EY Future Consumer Index: consumers return to physical stores for personal service, even as AI and tech revolutionize online shopping

  • 57% of consumers want to see, touch and feel items before they buy them.
  • 55% of consumers are concerned about the rising cost of living, driving over 72% of consumers to be more focused on value for money.
  • 66% of consumers find private label just as good as branded alternatives, with 38% having no plans to switch back to branded goods.

Despite technology transforming consumers’ retail experience, allowing them to seamlessly shop between online, social media, in-app and in-game, 32% of consumers still crave the personal service that only in-store shopping can provide, according to the latest release of data from the EY Future Consumer Index (FCI) – which surveyed more than 23,000 consumers across 30 countries.

People are returning to physical stores for reasons that investment in artificial intelligence (AI) and technology alone cannot satisfy – 57% of shoppers surveyed want to see, touch and feel items before they buy them, and 68% are seeking expert advice on high-value purchases to ensure they are making the most informed choices. In a further sign that consumers are favoring physical store visits, 61% say they would go to a retailer for a store promotion that is not available online.

The report also indicates that while 68% of consumers are happy to receive and trust offers and promotions that have been personalized by AI, 49% are frustrated by smart chatbots that are not effective in resolving their queries. A further 33% are concerned that AI-generated recommendations are biased toward products/brands that may not be in their best interest.

Blending tech with the personal touch to improve customer experience

Considering these challenges, the report suggests that consumer-facing businesses must integrate personal service with complementary technology. AI has the potential to guide consumers toward fulfilling purchase choices, however, brands and retailers’ success lies in striking the perfect balance – engaging customers at the right moment with a message or offer that resonates and that they trust.

The report reveals there is also a customer service gap with people’s digital shopping experience, and this is something technology alone cannot solve. For instance, 26% say that getting a refund or making an exchange is a source of frustration when shopping online and 30% say poor customer service/support and difficulty connecting with a customer service assistant also ranks highly. This highlights the critical need for a more integrated approach that combines advanced technology with a strong human element to address and resolve customer frustrations effectively.

Kristina Rogers, EY Global Consumer Leader, says, “Technology is not the enemy of human interaction; rather it can be a powerful ally, and consumer companies that use it to support a human-centered experience are more likely to succeed. Companies must not only leverage data and analytics to gain consumer insights and anticipate future needs, but also to uncover points of friction and customer dissatisfaction that need to be addressed.

“Striking the right balance between using technology to spot and resolve these challenges early, along with customer service training that is responsive, empathetic and creates value for the consumer, is key. AI-led product recommendations can deliver incremental sales, but they won’t resolve more complex, service-oriented customer needs. Investing in people, both in terms of experience and knowledge, is equally as important as investing in technology, and they must go hand in hand.”

Stay-at-home consumers invest in experiences

While consumers are returning to physical stores for high-value purchases, the FCI reveals that the home continues to grow in its role as the center of consumption. Since the pandemic, more consumers are moving away from convenience and digital streaming services and are less interested in following the latest trends, spending less on grocery deliveries (38%), streaming services (35%), fashion (35%), beauty (37%) and consumer electronics (41%). Instead, many are embracing a more grounded lifestyle, with 68% planning to reappraise how they spend their time on things they value the most – for example, (31%) are planning to entertain and nearly half (47%) are planning to cook more at home, compared to 29% and 39% respectively this time last year.

This preference for at-home experiences over convenience services is a response to the sustained inflationary pressures that have continued to challenge household budgets. The research shows that 85% of consumers are concerned about their finances and 72% will be focused on value for money in the future, particularly regarding the affordability of groceries and other essentials.

This trend is not limited to the older demographics (Gen X and baby boomers) – 38% of whom plan to spend more time at home. Over two-fifths (43%) of younger generations (Gen Z and millennials), often perceived as the most social, are also embracing this shift toward more intimate and personal home-based activities. According to the FCI, over half (54%) of younger consumers plan to cook more at home while 37% plan to entertain more.

Rogers adds: “In response to this emerging trend, consumer companies must reevaluate their strategies for engaging with consumers, particularly the younger demographic. As consumers are less willing to pay for digital conveniences, businesses will need to recalibrate the role that digital channels play in driving revenue and profit margins and prioritize physical distribution outlets. The trend toward more at-home experiences, including cooking and entertaining, and the move away from digital and delivery conveniences is also having a positive impact on the popularity of retailers’ private label over branded products.

“The key lies in recognizing that fulfilling physical and digital desires is not an either-or proposition. Companies must create value by adeptly navigating the digital landscape to streamline consumer experiences while also cultivating a physical presence that fosters deeper connections. Achieving this balance will require new value propositions to seamlessly address both digital convenience and the craving for immediate, tangible experiences. For instance, a consumer who lacks the time to prepare a meal from scratch may still seek an engaging and inspiring culinary experience rather than simply ordering takeout.”

Private label popularity on the rise

The cost-of-living crisis and inflationary pressures have also had an impact on consumers’ preference for private label over branded goods. While initially nearly a third of consumers (28%) admitted to buying private label over branded goods in response to rising costs, the survey highlights that this trend has become a sustained habit, with 66% finding these less expensive alternatives satisfying needs just as well as their branded alternatives, with 38% having no plans to switch back to branded goods.

Significantly, the research also reveals that this trend is not exclusive to mid- to lower-income bands. Higher income consumers are planning to buy private label brands in the future and are considering this across every category, including fresh food (60%); home and household care (56%); packaged food (52%); clothing, shoes and accessories (49%); personal care (49%); and beauty and cosmetics (39%).

According to the FCI, retailers are trying hard to capitalize on the opportunity by promoting private label aggressively – with eye-level shelving and front-of-store placements – and increasing the range of products they offer. Instead of just emulating branded products at a lesser price, they are offering a range of product options and analyzing their point-of-sale data to identify early trends, meaning they are in a strong position to respond to buying patterns and consumer needs. The closer retailers get to the consumer, the more power they have to curate buying choices and the more they can drive lasting loyalty.

Rogers adds: “In response to the growing popularity of private label with consumers, many consumer products (CP) companies are focusing on volume recovery. Efforts to simplify the portfolio, drive down costs and unlock resources are important, but this must happen alongside innovation and marketing – they need to keep their brands inside the consumer’s circle of trust to maintain their margins and fund growth agendas.

“For retailers, better data analytics capabilities will help them target and reach consumers. They can use retail media and loyalty programs to incentivize private label purchases and create alternative revenue streams by promoting their partner brands. CP companies will need to take a balanced approach – promoting their brands to meet today’s goals, while also pursuing ways to keep these new consumers and earn their loyalty. Innovative new products that differentiate from private label and which consumers find valuable will be key to their future success.”

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