimes.com).
Special thanks to Grace Cleland, Natalie Weinberg, and Anirudh Panuganty for their authorship, support, and research throughout the development of this article.
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