Adversities fuel innovation. The biggest leaps in our advancement as a species have been driven by adversities. The world of brand building is no different.
If this ongoing pandemic is considered to be an adversity as big as the Spanish Flu, the two World Wars, the Great Depression of the 1930s and the Great Recession between 2007–2009, then it is important to measure the nature of innovation it is driving. But alas, we are not witnessing the significant leaps in advancement as we have seen in the past. We are being waylaid by false trends, temporary changes in human behaviour and mindless prophecies.
We are now close to a year into the pandemic and business media is awash with news and opinions on how consumerism and the way we engage with brands has fundamentally changed. I strongly disagree as there is no strong evidence. Moving to forced WFH conditions, depending on online retail during lockdowns and changing our daily work and leisure routines may have caused blips in our behaviour, but we have not transformed as a species.
As I write this, the high clinic trial success rates of the Moderna and Pfizer vaccines have already driven down the stock prices of the likes of Zoom and Peloton (even though public availability of the vaccine is still many months away and half of the world may not be able to afford them). Our coverage and definitions of transformation of consumerism are also quite vague and skewed — no one talks about how Africa is coping through the crisis and how consumerism has changed there. I do read a lot about the fintech revolution sweeping through the continent.
The Twitter-verse reported that McKinsey & Company (unofficially) is expecting its profits to increase by 12–14% due to savings from almost zero client travel. Like every other consulting firm, they will be the first to travel the moment restrictions are off and everyone is vaccinated. Some more food for thought below:
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Here is a summary of what is really happening:
The challenges engulfing the physical retail sector were not caused by the pandemic. In reality, we cannot even blame Amazon for the sector’s malaise. The rapid development of online retail gave consumers a powerful weapon to exercise — “the convenience of buying whatever whenever”. Leaving aside the unorganised and generic segment, even the branded segment of physical retail had lost any form of differentiation long back. If you take this powerful combination of “lack of differentiation” with “online buying convenience”, and hand it to the consumer, any physical retail segment would have been in trouble. The quote below from GlobalData sums this up well:
"With the demise of the weakest operators, many of whom were already heading towards a long slow demise, the pandemic has proved the catalyst that has accelerated that process. This helps the survivors because it takes out the overcapacity in the market, concentrating spend onto fewer players.”
But there are notable exceptions, which capture the real impact of the pandemic. Any brand with a reasonable level of differentiation, with investment in online selling capabilities, has benefited. These brands (unless they are digitally-native), are best placed to reap the benefits of physical store re-opening combined with enhanced e-commerce models. In the restaurants sector, those who already had differentiation have adopted innovative business models (like meal kit delivery) to tide over lockdown restrictions.
Let’s not kid ourselves by thinking that the job losses, administrative buyouts and fire sales of the likes of Pizza Express, Byron Burger, Frankie & Benny, Upper Crust, Jamie’s Italian, Carluccio’s etc. were caused by the pandemic. Lack of brand and offer differentiation, diminishing price-value equation, average eating out experience and overcapacity had already caused spiralling debt and structural problems for these brands long back. Again, the pandemic just accelerated the inevitable.
This is true across sectors — restaurants, fast food chains, fashion and apparel, discount and even mid-sized supermarket chains. The overcapacity has not even spared retailers with deep pockets like Tesco, Sainsbury’s and Waitrose & Partners. M&S woes with its clothing business is a saga that has its roots before the pandemic.
I started this piece with a reference to innovation. Undeniably, the pandemic has accelerated innovation, but it is questionable how much of it is actually transformative and how much is just around the edges. For example — bundling multiple services under a single delivery platform is not innovation. It is about expanding the range of services available and giving retailers with different products a channel to overcome lockdown restrictions. The availability of grocery delivery from Aldi, Co-Op and Waitrose on Deliveroo is one such trend, but it is not new.
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This was before the pandemic hit India:
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I would beg to disagree that the pace of category-level innovation has increased during the pandemic. We now have a heightened sense of awareness about hygiene and cleanliness. This has spurned the creation of some new categories, but in reality they are meeting our (temporary) expanded set of needs. An example of this are fruit and vegetable cleaners.
We continually keep on giving the pandemic false points for spurring innovation. Indoor air purifiers as a category grew because of the increase in air pollution in most urban cities across the world. More recently, AkzoNobel (the makers of Dulux) have launched a Dulux paint, which purifies the internal air of rooms. This is important keeping in mind the fact that there is no scientific / medical / epidemiological evidence that COVID-19 lingers in the air (otherwise billions would have died by now).
By nature, we tend to look and analyse things collectively. This precise human behaviour allows brand builders to create and market products and solutions as bundles (or natural extensions). Consequently, fruit and vegetable cleaners and air purifiers become part of product bundles that contain hand sanitisers, hand washes and disinfectants.
We still have not found any completely new ways of doing things. For example, online retail or e-commerce in general has reached the zenith of innovation. The platform cannot innovate anymore, but what we sell on it can continue to do so forever. The sheer commoditisation of some categories (driven by Amazon) brings out the stark truth that there was never any real point of differentiation (but only perceived ones).
Differentiated (old model) or distinctive (new model) brands survive and thrive during pandemics or other kinds of adversities. At the time of writing this, Dunkin’ was bought by Inspire Brands for $11.3 billion, which was a 20% premium over its closing stock price end-October 2020. More recently, the sovereign wealth fund PIF invested $1.3 billion in Reliance Retail for a 2.04% equity stake. Between both these brands, there are thousands of physical stores in operation.
Let’s spare ourselves the “pandemic-induced consumer behaviour” nonsense and focus on the real change in business models, marketing & distribution and brand building that are happening.