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By: John Zimmerer on July 7th, 2017

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McKinsey on Turning Touchpoints into Customer Journeys

In a McKinsey article entitled “ From Touchpoints to Journeys: Seeing the World As Customers Do ,” Nicholas Maechler, Kevin Neher and Robert Park discuss maximizing customer satisfaction by focusing on the end-to-end customer journey rather than on individual touchpoints as many have in the past.

This article was published in March of 2017, and it’s (still) quite relevant to the current discussion regarding the evolution of customer experience from disjointed, siloed customer communications sent from an inside-out perspective (i.e., what the company wants or needs to say to the customer) to outside-in customer journeys that span multiple touchpoints (i.e., what the customer's trying to achieve).

Touchpoints: Where Channel Meets Device

A touchpoint is where a channel (like email) meets a device (like a mobile phone or tablet). There are many, many touchpoints through which customers make contact with brands these days, and the list keeps expanding as technology and customer expectations progress. It’s easy and logical to focus on touchpoints since most organizations are already operationally set up to deal with individual interactions in the context of marketing, commerce or service through those departments’ existing processes and technologies.

However, as the article’s authors point out, “The explosion of potential customer interaction points—across new channels, devices, applications, and more—makes consistency of service and experience across channels nigh impossible—unless you are managing the journey , and not simply individual touchpoints.”

Focusing on Customer Journeys

What is a customer journey ? Here’s a video of McKinsey’s Alex Singla explaining the concept. In a nutshell, “customer journeys include many things that happen before, during, and after the experience of a product or service. Journeys can be long, stretching across multiple channels and touchpoints, and often lasting days or weeks. Bringing a new customer on board is a classic example. Another is resolving a technical issue, upgrading a product, or helping a customer to move a service to a new home.”

Customer journeys are becoming ever more complex in a multi-touchpoint, cross-channel, always-on, hypercompetitive world. Companies that focus on touchpoints one at a time risk damaging the customer experience on a macro, cumulative level. Customers are relatively quick to forgive a single negative experience with one touchpoint or interaction. They are far less likely to overlook a series of negative or disjointed experiences stretching across their journey with your brand.

Solving the problem can be worth millions of dollars for many enterprises in terms of customer retention and upselling, but it requires a change in culture and mindset within the company to shift away from siloed, operational thinking to a more strategic and holistic journey-centric approach.

Here are McKinsey’s recommendations for getting started, excerpted from the article:

In our experience, six actions are critical to managing customer-experience journeys (articles elsewhere in this volume explore several of these topics in depth):

• Step back and identify the nature of the journeys customers take—from the customer’s point of view.
• Understand how customers navigate across the touchpoints as they move through the journey.
• Anticipate the customer’s needs, expectations, and desires during each part of the journey.
• Build an understanding of what is working and what is not.
• Set priorities for the most important gaps and opportunities to improve the journey.
• Come to grips with fixing root-cause issues and redesigning the journeys for a better end-to-end experience.

Customer Communications Management Must Adapt

CCM has traditionally lived in a silo, and it still does in many (if not most) organizations. It’s usually treated as a print -focused, obligatory piece of operations. Companies are simply required to send out letters, forms, disclosures, statements, legal notices, and more to customers, and CCM software is the best tool to do that.

But CCM really is, or should be, an integral part of the customer experience . Think about a critical customer journey in your industry. How many touchpoints along the way involve generating personalized documents, whether print or digital, sending them to customers through various channels, and following up appropriately? That’s all CCM.

So CCM vendors like us who understand the broader customer experience landscape are having to adapt to serve entire customer journeys—not just customer service and/or regulatory requirements as in the past—including touchpoints we’ve never really been a significant part of before, like marketing and ecommerce. If we don’t move our solutions to the cloud and make it easy for our clients to integrate CCM services with their other customer experience technologies that serve other parts of the customer journey, we will quickly become irrelevant.

That’s exactly why we built INTOUCH ® . We designed it from the beginning with customer journeys, not just touchpoints, in mind—because, as McKinsey’s research indicates, companies that excel in delivering journeys tend to win in the market: “Put simply, most companies perform fairly well on touchpoints, but distinctive performance on journeys can set a company apart .”

Read the McKinsey report for some great graphics illustrating the advantages of moving from touchpoints to journeys and some practical examples of the practice in action. The authors’ conclusion? “Research identified consistent and clear communications as one of the most important elements of customer experience. …Thinking about customer journeys—instead of traditional touchpoints—can require an operational and cultural shift that engages the organization across functions and from top to bottom. For the companies that master it, the reward is higher customer and employee satisfaction, revenue and cost improvements, and an enduring competitive advantage.”

Subscribe to the blog and join our CX Architects LinkedIn group for more discussion of the evolving role of CCM technology within organizations’ CX architectures.

