Shoppers, retail and FMCG trends. A glimpse into the future – the millennial shopper

The FMCG/Retail sector is in a phase of transformation, the like of which we have not seen before. Business stakeholders drive some of the changes, others are clearly coming from the outside. Business models nimble enough to adapt will thrive, while many others will be caught flatfooted and perish. We will look at shopper, retailer and FMCG manufacturer changes to gain a glimpse into a possible future.

Shoppers and shopper behaviour have changed radically. This is often explained by the impact of a new generation, the millennials. Some of this shopper behaviour change has originated externally, attributable to digitalisation (i.e. a push from tech companies and the industry, retailers, FMCG). But a seismic shift has also originated internally. In many ways, millennials are different from older generational cohorts and exert a much bigger influence on the direction of travel for the sector. And businesses wanting to react to these changes need to understand the underlying drivers.

In the shopper segment we have four topics to explore:

(1) Green/health & wellness has moved into the mainstream and changed character almost beyond recognition,

(2) Craft/artisanal and the rise of the maker movement

(3) Digitalisation, social media, voice and creating unreal expectations

(4) Urbanisation & decline of car ownership

There is a clear overarching trend towards fragmentation. Previously niche topics have gone mainstream and radically changed the mass market. Of course, organic ranges and specialists, veganism, artisanal producers, all this has existed for decades. That said, the quality and strength of these trends is different now. Take for example veganism. In the 1980s veganism used to be about animal rights, activism and eco warriors. Now veganism has evolved into a lifestyle choice of millennials, who are happy to fly around the world (despite the carbon footprint) as long as they get served a vegan meal.

(1) Green, health & wellness has changed character almost beyond recognition

Veganism is just one aspect of the wider green movement. In retail the impact of this movement can be seen in local, organic, health and wellness ranges in stores. Brands such as Alpro, Urtekram or Innocent tap into this perfectly. Over the last decades, dedicated environmentally conscious shoppers buying products with animal welfare in mind have been vastly outnumbered by shoppers buying organic, because of the perceived or real health benefits for themselves, their children and pets.

With this focus on personal wellbeing has also come the preponderance of food allergies, real or imagined. This is one driver behind the surge of the gluten free or the various free from ranges proliferating in dairy for example. All this is tied up with a much bigger focus on health and managing one’s body.

Leaving aside allergies and eating disorders, much of this change in eating behaviour is arguably connected to identity creation. It is much easier to change one’s dietary requirements than for example one’s national identity, ethnicity or religion. In times of social media sharing, individuality and standing out from the crowd have become ever more important. Food is predestinedto play a role in this.In other words: for some millenials buying certain products is an expression of identity. After all, they’ve been told to think of themselves as consumers in every sphere of life from health to education.

Businesses within the FMCG sector have reacted to this. In many markets “healthy” or health & wellness has become a new category and has brought out a new cuisine and greater choice (kale chips, coconut oil etc). The healthy food market is highly innovative and has created new options for consumers. It means shoppers can select from a much larger menu.

But there is more to millennial and health. For some the focus turns into self-optimisation, reflected in rising gym memberships, booming sales of fitness trackers, the quantified self and in extreme forms the use of steroids.

(2) Craft/artisanal and the rise of the maker movement

A separate development driving radical change and widening choice is the turn to craft and artisanal producers. From a shopper’s perspective, small-scale, independent producers provide experiences, authenticity, outstanding storytelling, passion for their category, entrepreneurship and often greater social engagement.

And such products are perfect in the age of social media sharing. Artisans provide products with which millennials can stand out from the crowd. According to some, millennials want to be seen to be consuming niche products that no one else has ever heard of in order to be ‘exclusive’. This is then the Instagram generation showing off via consumption. But arguably there is more to it.

This turn away from the mass market is also a result of the decade long crisis of global capitalism and big brands associated with it (fairly or not). A higher percentage of millennials have some form of higher education than previous generations. Combined with the spread of information through social media this means more thought goes into how they spend their money.

