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Economic growth and consumption: how to relaunch demand

Venice, 08/10/2021 - 10/10/2021, Aspen Seminars for Leaders

The Covid-19 pandemic has radically modified the consumer industry over the last 18 months. If, in a first phase, we saw the acceleration of trends that were already widespread, such as e-commerce, over time we witnessed the rise of new priorities, generally viewed as secondary in the pre-pandemic phase, including, but not limited to, the protection of the environment and the physical and mental well-being of the person. Consumers are now driven by new priorities and companies are obliged to reflect on the goods and services they offer to understand if these are still fit to satisfy that new consumer’s needs.

First of all, we must acknowledge that a separation between physical and digital is purely fictitious as consumers are active on both channels. Available data on e-commerce in Italy is quite clear on this point: the sector grew 35% in 2020, representing almost twice the average growth rate of the previous years; 2 million Italians made their first online purchase in 2020, on top of the 29 million digital consumers already active in Italy.  The growth of online commerce is unstoppable and companies that want to succeed in today’s world cannot neglect the digital aspect of their business.

If, on the one side, digital commerce expands the pool of potential customers, on the other it introduces new competitors. In the past, these may have been too geographically distant to constitute a real threat. Growing in an increasingly competitive market is possible only if companies succeed in differentiating their offer from that of the competition. While the cost of labor in Italy makes it impossible to gain market share by offering goods and services at the lowest possible price, the quality of that same labor allows Italians to offer goods and services of higher quality. Where higher quality proves insufficient to succeed against the competition, the world-renowned Italian creativity will need to focus on creating a “new” supply, one which is not based on what consumers ask for today but rather what consumers will want tomorrow.

Staying ahead of the competition also requires a reflection on the leadership model. The CEO who indicates the route to take – from far above the fray – based purely on his or her own instinct will struggle to succeed in a market dominated by data. The entrepreneur must recognize that the employees – who are closer to the consumers – will often be better positioned to understand market trends. Only by listening to the opinions of these employees, and comparing those opinions with data obtained from third parties, will entrepreneurs have the necessary tools to anticipate how the market will evolve.

Finally, any discussion about the consumer industry cannot exclude a specific focus on the most coveted category of consumers: tourists. Italy attracts millions of tourists each year and entrepreneurs need to work in order to maximize the conversion of tourists into consumers. Italy needs to offer goods and services that complement the visitor’s experience. Such an offer must be tailored to the needs and habits of tourists, who are often radically different to those of the usual consumer. This strategy requires close collaboration between the public and the private sector hence any chance of success relies on the implementation by the central government of a framework within which private entrepreneurs can operate easily. Only a political control room which sets the objectives and checks on the correct implementation of the plan will kickstart the much needed economic growth and ensure sustained progress in the long run.