Consumer Technology & Durables (CTD) in the COVID-19 Era
It would not be wrong to describe the past few decades of the global economy as ‘Consumerist,’ as increased incomes drove what economists call conspicuous or aspirational consumption. Demand for luxury and lifestyle goods like cars, smart homes, in-home entertainment, automated household appliances, personal devices, and gadgets has increased manifold. This explains the exponential growth Consumer Technology & Durables (CTD) has seen in the past few years.
CTD’s growth over the last two decades was aided by technological innovation and the steady drop of electronics components’ costs, driven by economies of scale. Apple launched an iPhone version almost every three months. Consumer brands offered discounts and offers to consumers during shopping seasons to boost the sales of HDTVs, household appliances, home entertainment, and cars. Lucrative hire purchase schemes brought high-end CTD items within the reach of a large number of working-class consumers. On the supply side, factories moved to China and Taiwan, due to the availability of cheap raw materials, inexpensive labour and lower duties.
The COVID-19 Impact
Today, with the COVID-19 pandemic sweeping the globe, there is a significant impact on all industries and CTD is no exception. This blog takes a look at the impact of the pandemic on Consumer Technology and Durables, and how the industry is responding to the crisis.
As we’ve learned from Gartner, COVID-19 has triggered a few dominant emotions driving economic behaviours. In CTD, the underlying customer sentiment is Hope. Here the customers’ perception of how soon they expect conditions to improve after COVID, directly influences their planned consumption. To navigate this increasingly complex landscape of COVID-19, business leaders must address consumer expectations and fears, and craft strategies accordingly.
How consumer sentiment is changing
The Boston Consulting Group’s Consumer Sentiment Survey during March, 2020, has offered insights into how consumer sentiment has changed in major markets and how it is reflected in demand for consumer durables. Consumer sentiment has turned more pessimistic in the US, France, and the UK. However, Italy, which seems to be flattening the curve, has started showing signs of optimism.
Priorities have changed
Across the US and Europe, consumers do not consider the following areas as an immediate spending priority:
- Cars / automobiles
- Mobile electronics
- Home electronics and appliances
- Athletic equipment and clothing
More than 20% of the consumers (survey respondents) across Italy and France plan on reducing spend on in-home entertainment, while in the US, Canada and UK consumers stay neutral toward this category. Consumers in most countries plan to lower their spending in more product and experience categories than they intend to increase their spending in—except in China, where consumer optimism continues to recover from its earlier nadir, and in India, where consumers are inclined towards a more balanced split of spending declines and spikes across categories.
Across markets, younger generations (including Generation Z and millennials) express less optimism and more worry than more mature generations. Older generations are more likely planning to maintain their current level of spending, and younger generations are expected to make changes to their spending. Since most youngsters fall in the working-class segment, their propensity to keep up with the latest consumer tech, when supported by purchasing power, is high. So this spending behavior change means a lot of aspirational and impulsive spending on CTD by the younger generation is on hold.
Change in habits and expectations for the future
Consumer habits and lifestyle during the pandemic have undergone a sea change. Most of the respondents plan to return to normal spending once the virus is under control. A survey of US customers under lockdown indicates that 42% of them are spending more time with family at home, while 62% are connecting with friends and family digitally. As many as 41% are spending more time on a hobby, and 39% are exercising more. Irrespective of the possibility of lockdown extensions lasting 1 month, 3 month or 6 months, about two-thirds of them replied positively that they expect their spending to bounce back to normal.
Major Challenges in Consumer Technology and Durables
As a result of the impact of COVID-19, we see a few major themes emerging in CTD, which are changing the way businesses have handled their sales, operations and supply chains. Broadly, these are as follows:
(a) Shift in Buying Channels—towards Digital Commerce: In-store and outdoor vending have shifted toward e-commerce orders as customers attempt to minimize exposure risk. Recent data indicates daily e-commerce sales to be up by 25% in the US and by 33% in the UK. Businesses need to improve their digital channels to welcome and delight users; they need to figure out a way to present an omnichannel experience. There is also a need to improve personalization across devices/channels to provide a seamless experience. Both aggregators & OEMs will scale up the SKUs available through direct-to-consumer and online channels.
(b) Rising need to Digitally Engage with Customers: Brands are increasingly using digital tools to find, listen to, interact & empathize with customers around a range of products. Multichannel communication, self-service features, live chat, voice bots & others are some of the new features being introduced by companies to improve digital customer engagement. Driving customers to unassisted support can improve customer experience (CX) while reducing costs. Digital engagement also allows brands to collect customer data at various touchpoints, for better understanding of behaviour and hence, enhanced personalization.
