It’s March 2021 and we are now a year into a pandemic that wasn’t supposed to last more than a few weeks. To put it lightly, the impact of COVID-19 hit the business world like a ton of bricks. Restaurants and other businesses had to make difficult decisions, including lay-offs, budget cuts, and more to stay afloat, and many realized they did not have the capital needed to propel their business forward. Other businesses experienced the rollercoaster of short-lived spikes in sales due to pandemic hoarding, followed by a slow-down in consumer demand as individuals and families were extending the time between shopping trips and no longer casually perusing grocery aisles, but rather methodically planning their grocery lists to make trips to the store as brief as possible. The world of funding was also flipped on its head, as in-person meetings quickly pivoted to Zoom calls and emails, and investors were much more cautious with their capital.
However, many found opportunities during an immensely difficult year and figured out how to adapt and grow with the circumstances. As the light at the end of the pandemic tunnel is approaching, read on to learn about key areas of business that are forever changed.
Attracting Investment
In the past year, we have all spent more hours on screens than we would care to admit. With social distancing in place, streaming TV shows, Zoom calls, ordering groceries online, and turning to social media as a main source of entertainment have skyrocketed. The impact? In 2021 and beyond, a brand must be digital-first to be relevant and discoverable. In speaking with Jon Sebastiani, Founder and CEO of Sonoma Brands and Founder of KRAVE Jerky, he shared that having a strong digital presence has always been a factor in his investment strategy, as evident in the Sonoma Brands portfolio of companies, including Hu Products, Hum Nutrition, Milk Bar, and more. But now, it is non-negotiable. Sebastiani shared, “Digital presence has always been of paramount importance for brand building and the pandemic only accelerated the logistical avenues of how consumers attain their brands. Whether a consumer is finding your product on Amazon, Thrive Market, Target.com, or through curbside pick-up at their local retailer, the digital requirement of brands is here to stay.”
Per Sebastiani, consumers have always made emotional decisions, whether that comes to price, sustainability, better-for-you options, and more, but the next wave of brand building will be the concept of connectivity and providing a sense of belonging to consumers through your brand. For example, Milk Bar has tapped into the overwhelming growth of baking together, in-person or via YouTube or Instagram Live, by creating great daily content that educates and entertains, with human connectivity as the thread as users engage with Christina Tosi and the brand. “This content, similar to a small cable network specific to your brand’s community, provides a daily way for consumers to interact with your brand, in turn making them more engaged and brand loyal. You know magic when you see it and as we look towards the evolution of building businesses and attracting funding in 2021, consumers and investors alike are looking for that magic and know a brand will win if they lead with human connectivity through content, entertainment, and education,” he added.
The magic of brand-building that generates excitement from investors and consumers alike is the “it” factor and through a digital-first lens, in spite of the pandemic, brands have made consumers feel more connected to their ethos and platform than ever before. Content, however, is only one piece of the pie. Utility and building brands that fit into the “new normal” is another. Especially within the CPG space, brands must keep health and wellness and healthy habits developed during the pandemic in-mind to continue to be relevant to their consumers.
Cambridge Companies SPG’s investment strategy across food, beverage, lifestyle, and tech companies including Carbon38, Owl’s Brew, Matchabar, and more, was already focused on a belief that products with a strong health proposition would hold firm and continued bullishness among consumers and investors in 2021 and beyond due to changes in consumer habits is notable. Filipp Chebotarev, Chief Operating Officer and General Partner, and Polina Chebotareva, Vice President and General Partner of Cambridge Companies SPG, shared, “The pandemic and subsequent shutdowns altered the brand discovery process, causing the VC community to be more cautious, and certain categories and deals to be significantly disrupted. Nonetheless, there were still deals to be made for sound businesses with strong underlying unit economics. Well-run businesses fared well during this time, especially those rooted in health, wellness, and immunity. With this global public-health event, consumers took stock of their own health and have made decisions to commit to wellness that they will not be going back on. This is a generational trend, in our opinion, and brands already committed to this space, such as Vive Organic, Lifeaid Beverage Co, and Tiesta Tea saw impressive growth this past year, and will continue to thrive.”
Dining Out/In
It’s no secret that the restaurant industry has been one of the hardest hit by the COVID-19 pandemic. The National Restaurant Association estimates that compared to pre-pandemic levels, restaurant employment is down approximately 2.5 million jobs and the industry itself lost more than $240 billion in sales last year. Establishments across the United States had to immediately figure out ways to adapt so they could safely continue to serve customers. Now that the vaccine is rolling out and restrictions are starting to loosen up in many areas, the next several months ahead are poised for rapid recovery of the restaurant industry.
Pent-up consumer demand is still high, and people are eager to return to restaurants as they are a vital part of our social fabric. In fact, 6 out of 10 adults in the United States say that dining out is an essential part of their day-to-day lives, and nearly 85% of adults prefer dining out with family and friends and say it’s a better way to spend their free time than cooking + cleaning at home… something that we’ve all experienced a LOT of burnout from over the past year. As more adults become vaccinated, restrictions are eased and spring weather hits, restaurants are likely to see a surge in consumers excitedly walking through their doors.
However, take-out will not be going away anytime soon. Because of the state and local regulations tied to the pandemic, restaurant operators were required to make changes to streamline or enhance off-premise and contactless capabilities. The result? Greater efficiency from rapid development and implementation of technology will continue to keep restaurants afloat as consumers ease into dining in. Those who seamlessly ordered from you during the pandemic are likely going to be the same consumers who return to support you in-person once they’re comfortable dining out so it’s crucial not to assume restaurants will be backing away from delivery. Takeout and delivery have become a part of consumers’ everyday routines, with nearly 70% of people being more likely to get takeout than prior to the pandemic. Additionally, more than 50% have stated that takeout and delivery have become essential to the way they live.