Image courtesy of mckinsey.com .

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Consumer journeys: developing consumer-based strategy

• Published: 09 February 2019
• Volume 47 , pages 187–191, ( 2019 )

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• Linda L. Price 2  

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Consumers undertake many journeys in pursuit of large and small life goals and in response to various opportunities, obstacles, and challenges. Consumer journeys may anticipate consumption experiences, such as when consumers take steps to choose products, brands, or technologies, engage in online or offline retail experiences, and use products and services. However, consumers take other journeys that don’t have consumption as their goal but nonetheless implicate brands, technologies, products, and services. For example, a cancer patient and family members undertake a traumatic emotional journey that involves a complex network of heath care brands, technologies, and services as patients and their families move from diagnosis, through treatment, to recovery, remission, or end-of-life care (Berry et al. 2015 ). An Uber driver may use his Toyota not only to take his own journeys but also to earn money by taking other people where they need to go. During some parts of these journeys, the consumer role may not be as prominent as other roles such as patient or producer or person.

The broad topic for this special issue, consumer journeys, is contoured by a focus on consumers rather than customers or firm touchpoints, and on journeys rather than goals, tasks, or jobs. Both of these aspects frame the topic in particular and significant ways.

Focus on consumers

The focus on consumers rather than customers is deliberate and important (Hamilton 2016 ). An essential impetus for this issue is to highlight the value of consumer-based strategy for generating customer insights. “Consumer-based strategy is organizational strategy that is developed based on insights about consumers” (Hamilton 2016 , p. 281). More holistic than a traditional strategic focus on customers, consumer-based strategy recognizes the need to understand consumers as they select, create, integrate, use, adapt, and discard products and services in order to meet needs and accomplish goals. “Consumers” is a more general term than “customers” that emphasizes that people draw on and integrate a wide variety of market and non-market resources to pursue their life paths (Epp and Price 2011 ). As Fournier famously wrote, consumers don’t choose brands, they choose lives (Fournier 1998 ).

Consumers act as resource integrators in their role as customers of multiple entities, trying to accomplish, for example, the goal of moving to a new home or going on a family vacation. These common examples highlight the importance of understanding the context of the consumer’s overall journey (Rawson et al. 2013 ). Understanding what consumers are trying to accomplish both before and after interacting with a provider can help providers increase the value they provide to their consumers (Seybold 2001 ). Such a perspective recognizes that “markets, customers, resources and contexts are constantly changing,” (Bettencourt et al. 2014 , p. 60). Without this broader perspective, firms can become so consumed with improving a specific touchpoint or maximizing choice of an option that they lose sight of the consumer’s overall goal. When consumers move to a new home, they may need to navigate a complex array of separate and layered service encounters, including the home transaction(s), inspections, insurance, the physical move, and furnishing the new home. Even planning a family vacation is a complex problem, involving integrating various collective and individual goals (Epp and Price 2011 ). Firms may mismatch solutions to consumers because they don’t appreciate the array of networked goals, goal management approaches, and constraints that families face. By looking at consumer networks more holistically, firms can improve solution design, identify new network partners, and create new offerings (Epp and Price 2011 ).

Focus on journeys

As importantly, the framing of consumption processes as journeys is consequential. “Journey” is one of the primary deep metaphors that consumers use to describe and understand their lives, and especially to make meaning of the past, present, and future (Zaltman and Zaltman 2008 ). Deep metaphors “provide a window into people’s underlying conceptions of the social world,” and help them interpret and evaluate information related to abstract constructs (Landau et al. 2010 , p. 1046; Lakoff and Johnson 2008 ). The journey metaphor is evoked in numerous naturally occurring consumer settings and associated with a variety of experiences. Journeys can be arduous, as in a hero’s journey, be of short or long duration, have unexpected events and turns, go toward or away from something, be repeated multiple times, and include obstacles, detours, and alternative routes. The journey includes the events or “touchpoints” along the way, but it is also a narrative of a progression in which overcoming fear and failure may be important parts (Arnould and Price 1993 ). The journey metaphor has been usefully applied to love, relationships, disease, adventure, addiction, education, growth, creativity, grief, death, and numerous other concrete and abstract human experiences.

