TRANSCRIPT 🔗
Steve Katz 00:16
Hi, everybody, and thanks for listening in on our Hilco Global Smarter Perspective podcasts. I'm your host, Steve Katz. We're glad you could tune in. Today, we're going to be discussing how the rapid change that's taking place in the consumer product industry, along with current economic challenges is creating a bit of a ripple effect that is shaping American shoppers and most likely will shape them for years to come. Joining us today for that discussion is returning guests. Robert Gorin, Managing Director and Consumer Products Practice Leader at Getzler Henrich. Rob, welcome back to the podcast.
Rob Gorin 00:49
Steve, it's great to be here. Thanks for having me.
Steve Katz 00:51
Well, we're glad to have you back. And let's just jump right into because I know you have a lot to talk about. We've got a current inflation rate around 3.35%, as of December at least, which is placing a lot of pressure on consumers. How would you explain the first wave of the behavior change that we might expect to be developing as a result of that?
Rob Gorin 01:13
You know, Steve, I think it's a great question, particularly in these crazy times, you know, between the high inflation rates, the continued threats of a recession that may or may not happen, geopolitical conflicts and the persistent supply chain issue that just won't go away. If businesses haven't felt any reverberations to their bottom line, they likely will. These market stressors, are going to have a significant impact on shoppers. Right, both today, I think, and in the future, and consumer product companies need to prepare for, for what kind of this weaves so that they can follow their customers today and going forward. Kind of in a first wave, I think consumers are going to buy less. You know, current surveys show that 65% of of consumers have managed their expenses in the recent past by increasing their credit card usage and by diving into their savings. That's not sustainable. Right? And couple that pandemic era programs being depleted, and student loans restarting, less savings being available, consumer buying power starts to wane, right? Shoppers will have less disposable income, and they're going to have to cut back in likely non essential areas. Right? And further, customers have shown recently, that brand loyalty is also less of a link at the moment, right? A linkage. If you look at again, current surveys, 74% of consumers have said they're trading down to less expensive options. So customers shoppers are looking for cheaper alternatives. But kind of what's interesting here is even as they are saying they want bargains and their store brands instead of the expensive name brand, they still expect the same or higher value for their dollar. So it's a different measuring stick than they used in the past, right? And to that end, negative experiences, such as poor customer service, or shipping delays, or anything that might upset or draw the customer are going to be more heavily factored in to how those customers make their decisions in the future where they decide to buy.
Steve Katz 03:22
Alright, so those are all great points. I think we've all witnessed to some degree more and more of these store brands, or more visibility for the store brands and even some news stories recently about people, you know, looking for those brands to as a way to bring down their costs all across retail, including groceries. So great points. So we've got those factors playing into what's happening, what what are we likely to see next from buyers consumers?
Rob Gorin 03:47
Right. So now we're going to start to see consumers will shift some of their spending from goods to services. That, you know, customers are getting much more comfortable owning less, because things are so readily available, and they can get them so quickly. And you have companies like Spotify, that have taught customers that the subscription base or paid to view, pay to use access is very, very vital. So I don't need to hold as much today as I might have in the past I don't need to have as much in my home, right. And then you layer on top of that consumer products will become, are becoming, will become even more commoditized as we see advancement and further advancement in online shopping, AI enabled automation. It allows buyers to really make selections based on other intangible benefits, the biggest being convenience. Right? And so what we see again, right 72% of consumers say they're buying at least some of their groceries online. That's a perfect example of this. That didn't exist. Right? It was it was almost non existent now it's very, very major player and a very major way to buy your products. On top of that, shoppers are going to start to resist the big ticket purchases. Highest interest rates are impacting those customers and we see that 60% of customers believe that it's much harder to get a loan or mortgage today than it was a year ago. Right? And that's, that's their feeling that in their pocketbook, and how does that impact them? Major purchases. Homes, cars, appliances they've all bought. And here's, here's a real interesting example of how that manifests. Right? So, whereas not too long ago, people were all in on remodeling their kitchen. Today, instead of redoing the kitchen. we'll just we'll just replace the broken fridge. Right? Or instead of replacing the fridge, maybe spend a few $100 and fix it, rather than getting a brand new one. Those are big shifts from from particularly from the recent.