(c) Improving Employee Digital Engagement & Productivity: With the spread of the pandemic, companies were faced with workforce unavailability and have mostly switched to a remote working model. Studies suggest 90% of employees feel that flexibility in their work arrangements contributes to their morale during COVID-19. The challenge for businesses is, therefore, how to engage digitally with employees. They need to figure out how to enable their workforce with the right skill sets, while optimizing costs. Additionally, there are challenges involved in digitally recruiting the right people and onboarding them remotely, while disruptions abound.
(d) Managing Supply Chain Risk & Disruption: Companies are trying to cope with demand volatility, they need to figure out how best supplier networks can be expanded and utilized. With increasing demand, they need to find ways to ensure reliable replenishment. We have seen a 38% decrease in cell phone units shipped in Feb’20 YoY due to supply chain disruptions alone. Supply chains have to consider dynamic demand pattern changes because of COVID-19. Pre-COVID-19 forecasts are no longer valid as the pandemic has entirely disrupted the market and firms would need to work on new models to predict patterns.
Earlier, the availability of cheap raw materials, labour, and lower duties allowed most CTD manufacturers to either shift their factories to China or depend on contract manufacturers there. Now as the curve flattens and nationalistic feelings emerge among consumers, it is to be seen whether governments will consider imposing restrictions on Chinese products and encourage domestic manufacturers. It’s also uncertain whether, for manufacturers, logistical benefits will outweigh cost advantages, while protecting domestic interests.
Using Digital Transformation to mitigate challenges
Experts predict that the CTD sector could mitigate most of the challenges by embracing digital transformation and allowing AI and analytics-led solutions to power their businesses in each of these focus areas.
Digital Commerce: Digital Commerce can improve the omnichannel shopping experience,via improved click-through rates & conversion driving revenues, better retargeting & personalization, and allowing next best product recommendation in cases of product unavailability. All these go a long way in boosting CX and sales.
BRIDGEi2i’s Digital Campaign Effectiveness WatchTower™ can be used to test various reach out strategies and optimize them. It can be used to predict traffic intent and offer omnichannel personalized solutions for digital commerce and self-serve portals.
Digital Customer Engagement: By embracing digital transformation, companies can analyse which channel suits their requirements best and also focus on driving the Net Promoter Score (NPS). They can have a better understanding of user search intent and drive optimization of the website, driving traffic/leads to the website. Companies can also reap significant benefits by investing in chatbots and enhancing the effectiveness of online support content.
BRIDGEi2i’s CX WatchTower™ can be used to connect with all customer queries, feedback & sentiments from different interactions to address evolving needs & issues proactively. We can offer digital self-care recommendations and interactions to reduce assisted support requirements.
Digital Employee Engagement: Moving to digital tools and systems for employee engagement can help companies empathize with their health & safety concerns. Companies can achieve dynamic resource utilization basis the project requirements—a win-win for clients & employees. They can create exhaustive learning catalogues coupled with video training to reskill/upskill. In addition, survey-based measurement tools for employees can help gauge employee morale & take action.
With its Talent Analytics solutions, BRIDGEi2i can help companies with their digital talent development programs. It can assist in intelligent workplace planning, with social distancing compliance. It can design programs for remote employee experience, while maintaining a grip on costs and compliance.
Managing Supply Chain Risks: With Digital Transformation, leveraging cutting-edge technology like AI, ML and IoT, companies can study dynamic demand patterns. They could allow suppliers & sub-contractor networks to be optimized for on-time delivery, to ensure business continuity & planning. They might also look to manufacture & source locally as this also helps drive local communities by generating jobs.
BRIDGEi2i’s E2E Forecasting tool can provide insights into the orchestration of perfect order fulfilment by governing upstream operations to full capacity. We can help you refine your demand & inventory models factoring in simulations based on new COVID-19 contextual attributes.
See how BRIDGEi2i helped a large Consumer Electronics brand improve its Sales Forecasting with Machine Learning.
“Fast proactive planning driven by AI holds the key. In the CTD industry, we see a strong focus on digital customer engagement, D2C business models and supply-chain re-orchestration going forward, and these can help CTD businesses stay ahead through Digital Transformation.’’ said Suvodip Chatterjee, BRIDGEi2i’s Business Head, CTD. “We at BRIDGEi2i are proud to be the Digital transformation partner of some of the global fortune 500 Consumer Technology & Durables brands and helping them in their journey during these testing times, leveraging our proprietary AI solutions.”
The solutions for CTD to mitigate COVID-related challenges are not specific and limited to the current pandemic only. These are expected to ensure the industry is prepared for any such radical disruptions and these solutions can herald future-proof efficiency powered by digital transformation.
Here’s a glimpse of BRIDGEi2i’s points of view and AI solutions, crucial for thriving in the continually changing new normal, post-COVID.