Tracking the latest changes in the consumer landscape

The changing fall scenery and rapid approach of Black Friday are useful reminders to check in on the latest developments in another vibrant realm – the consumer landscape. How are consumer preferences and expectations evolving? A report from McKinsey paints a colorful picture, with important implications on retail sales taxes and related compliance strategies.

Based on a survey of 15,000 consumers in 18 global markets, McKinsey’s research delivers some unexpected insights:

• Middle-income consumers globally are experiencing economic pressure, but they’re still willing to “splurge” on discretionary items at a rate similar to that of high-income consumers.  
• Sustainability claims are an important consideration for buyers; however, younger consumers are now less willing to pay a premium for products that make such claims.  
• Social commerce – the use of social media to purchase online – is currently more popular among consumers in China, India and other emerging markets than among consumers in Europe and the United States. However, McKinsey expects social commerce in the U.S. to expand to $145 billion by 2027, up from $67 billion today.

McKinsey condenses its insights into four recommendations that make sense for retailers to consider:  

1. Develop a more granular understanding of your customers: Retailers can leverage Generative AI to develop more detailed insights into customer preferences and behaviors in order to offer more personalized experiences. They can identify and target microsegments of the customer base – for example, young people in emerging markets or high-income retired customers – that will likely respond well to marketing outreach.
2. Look into creating products for the consumer wellness space: Companies should look for ways to extend their offerings, if possible, to capitalize on opportunities in the rapidly expanding personal wellness market. Producers of data- and science-backed health and wellness solutions are experiencing strong demand.
3. Lean in to social commerce: Strive to interact with customers on a wide variety of channels and platforms. Consider innovative approaches to social commerce. For example, some retailers are engaging consumers at the local level by mobilizing local opinion leaders, creating viral campaigns and leveraging private chat platforms.
4. Strengthen brand loyalty with premium products: Identify product categories that can be adjusted or extended to encourage “splurge” activity. Consider integrating loyalty and pricing strategies and implementing pricing tiers to improve brand adherence.

In each of these areas, advanced data analysis and tax technologies play a crucial role. As I’ve pointed out, omnichannel marketing is quickly evolving to leverage AI and analytics, as well as the full power of edge computing to provide tax calculation endpoints close to where they’re needed. An edge-enabled tax engine can support that experience with unified tax configuration and compliance capabilities.

These innovations enable retailers to move beyond siloed customer engagement strategies and deliver a seamless customer experience that includes fast, accurate tax calculations. With that in mind, this fall is a good time to review your data analytics and tax technology stack while exploring ways to attract and retain the consumer of the future.