Steve Katz 05:54
Yes. So all again, really interesting stuff. We, you know, we were chatting before the podcast, you talked a little bit about something you referred to as a as a current misalignment that you and and the team at Getzler have found that now exists between customer feedback, meaning what customers are telling retailers via surveys and other input mechanisms, and what their actual demonstrated behavior is. Can you maybe I'd like a
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little clarity on it myself, but can you just explain what that means for the audience overall?
Rob Gorin 06:27
Yeah, this one is really interesting for me as well. And I think what it shows is that is that industry leaders have a lot of ground to go if they want to really understand where their customers are and where they're going. And the formulaic approach we've used in the past, to forecasting demand, and applying the supply chains. It has to be it has to be shifted for this more dynamic world that formulaic approach isn't going to work. We have to find ways that have more long term solvency. Right? So you look at all of you look at things like the forecast, how we forecast, how we apply our supply chains, how we identify sustainable practices, those are all great, but the most important strategy we have right now. And the one that addresses all the ripples that we've been talking about, and that you mentioned, the beginning, is data mining. It's it's become almost table stakes. And most companies say it say it's important to them. 70%, in fact, of consumer product executives say data mining is critical, very few of them are actually doing particularly in the middle market. But really in all, in all areas in all parts of the industry. What we find is that they're not even analyzing the data they have, they have this own, they have their own sale data, they're not analyzing it. They don't want to buy the demographic data that's out there. And without this investment of both time and money into consumer research, it's really hard to gauge with customer about what they truly need, not just what they say, right? I want sustainability, but I don't want to pay for it. You know, I want sustainability as long as it doesn't affect my pocketbook as an example. How do we really truly understand what the customer wants to meet? You can't just listen to what they're saying. This misalignment? It puts your company in a different orbit, if you will, then what your customers what your customers want.
Steve Katz 08:25
Okay, so given the things you just touched on the data aspect, the shifts in behavior, and the idea of this, this orbit. Syncing syncing up this orbit, how can companies best go about charting a path that tracks with customers and then creates the types of bonds that embrace them, but are needed?
Rob Gorin 08:45
Steve, I think that's that's the big question, right? And it all starts with gathering all relevant data that you can analyze it for deep insights. Very often you have teams from production, and sales and marketing and finance, using data, different data sets within the organization to run their analysis and this creates departmental silos. I like to joke that it's between those silos that revenue and profits go to die. Right? And if you have those silos and have all these different analyses, which one do you trust? Which one do you believe? How do you know how to move forward with your customers, because you're getting different pieces of views from your different departments. If you break down and you you take your financial, your customer, your product data, and interweave them into into a single source of truth. Now you've got something we all everybody understands. Everybody in the organization is rowing in the same direction. And we can start to see the path forward on how we can best serve customers. Let's take an example, right, you know your customer is buying ads. You have sales data. Right? From that you know how much your customers spend, you know how many products they want to purchase, you know, the purchasing frequency. It's a lot of data that you already have in use. Through your shipping records, which you also have, you also know where they live. Now, couple that the demographic data that you just bought, now you know, what they look like, what their generally age is, what your socio economic status is. You take all of this, and you get a 360 degree view and you really develop customer personas and you can attach likely purchasing profiles with those personas. Now you've got deep insight, which can give you what many consider to be the Holy Grail, what is that customer going to buy next? How do I compare them to others that I already have? And create some kind of algorithm that tells me what do they want before they know they want? But even that is not enough, right? So you, just knowing your customers is not enough. You have to connect with them as individuals, and truly understand them. Think about, think about the last time you had a strong link to a particular brand, whatever that brand may be, but it's a brand where you thought they get me they understand me. How did the company build that brand? They did it through data. And they did it through analyzing that data in a holistic way to truly understand you as a consumer, and as a person. So let's take some hardcore hints, right? Let's put this into practice. The company knows that you like to buy their product, every five weeks. Doesn't matter if it's soap, printer ink, diet soda. Whatever the product is. So they know you're gonna buy it every five weeks. So every fourth week, they send you an email, reminding you about them, maybe giving you a link, so you just have to click on it. Right? And it takes you to the product and you can buy it. There's that convenience, Steve right, that makes you they've made it nice and easy for you. Right? You don't even have to think about it.
Steve Katz 11:58
Exactly. Exactly.
