The Business Development Bank of Canada (BDC) has come out with a report this morning urging entrepreneurs and startups to consider five new consumer trends that should taken into account while growing their businesses.
According to the BDC, the trends will have a “permanent impact” on Canadians’ buying habits and create growth opportunities for small and medium-sized enterprises (SMEs).
They are:
1. The changed path of consumer purchasing, or the impact of the internet
2. The new “health mania”, or rising health awareness
3. The “Made in Canada” advantage, or the buy-local movement
4. Customization is king, or mass customization of goods
5. The lingering effects of the recession, or frugality
“These consumer trends have created rich business opportunities, which entrepreneurs must seize on if they want to grow their businesses,” said Pierre Cléroux, Chief Economist, BDC.
Apparently the trends come as a result of “three major phenomena” that are profoundly altering Canada’s commercial landscape: advances in technology, changing demographics and the 2007-08 recession.
The five trends are detailed here, and the report was particularly scathing of Canada when it came to the first trend, the buy-local movement.
The changed path of consumer purchasing: the Canadian online retail presence remains largely underdeveloped and, as a result, e-commerce has lagged behind that of most other nations, with some of the lowest penetration levels in the developed world. A simple Web presence is no longer enough. A structured, proactive and tailored multi-platform strategy has become critical in today’s business environment, and the underdeveloped online Canadian retail presence offers substantial opportunities for SMEs. Those that move quickly to adapt their business models and embrace these changes can make the most of this new reality.
The new “health mania”: health concerns are rising and health awareness is growing among Canadian consumers and will continue to accelerate as the population ages, with 25% of the population over the age of 65 by 2031. The demand for health and wellness-related products is increasing rapidly, and 31% of Canadian consumers are willing to pay a premium for health enhancing products. Companies that can adapt their products to these growing health concerns are likely to generate positive reactions from customers and position themselves favourably in the marketplace.
The “Made in Canada” advantage: a majority of Canadians now make an effort to buy local or Canadian-made products and some are willing to pay a premium. SMEs should highlight the local characteristics of their products. Even if not made locally, SMEs should emphasize other local features of the value chain, such as R&D, product design or product assembly.
Of all the consumer trends, the buy-local movement has been the most powerful. Close to two-thirds of Canadians say they have made an effort to buy local or Canadian-made products in the past year, and two in five consider local production an important factor in their buying decision.
“The ‘Made in Canada’ brand is powerful because Canadians have clear understanding of what buying locally made products means to the national economy,” said Cléroux.
The research shows that consumers who buy local do so for economic reasons: 97% of Canadians do it to support the local economy, 96% do it to support local farmers and 93% do it to create local jobs, while 87% think it is better for the environment.
Customization is king: consumers are increasingly looking for custom-made solutions that fit their specific needs, becoming more engaged in product creation. Many companies are expanding their product lines to better address consumer preferences. Others have developed “mass customization” techniques, which deliver tailor-made solutions at prices and lead times that match traditional mass-produced products. Nimble SMEs can leverage both approaches—designing niche products and empowering their customer base—to compete with large producers, increase their margins and minimize product development risks.
The lingering effects of the recession: certain consumer habits that arose during the 2007–08 recession are becoming the new standard. Consumers expect quality at a low cost, and are interested in pricing models based on use rather than ownership. The strategic use of group couponing can be a good way to introduce consumers to SME businesses and products. SMEs can capitalize on other driving forces behind the “sharing economy” phenomenon, including the desire to have access to items only when needed.
“Consumers want personalized, high-quality products at reasonable prices and are using many penny-pinching strategies like group couponing to get more bang for their buck,” said Cléroux.
The report also suggested that SMEs could benefit from these trends by engaging customers in a closer dialogue. SMEs can effectively communicate their value proposition, create a better understanding of consumer needs and encourage customers to share their opinions in order to increase consumers’ engagement in product development.
They can also clearly explain the value of their products. It is crucial for SMEs to understand what consumers perceive as value, and communicate how their product fits with that value through the communication channels (online and offline) that resonate most with a specific client segment. The report suggested that this can be done by emphasizing if the product is made in Canada, clearly displaying ethical or environmental features and health-related benefits of products.