Keeping up with ‘digital consumers’
As digitalization revolutionizes customer behavior, the consumer industries need to act fast to meet the expectations of digital consumers.
Consumer industries touch people’s lives in a way that few other industries can match. Every day, 2 billion people – almost a third of the world’s population – use the products of just one global consumer products company.
Digital innovation is shaking up consumer industries: shifting power from brands to consumers, shifting value from traditional players to digital insurgents, and putting the consumer in the driver’s seat.
As we outline in our article on digital trends in the consumer industries, mobile, social media, analytics and cloud have fundamentally shifted the way consumers buy and use products and services across the world. And consumers are making companies work harder to earn their money. The transformation of consumer industries has led to some important innovations, particularly on the periphery of the consumer ecosystem in areas such as payment technology and last-mile delivery.
As a consequence of their place in the digital vanguard, consumer businesses are sailing further ahead into uncharted waters.
We have identified four digital transformation themes – consumer data flow and value capture, experience economy, omni-channel retail and digital operating model – that we expect to play an important role in the future evolution of consumer industries:
These digital themes are expected to put a cumulative $4.9 trillion¹ of value at stake for the consumer industries in terms of operating profits from 2016 to 2025. This is approximately 14% of the total operating profits of the industry over the same period. The economically measured impact to society and consumers from the digital themes is estimated to be around $5.4 trillion.
The success of digital transformation will hinge on the success of consumer companies in innovating while maintaining the trust of their consumers. Digital transformation will benefit the environment through the efficient use of resources, decreased energy usage and reduced wastage. It will also impact society by generating employment in new fields, which will require efforts to retrain and build the skills of the workforce, and by creating and propagating a wellness culture, leading to better health outcomes. Looking to the future, consumer industries need to think deeply about what digital means for them and what problems digital can help them overcome.
Irrespective of the path that businesses choose to take, there will be ‘no regret’ investments that can be made to survive and thrive in the future. Our recommendations for these investments include breaking down traditional organizational barriers, building ecosystem partnerships, investing in skills and digital capabilities, and building an omni-channel presence.
Finally, we would like to highlight four key questions for stakeholders in the industry and its ecosystem:
- With over $600 billion for industry and $2.8 trillion for society, e-commerce is the single largest digital initiative we have identified across industries so far. Internet access and last mile delivery are critical to realizing this value, so how can consumer, telecoms and logistics industries collaborate to realize this potential?
- The sharing economy is estimated to have over $2 trillion of societal impact. What innovative business models can incumbents deploy to increase second hand goods sales which in turn fuels ‘new demand’ growth?
- How can companies push the boundaries on innovation and invest in the right capabilities to enable product and service offerings that drive differentiation in the digital age? How can industry firms work with regulators to facilitate digital driven innovation in business models, while protecting interests of consumers especially around consumer data and transparency?
- Will businesses have access to a sufficiently skilled workforce to successfully leverage digital opportunities? What role will businesses play in skill development in the future?
1. Disclaimer: These calculations are subject to change. Impacts are based on estimates and would vary in range given a change in adoption rates or disruption in any of the initiatives
The consumer industries are one of six sectors (along with automotive, electricity, healthcare, logistics and media) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth findings about the digital transformation of the consumer industries are available in a white paper, which can be downloaded here.
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