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Next in consumer markets 2023
Poised for growth, despite economic uncertainty
Consumer-facing companies saw their prospects for growth buffeted by geopolitical and macroeconomic crosswinds in 2022. Leaders are still watching those conditions closely as they advance into 2023.
Some of the uncertainty that clouded business operations over the past year is dissipating. Tax policy is coming into clearer focus with more certainty about the political makeup of Congress. Inflation could be easing, although consumer markets (CM) leaders remain concerned about a decline in consumer purchasing power.
Will the next six months bring an economic recession, as the majority of CM leaders expect? That remains to be seen. Despite this and other areas of uncertainty, some trends within the sector are evident.
In 2023, we can likely expect significant disruptive forces — which have been afoot for a while now — to continue to transform the industry, from environmental and technological advances to social and human capital developments. Rather than cede control to external economic forces, CM companies are well-positioned to help steer the future of the industry in the year ahead — and beyond.
Pivotal trends in 2023 will fall into these categories:
- Sustain growth with cost transformation
- Shore up core capabilities with the right deals
- Unlock the combined power of cloud and data analytics
- Outperform on customer experience
- Deploy ESG strategy as a growth opportunity
- Plan for tax and business risk
Sustain growth with cost transformation
Caught between fluctuating customer demand and rising costs for materials, labor, transportation and capital, CM companies will likely need to realize sustainable margins while balancing near-term and foundational improvements. This balance is crucial to help maintain growth over the long term, the ultimate goal.
A proactive pricing strategy takes into account both the broader economic environment and the effect of raised prices on customer loyalty. Beyond pricing, boosting supply chain resilience can help manage costs, as can shedding underperforming assets to free up capital for reinvestment in high-growth segments. Meanwhile, digital transformation efforts can deliver both near-term operating efficiencies and long-term top-line growth.
Why it matters
You can take cost-structure action now to help create breathing room to reinvest in improved capabilities throughout 2023, especially in technology and analysis. Doing this enables CM companies to reach their most valuable customers with the products those customers want — in the channels they prefer. The outcome? Improved margins from both higher revenues and lower costs.
Shore up core capabilities with the right deals
Areas central to dealmaking in recent years will continue to guide action for CM companies. Rising workforce costs are driving investments in tech and automation. And the retreat from globalization has leaders derisking their supply chains by increasing vertical integration and acquiring key suppliers.
Pandemic growth areas, meanwhile, can face significant headwinds, leading to portfolio reassessment and consolidation. Expect distressed M&A or restructuring in the coming months as well.
As you fill gaps in your overall portfolio with strategic acquisitions, continue the assessment for products (within your own portfolio) — or participation in certain categories — that don’t support your core capabilities. These slow-growing offerings that aren’t a natural fit are ripe for divestiture, which can allow you to focus on a leaner, more cohesive growth portfolio.
Why it matters
After a record-setting 2021, dealmakers spent much of 2022 adapting to a landscape reshaped by inflationary pressures, geopolitical tensions and supply chain disruptions. Shoring up your capabilities and sleuthing out future growth through M&A in 2023 will likely require a strategic reset and renewed focus on core capabilities.
Unlock the combined power of cloud and data analytics
The pandemic-induced acceleration of technology ecosystems powered by cloud and data analytics can offer a world of new possibilities. CM companies can combine cloud transformation with advanced data analytics and AI to help expand omnichannel reach and cultivate brand loyalty in 2023 and beyond.
By gathering and analyzing internal and external data sources for audience management, personalization and real-time decision-making, you can pivot with agility in response to changes in the economic landscape.
Yet, this potential remains largely unrealized so far. The top two reported barriers, according to PwC analysis, are a lack of clarity on organizational responsibilities and the lack of tech talent. Other obstacles can include governance, value measurement and stakeholder engagement.
A unified executive team supported by tech talent, new metrics, governance and organizational structures can deploy cloud and digital technology to help drive consistent innovation and bottom-line growth.
Why it matters
Digital transformation is cost effective at managing operations, limiting risk, increasing supply chain visibility and enhancing customer experience across a variety of channels. It has proven to be reliable in driving growth, improving efficiency and supporting environmental, social and governance (ESG) initiatives.
Outperform on customer experience
Despite pandemic-accelerated investment in new technologies — such as contactless payment and curbside pickup with shopping or digital check-in at hotels and airlines — consumers are often less brand-loyal than ever before.
Ever since pandemic-induced shortages forced them to change their habits or try new brands in 2020, they continue to be more open to doing so — particularly when companies are not delivering the personalized experiences they seek.
How can CM companies respond in 2023? By delivering the human touch. Experience in essence is the emotional connection your customers have when interacting with your brand across your purchasing life cycle, not least of which is the interaction with your employees.
Why it matters
Thanks to the proliferation of social media, consumers — especially younger cohorts — are acutely aware of the breadth of their options. To inspire their trust and loyalty in 2023 and beyond, deliver seamless one-on-one experiences that transition effortlessly from mobile to online to in-person. For airlines and hotels, this means communicating changes clearly, frequently and consistently while being attentive to feedback.
Deploy ESG strategy as a growth opportunity
CM companies have embedded ESG elements into their businesses for several years now; however, their approach has typically been siloed, in response to specific issues. Now, stakeholders are increasingly demanding a more holistic ESG blueprint.
The Securities and Exchange Commission’s (SEC’s) proposed climate disclosure rules have added new urgency, as CM companies prepare to monitor and report climate-related metrics.
Your company’s purpose and values should be the foundation of an ESG strategy that helps transform values into action in 2023 and beyond. Craft an ESG narrative distinctive to your company, then back it up with credible data. Prioritize granular, reliable, high-quality data that can provide a holistic picture of your value chain.
Why it matters
Your ESG strategy offers an opportunity to create value for stakeholders that redounds to your benefit. Consumers, especially younger consumers, have told us repeatedly that they want to hear your ESG story. And they have illustrated that they will be loyal to companies whose values align with their own.
Plan for tax and business risk
While planning for a range of tax and business risks in 2023, consider potential actions in the context of broader macroeconomic conditions and the latest business trends — including ongoing supply chain disruptions, evolving ESG expectations, increasing cost pressure in light of a potential recession and wide-spread digital transformation efforts across the industry.
Combine contextual awareness with a data-driven and technology-enabled approach to help navigate ever-changing tax and regulatory conditions. This might mean assessing the tax repercussions of enterprise-wide technology modernizations and digital transformation initiatives, new forms of ESG value creation or available tax incentives applicable to supply chain changes, all of which may require companies to rethink their global operating models in an effort to achieve more efficiencies.
The same logic applies to the broader risk landscape, from cybersecurity threats — which CM leaders told us they expect to see more frequently in 2023 — to privacy and financial risk.
Why it matters
To help attain more targeted visibility and decision-making capacity, companies should have a framework oriented toward risk mitigation and incident response, supported by tax-sensitized data and insights. Incorporating this type of framework into the strategic planning process can result in greater agility and resilience, despite uncertainty and complexity.
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