BearingPoint as the partner of the ESCP “Retailing 4.0" Chair is committed to contributing to building bridges between the academic world and companies. As part of this engagement, the BearingPoint Retail, Luxury and CPG team mentored the writing of a series of articles of ESCP MSc students and shared insights on major retail stakes. Enjoy your reading !
What strategies for retailer facing more responsible and locavore consumers? (Part 3)
Sustainability, traceability, brand image, these 3 pillars are driving the market through a new era where customers have the last word and where companies need to adapt.
With the arrival of the Internet, smartphones and the globalization, information has become accessible from everyone at every time. Customers know how company A is behaving and are now willing to switch to brand B if they do not like what they found out about A. The increase in competition allows them to switch to a similar product easily without any sacrifice or effort.
An IBM study pointed out that 1/3 of consumers are willing to stop buying from a company if they lose trust in it and 56% of consumers are willing to pay 35% more for sustainable brands. Moreover, while 34% of consumers agreed that they would switch brands to get more information about food in 2016, 75% of them still agreed on the same fact in 2018 (IFIC, 2019). These numbers clearly display the reality and the threats and opportunities of this new environment.
Customers are looking for companies that share their own values; and companies are struggling to find causes and values to stand for but sometimes it is not that easy. There is a clear and huge gap between companies’ actions, publics image and customer trust, especially regarding big companies. Since consumers’ needs and (environmental) concerns are growing, it has become more difficult for companies to find causes and value to stand for.
There are several ways to gain back consumers trust and support. The main tools that big companies are adopting is involving the customer more in their processes and internal functions. Deeply understanding customers’ needs and constantly evaluating internal decision based on this would on one hand help the brand to make more well-founded decisions, and on the other hand increase the sense of reliability and transparency perceived by the customer.
Some brands are building trust through their active social media presence, enabling the consumer to be engaged with the brand and communicate with it, while others get the final customer involved through loyalty programs and consumers reviews. Below are two examples of how to involve customers in the company and gain transparency.
MacDonald’s: Question and Answer campaign. Customers were allowed to ask questions about the traceability of their products or any other question they care about.
McDonald Question and answer campaign "Our food, Your questions", source: company Website, 2019
Unilever publicly revealing their suppliers and mills source from. In 2018 Unilever recognized the need to gain customer trust and came up with this project.
Unilever publishing its internal information, source: Unilever, 2018
Obviously within this context there are threats for some companies: 44% of UK adults consumers are concern about plastic environmental issues and for that reason limited their consumption of plastic bottled water (Plastic bottled water companies (Mintel trend report, 2018)), and opportunities for others: 49% of UK customers would be interested in buying fashion items made wholly/partially with recycled plastic (Fashion brands (Mintel trend report, 2018)).
Conceptual model for the integration of sustainability into business practices, source: Scielo, 2012.
The key to success in such a dynamic and complex environment is forecasting the evolution of critical trends and adapting to changes. It is essential to integrate sustainability in every aspect of the company. CSR is no longer a marketing gimmick, customers are informed and responsible, it is not enough to speak about values, it is essential to really integrate those values in the process and backbone of the company. The above diagram facilitates integration of sustainability and social responsibility into business practices. It identifies a group of institutional factors that serve as drivers or facilitators of such integration and helps identify the importance of involving all the aspects of the company in introducing sustainable and CSR principles.
Corporations that used those values just as a bait to capture customers had been all unmasked and have all lost customer trust and support (1/3 of consumers are willing to stop buying from a company if they lose trust in it).
2012 KFC: Greenpeace moved against KFC because there were traces of mixed tropical hardwood fiber (MTH) found in KFC’s drink cups, food boxes, napkins, and chicken buckets. The fiber comes from Asia Pulp & Paper, a paper products giant that continues to rely on conversion of Indonesian rainforests for pulp and paper production. “KFC is the latest big brand to be caught trashing rainforests and pushing endangered animals, like the Sumatran tiger, towards extinction,” said Bustar Maitar, head of Greenpeace’s Indonesia campaign, in a press release. (Mongabay, 2012)
Greenpeace claims against KFC, source: Greenpeace, 2012
2020 KFC: commits to sustainable packaging globally. The chain plans to make all plastic consumer packaging recoverable or reusable by 2025. KFC of Plano, Texas, has recently announced a new global sustainability commitment that all plastic-based, consumer-facing packaging will be recoverable or reusable by 2025. KFC said it was introducing new policies for all paper and wood fibre used in its packaging. KFC did not confirm to PN whether it had changed its packaging policy due to Greenpeace’s campaign. However, it has committed supplying its packaging only from suppliers who source paper and pulp products from well-managed sustainable sources, and says it is using a supplier database that includes testing of fibers and surveillance to ensure standards are met (packagingnews, 2012)
Companies behavior and responsibility report, source: European Management Journal, 2018
The matrix shows those “big brands” or their relative supply chain partners that violated CSR principles and dealt with the relative consequences. Gaining customer trust is hard, but gaining it back once you betrayed their values is much harder and requires much more money. Sustainability, traceability and generally CSR lead to a better brand image, and a better brand image in return leads to a larger market share. In this complex context company A can, be eaten by company B extremely fast. Avoiding being in this situation is a matter of comprehension and adaptation to customer needs and expectations in a true and transparent way.
Conclusion
Although the “end all be all” is not the solution to sustainability, Locavorism was and still is an important part of what each individual can do to be more sustainable. But now it’s the retailers turn to take action swiftly and leverage the vast technological possibilities that are arising to enable “Locavorism 2.0" and bring it into the digital era to match customer’s needs.
Retailers now have the choice: By increasingly focusing on this through traceability, waste reduction and CRM measures, they can either regain and strengthen trust with their customer base and therefore set themselves up for future success - or they can stay stagnant, fall behind and eventually be abandoned.
Either way, they will now be held accountable more than ever. So, what would you do?
Authors : Bettina Devines Guedes , Faustine Samyn, Sebastian-Alexandre Demel, Divya Dhirwani, Jeanne Guenier, Roberta Poccafassi and Andrea Scucchia
Key references
- Food and Agriculture Organisation of the United Nations, (2019). Food loss and food waste, FAO of the UN Online. Retrieved from: http://www.fao.org/food-loss-and-food-waste/en/
- Nunes, Mauro Fracarolli., (2018), Supply Chain Contamination: An Exploratory Approach on the Collateral Effects of Negative Corporate Events. European Management Journal, vol. 36, no. 4., Aug. 2018, Retrieved from: https://www.sciencedirect.com/science/article/abs/pii/S0263237317301172#fig3
- Mintel, (2018). Europe Consumer Trends 2018, Retrieved from: https://reports.mintel.com/static/trends/documents/European_Consumer_Trends.pdf
- Packaging News, (2012). KFC latest to drop APP, Greenpeace claims. Retrieved from https://www.packagingnews.co.uk/news/kfc-is-latest-to-drop-app-greenpeace-claims-31-10-2012
- Butler, R., (2020). KFC Linked To Destruction Of Indonesia’S Rainforests, Mongabay Environmental News. Retrieved from: https://news.mongabay.com/2012/05/kfc-linked-to-destruction-of-indonesias-rainforests/
- Petrini, Maira, and Marlei Pozzebon, (2010). Integrating Sustainability into Business Practices: Learning from Brazilian Firms., BAR - Brazilian Administration Review, vol. 7, no. 4, Dec. 2010. Retrieved from:https://www.scielo.br/scielo.php?script=sci_arttext&pid=S1807-76922010000400004