Arguably this has resulted in a move towards premiumisation of various categories, such as craft beer, gin, coffee, chocolates, ice cream or baked products. Some of the brands include Halo-Top ice cream, Graze snacks, Kind snack bars, Dollar Shave Club and Harry’s in razors, Tito’s in vodka, Fevertree tonics, The Ordinary and Glossier in skincare/cosmetics.

As trends in food retail often travel to food service and vice versa, one can see the rise of street food in the same light. Street food has benefitted from the same trends towards fragmentation, premiumisation, story telling, authenticity, healthy ingredients and so on. Driven by social media marketing and sharing, independent, small-scale, street vendors (the various burger, pizza, burritos sellers with their own trucks) defined against the mass-market have outperformed the mainstream. But in general, food service is continuing to grow, not just in street food, but also in the fast casual and chained sector. And again, social media plays a huge role in this. Scanning Yelp, it becomes quickly obvious how obsessed millennials can be with the latest food joints and whatever is new to offer.

A crucial factor in the transformation of the wider FMCG industry is digitalisation. In foodservice this has manifested itself in the boom of takeaway deliveries with companies such as Deliveroo, UberEats or Just Eat outperforming. Another major innovation in the digital space are recipe bags/meal kits, such as Hello Fresh, Plated and Blue Apron.

(3) Digitalisation, social media, voice and unreal expectations

One cannot talk about the millennial generation without talking about digitalisation in the broader sense. For millennial online presences have become paramount and compared to their elders the impact of social media on their lives has been a astounding.

Social media has also enabled new business models such as the V-loggers (on YouTube or elsewhere). These influencers are a new millennial phenomenon and their business models would simply not have been viable a decade or so ago. And social media is eroding other barriers too. In the past, a company needed a huge marketing budget to advertise on television and had to be big enough to persuade large grocers to stock its products. Social media and e-commerce have eroded those barriers.

Now the next digitalisation shift is happening with interactions moving from keyboards and smart phones to voice. Access points in the home such as smart speakers will become the gateway to a specific retailer. This will have profound effects on loyalty schemes. That said, many millennial shoppers are not loyal to a retail brand per se anyway, but are rather on the look out for novelty and individual experiences.

Digital technology has also had other effects too. Services from digitally transformed businesses or new start-ups have created millennial shoppers with extremely high expectations. For many millennials every app experience needs to be as slick as Uber, delivery speeds need to be as fast Prime, and content needs be as readily available as on Spotify or Netflix. Digitalisation has certainly raised standards, the competitive bar and the table stakes for doing business in the age of the millennial shopper.

(4) Urbanisation challenges and declining car ownerships

Urbanisation is one of the megatrends of this century and had a major effect on car ownership, which is falling back across the west. Declining car usage means that footfall is down especially in big out-of-town locations in many markets and that shopping behaviour has evolved to more frequent top up shopping from convenience outlets.

This means that footfall is actually up in convenience locations, especially if these are combined with a food service outlet. Here some retailers see the same shoppers appearing more then once during the day. Incidentally Amazon is targeting this kind of shopping behaviour with its Prime Now service.

Due to the millennial shopper becoming more and more urban, we are seeing manyinnovations in last mile delivery (in all ofits forms from drones to robots). The downward trend in car ownership might actually foreshadow and signal the rise of self-driving cars and new car sharing schemes, run by Google, Uber and the likes.

In conclusion companies need to take into account that the millennial shopper has green/health & wellness values and supports small-scale craft/artisanal producers over mass-market brands and product experiences. Millennial shoppers are digital savvy, highly active on social media, open to innovations and increasingly unlikely to drive their own car. As time progresses, these shoppers are likely to take their current attitudes, beliefs and values with them into older age. In other words, businesses will need to adapt to these shoppers and their values to stay relevant in future and continue to have an addressable shopper segment.

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