At the end of the day, restaurants are a major cornerstone of communities across the United States as a place to connect with family and friends, and more than half of adults have said that dining out is a key element of their lifestyle. As such, the industry is certainly well-positioned for tremendous recovery as the year progresses. Research shows a very strong desire by consumers to enjoy in-restaurant dining more than they’ve been able to during the last 12 months. As more of the population receives the COVID-19 vaccination and we get closer to herd immunity, it will allow more social occasions to return to restaurants.
Growing Importance of E-Commerce
Grappling with the day-to-day of being a marketer has been made increasingly complicated over the past year as businesses have had to fortify their digital offerings while preserving what budget they can for the uncertainty of what may come back into play in the future. The dramatic shift, encompassing a decade of growth in the first few months of the pandemic, made it a priority to focus on building communities and converting customers online in ways that most companies had not considered. As marketers quickly discovered, it has not been a matter of simply making your product available on your website or a third-party vendor. Success requires building more than one-off transactions and involves a commitment to building experiences for customers.
What has changed? The specifics of the shift from offline to online are complex, but ultimately boil down to a few points:
- Online is now driving sales even for large retailers, and Target, for example, has come out ahead by making fulfillment its strong suit so it can compete with Amazon in creating seamless customer experiences from consideration to purchase to return.
- Older audiences have also moved online, and brands must take them into account when developing customer journeys.
- According to data from Shopify, 84% of all consumers are purchasing products online, including 150 million people who are shopping online for the first time, making e-shopper share increasingly competitive.
- Products that were rarely bought online are now relying on e-commerce and many of these new competitors were completely caught unprepared, giving an edge to online native companies that had the foresight to prioritize immersive online experiences.
What have we learned?
- First and foremost, all brands looking to make e-commerce a stable source of revenue need an intuitive digital experience across all channels and devices. You must unify customer segmentation and product data to create customized experiences that deliver on convenience, speed, and general satisfaction. You need to keep in mind that customers are comparing you not with your competitors but with their last great online shopping experience. The entire customer journey must be seamless and personalized from content on social media to e-mails to mobile apps to ads to the purchase transaction.
- Marketers cannot afford to think this will soon end and go back to normal. There will be no backward progression and it is crucial to invest in building a website and mobile shopping experience that is responsive, meaning no matter what device you are on it will be consistent and designed to load instantly, even if the user is offline.
- Conversion cannot be optimized if it is not crystal-clear from the consideration stage that shipping is free. Keep in mind your customer is often making comparisons to the experience on Amazon Prime where shipping is free… and fast. Free same-day, next-day, or two-day delivery have become expectations thanks to the behemoth’s established benchmarks.
- As part of their commitment to customer relationships, brands must consider what is important to their target audience and what will influence their purchasing decisions For example, we know consumers are more likely to buy brands set up for zero-waste or minimalistic packaging, and when a social media influencer shares an unboxing of that product, you have even more guarantees that purchase decisions will move quickly.
- One last thing to consider is that return behaviors have adapted. The expectation is that a customer can purchase multiple versions of a product with the full intention of returning what they don’t want conveniently (sometimes in person) and at no cost.
Also notable as we look ahead, is the challenge of customer retention and acquisition being impacted by scrutiny over privacy – digital ads are too intrusive, google and apple are making it harder to target ads – so it will be important for marketers to think about structuring the online experience when they can no longer rely on IDFA and third-party cookies (Google recently announced they are phasing out cookies for Chrome browser in 2022) to reach their customer effectively. It is essential to prioritize loyalty programming and engaging the existing customer base in a way that feels personal and seamless enough they enable them to make immediate and multiple purchases.
A Final Lesson: Always Be Prepared
Sheryl O’Loughlin, co-founder and co-chair of Women on Boards Project, former CEO of REBBL Inc. and Clif Bar, and co-founder of Plum Organics, has vast experience in brand-building as a leader and a board member for many of the industry’s leading companies and believes an important lesson we must take forward into the future is to always be prepared for the unexpected. O’Loughlin shares, “I remember naively thinking at the beginning of the pandemic that it would just be a short-term challenge to get through, and then we would all move on to the next hill to climb. Now, one year later, COVID-19 has forever changed the way business gets done and has changed the entire landscape. Importantly, although it’s been so horribly painful for so many leaders, it has also shaped us in ways that hopefully have helped us to become more nimble, flexible, and resilient — and better at leading our companies.”
According to O’Loughlin, many leaders are now keeping the long-game in mind, but are planning in much more frequent and shorter-term chunks of time to be able to adjust and pivot as they learn. She believes the vision for a company is still critical, but how you get there can be more fluid and flexible. “I recently spoke with several leaders who thought they would be fine to get by with the cash they had when COVID hit. They even felt cash-rich for a bit as they experienced a COVID bump in sales, but even that changed as the COVID hoarding of products slowed. They now realize they are in desperate need of cash,” she shared. As a business leader, you must always plan for needing more cash than you ever think you will need—both to take advantage of opportunities in good times and to be prepared when times get tough. You don’t want to have to find cash when you are in a dire state because your options will be limited and you may have to make choices that don’t ultimately serve your vision.
From the insights above, it’s clear that the brands that have been able to adapt to meet consumer needs and lead with a digital-first mentality are the ones in the best position today, and it’s not too late to take these lessons into the months ahead as we come out of the pandemic winter. Need some help reaching your ideal customer and building great digital experiences? Reach out to us at info@konnectagency.com.