Rob Gorin 11:59
Unless it's one less concern you have in your life. Or they know that you buy a specific product. So they send you tips, how can you use that product or what other products go well with that product? What else should you consider? Right? Helping you again, how do I use it, what else do I need? Or they one of my favorite 60 that you do most of your shopping online. But they send you an email that says hey, we know that you're in this zip code, I want to let
you know that there's going to be an in store sale. And by the way, if you go in, here's a coupon for an extra 5% attached, right?
Steve Katz 12:38
Yeah, getting much more sophisticated all of it.
Rob Gorin 12:40
Absolutely and, and personalized, right? That's how you build brand loyalty. They just, they just took you or me or anybody and they've created a linkage. It's built and it's sustained, and they care about me, I'm gonna care about them, and they're making my life better. And what happens is, while other companies are forced to either raise prices, to maintain their margins where they might and those increased prices might lose customers, or they decide to stand pat and sacrifice. Data Mining businesses can maintain their profits. And in fact, if there's some price elasticity in some of these products, you might find I'm paying $2 more for my printer ink, because I don't have to think about it and I don't have to go in the store to drive and drive to it. I don't have to remember to order it. You sent me the link. Alright. Yeah, I know, it's probably $1 or 2 more, but I'm willing to buy it because you you've given me time back in my life. Right? That's really important. And that's, you know, I'm what less likely on top of that, to trade down to a lower priced alternative. Right? And that's a that's a really big deal. The way I like to think about it, I mentioned the word orbit, recently, you know, recently in our conversation. I'd like to think about this that if you and your customers are misaligned, then you're in two orbits that are intersecting, but not really synced up in any way shape or form. Right? And so what happens when those orbits happen to intersect, you do business the customer buys in. But it's very difficult to predict. And in between those orbits, your customer could you know, those orbit intersections, your customer could find a different place or a different way to buy it, or somebody else doing the types of things we're talking about. As you as you take the data analysis that we've been talking about, right, it lets you get into the same orbit as your customer. In fact, if you want almost let you surround your customer, so that using the data, you can anticipate what that customer wants five minutes before they know they need it. And that's a real value add. That's something that really matters to the customer and that creates an impressive linkage. Those are bonds frankly that even today, even these ripples that we're talking about, and even the stresses that we're talking about, will struggle to break, because that you have loyalty to them in their eyes, and they have loyalty to you. And that's the goal at the end of the day.
Steve Katz 15:14
Yeah, that's, you know, you see, you see a bit of it as a consumer I think. That it's occurring. But you don't realize the, you don't realize sort of the, the rationale behind it, and what it can really what it's really doing to you as, as, as the consumer, but as the consumer products, entity or the retailer, to be able to create those types of ties that, you know, create that long term loyalty, but also prevent this trade down, I think to lower priced merchandise is is pretty impressive that it can be done and that it's being done now with increased frequency. So that's really great insights. Rob, as always, I think you've given everybody a few things to think about. And by painting that picture of how consumer products companies can achieve that type of shared orbit, I guess, sync up, if you will, with customers, it really helps drive it home. So for listeners in the consumer products area who want to reach out with follow up questions or discuss how best to produce their own current consumer challenges, can you share your contact information?
Rob Gorin 16:17
Happy to do so Steven. And happy to talk to anybody that, you know, has questions or wants to, you know, brainstorm on on on these or any topics. So I'm at rgorin@getzlerhenrich.com. And I'll spell that for you. It's R G O R I N @ G E T Z L E R H E N R I C H .com. And they can reach me by phone as well at 786-807-8460. I'm happy to talk.
Steve Katz 16:53
Alright. Perfect. Thanks thanks again for joining us, Rob. And listeners, we hope that this Smarter Perspective podcast provided you with at least one key takeaway that you can put to good use in your business or share with a colleague or client to help make them that much more successful moving forward. And remember that you can always check out more great podcasts and articles featuring timely insights from Getzler Henrich experts and Hilco experts at Hilco Global.com/Smarter-Perspectives. And by the way, I think it's worth pointing out here that Rob has a recent article that's posted to that site that provides a really great illustration of the shared company consumer product orbit that he talked about. And I think that really will help people even picture it a little bit, a little bit more than we were able to present it via audio here today. So thanks again, Rob. Thanks, listeners for tuning in. And until next time for Hilco Global, I'm Steve Katz.