Concurrent market flashpoints, such as climate change, economic deterioration and societal shocks, have an amplified negative effect on consumption due to their interrelated nature. The efforts to understand the impact of multiple and interlinked disturbances and finding growth in the VUCA (volatile, uncertain, complex, ambiguous) environment bring the corporate sector into a loss. Navigating through the new polycrisis reality means drawing lessons from past errors, proactively anticipating future challenges, fostering consumer trust, and adopting a thoughtful approach to communication.
The new reality is volatile and unpredictable
According to the World Economic Forum, more than 30 independent yet interacting flashpoints drive change in consumer markets in 2023. Economic deterioration, especially the cost-of-living crisis, is the most abrupt and stressful issue. Yet, geopolitical conflicts, including the war in Ukraine and ongoing turmoil in Middle Eastern countries, coupled with climate crises in Pakistan, India and Bangladesh, are massive drivers too, amplifying inequality, facilitating mass migration and spreading negative consumer sentiment. Their interrelatedness requires complex solutions. Below are our top five recommendations for growth in the VUCA environment.
Note: The list above is not exhaustive
1. Monitor the volatility
To better navigate the complexities of polycrisis, businesses need to proactively anticipate, assess, and address the multiple flashpoints, their drivers and consequences. For instance, while growing indebtedness is an alarming issue on its own, it is also highly influenced by inflation, economic climate and central banks' policies, which might change at least quarterly. Additionally, growing indebtedness feeds into the consumption squeeze, slows property market growth and reinforces income inequality. Often, financial insecurity is not limited to specific age, ethnicity or even income levels.
Nearly 1 in 10 of higher income earning consumers have fallen behind on rent/mortgage payments in 2023
Source: Euromonitor International Voice of the Consumer: Lifestyles Survey 2023, n=40,691
Only by continuously monitoring and evaluating the risks and creating (and updating) contingency plans will companies feel secure enough to mitigate potential disruptions in the VUCA environment.
2. Be transparent and clear
Structured and multilayered risk assessment and comprehensive scenario planning address the tangible areas of the business, such as supply chain risks and financial resilience. Yet, intangible aspects, such as proactive and clear crisis communication in VUCA should not be underestimated. Developing clear and transparent communication strategies for internal and external stakeholders and keeping all parties informed about the organisation's actions and strategy during times of uncertainty transmits the leadership's credibility and reliability.
3. Learn from past mistakes
Mistakes are costly; repeated mistakes are even more expensive. Hence, learning lessons and adapting to the post-pandemic reality means preparing for future turbulences. Embracing the omnichannel approach for a seamless customer journey, securing presence in the digital realm, incorporating health and wellness traits in the offering, and introducing multidimensional responsibility are the top lessons learned from past pandemics. In fact, health and sustainability are the bulletproof areas for companies to think of when considering the product portfolio's specific traits. More than half (55%) of global consumers surveyed by Euromonitor International’s Voice of the Consumer: Lifestyles Survey in 2023 said they feel they can make an environmental and social difference with their choices and actions.
4. Adopt a consumer-centric approach
More than 80% of professionals said their company incorporates assessments of consumer trends into strategy planning and innovation
Source: Euromonitor International’s Voice of the Industry: Innovation and Lifestyles Survey 2023
Staying closely connected with the customers and understanding their changing needs and preferences leads to thoroughly adapting the product portfolio.
The consumer-centric approach means catering to the needs and wants of the consumer and creating a seamless consumer experience. Adopting an omnichannel approach, ensuring convenient and wide-reaching delivery options and empowering consumers to tell their story through the company's brands positions a company as an ally and reinforces loyalty.
5. Balance vision with adaptive flexibility
Maintaining a long-term perspective and avoiding making hasty decisions solely based on short-term fluctuations is important in VUCA. However, innovation and opportunities seldom happen as expected. Hence, it is essential to prioritise, streamline and save some space for the unexpected.
For example, by streamlining the product portfolio, the company can strengthen its operations, give a stronger value offer to clients and act on the growth opportunities. According to the Euromonitor International Voice of the Industry: Innovation and Lifestyle Survey in 2023, improving the existing product or service portfolio to increase share in existing categories and use occasions is the primary route to growth for 63% of professional respondents.
Learn more about consumer market flashpoints and how they interact in our report, Consumer Market Flashpoints: Between Uncertainty and Opportunity, to stay ahead and unlock the potential in volatile times.