Recent research has underscored the importance of examining the customer journey in order to understand customer experience. The customer journey is defined as the process the customer goes through, across all stages and touchpoints with an organization, comprising the customer experience (Lemon and Verhoef 2016 ). Mapping customer journeys from a firm perspective has long been a valuable tool for improving customer experiences (Bitner et al. 2008 ; Dhebar 2013 ; Edelman and Singer 2015 ; Rawson et al. 2013 ), and is likely to remain so. Yet, as Lemon and Verhoef ( 2016 ) explain, only some of these touchpoints are controlled by the firm, and firms need to deepen their understanding of both the ones they control and the ones they don’t. Increasingly, theory and research call for advances in customer journey mapping, moving toward more adaptive and customized mapping, done less from a strictly firm perspective, and incorporating more of the pre- and post- components of the customer journey with the firm (Lemon and Verhoef 2016 ; Voorhees et al. 2017 ; Rosenbaum et al. 2017 ). New technologies and platforms have altered customer journeys in myriad ways (Kannan and Li 2017 ; Court et al. 2009 ; Edelman and Singer 2015 ). New technology has introduced many different channels through which consumers can interact with product and service providers (Barwitz and Maas 2018 ; Chheda et al. 2019 ; Leeflang et al. 2014 ), giving consumers considerable control in how they interact with providers (Harmeling et al. 2017 ; Lemon and Verhoef 2016 ). It is important to examine touchpoints across multiple channels because analyzing channels individually can lead researchers to incorrect conclusions (Li and Kannan 2014 ).

Consumer journeys

A consumer journey often subsumes customer journeys, in that a consumer journey is broader and may involve multiple activities (e.g., engaging with a social media platform and then visiting a retailer, or deciding to see a doctor and then visiting a pharmacy) and multiple service providers (e.g., comparison shopping). Beyond understanding provider–consumer touchpoints, we contend it is vital to understand the complex emotional and experiential journeys that consumers engage in with the help of brands, technologies, products, and services. We can think of customer journeys as being motivated by more concrete goals, such as getting medications, while consumer journeys may be motivated by more abstract goals, such as getting healthy and feeling good again. For example, a customer journey with a pharmacy might flow from naming it as the preferred pharmacy during a visit to the doctor, stopping at its retail location on the way home to pick up the medication, and taking the medication each day until the prescription is gone. In contrast, a consumer journey might begin with the consumer feeling a bit off, modifying exercise and diet to no avail, searching online for a diagnosis of the symptoms being experienced, deciding to see a doctor and making an appointment, and then following a customer journey with the pharmacy. Following this broader conceptualization, we consider how a person’s role as a consumer relates to this person’s other roles, whether these roles are as a patient, a parent, or a producer.

Increasingly, service providers are taking these other roles into consideration. For example, the CEO of CVS Health, Larry Merlo, recently noted that their customers are also patients, and understanding them more holistically—in both roles—is important. Supporting this idea, CVS Health has developed a “Health Engagement Engine” that integrates their own pharmacy data with data from other sources such as health plans, providers, and health systems. Similarly, platforms such as AirBnB will be more successful if they understand that the same people sometimes play the role of guests (consumers) and other times the role of hosts (producers). In addition, by understanding AirBnB’s role in the consumer journey, there is an opportunity to enlarge the platform to build on and complement other aspects of that journey. For example, AirBnB has expanded their service to include letting users book experiences on their app and make restaurant reservations in select U.S. cities (Forbes 2017 ). In their advertising, Deloitte Digital declares, “the customer experience is dead. It’s time to see the customer journey as what it really is, a human journey” (Advertising Age Cover Advertisement, December 17, 2018). This overstates the case, but highlights increasing recognition of the need to understand holistically how people move into and out of consumer roles and customer journeys.

Overview of the articles in this issue

This special issue brings together a set of 13 conceptual and empirical articles around the broad topic of consumer journeys. Due to the high level of interest (over 60 submissions) and space constraints, nine papers appear in this issue (vol. 47, issue 2) and four papers will appear in a special sub-section of the next issue (vol. 47, issue 3). We are grateful to the many authors, reviewers, and conference participants who helped bring this issue to fruition, along with the vision, energy and resolve of editors Robert Palmatier and John Hulland. By design, the articles in this issue represent broad and diverse perspectives on consumers’ journeys.

Illustrating a wide view of the roles of consumers within journeys, work by Nakata and colleagues (Nakata et al. 2019 , issue 2) suggests that focusing on a consumer’s interactions with firms produces limited models of the journey that miss the nuance of consumers’ usage experiences over extended periods in everyday settings. Their paper reports a qualitative study of the situated experiences of disadvantaged consumers who are struggling to treat chronic hypertension, which incorporates consumers’ interactions with firms but spends more time with them as they follow their daily routines. Complementing this work, a paper by Trujillo Torres and DeBerry-Spence ( 2019 , issue 3) examines consumers’ responses to traumatic, extraordinary experiences such as receiving a cancer diagnosis. A qualitative analysis identifies strategies consumers use to construct an enduring life story, claim authority and preserve meanings as they live through traumatic experiences.

Work by Novak and Hoffman ( 2019 , issue 2) also considers consumers’ usage experiences over an extended time period, in this case, focusing on technology products. They propose a framework for considering consumers’ complex relationships with smart objects. Sometimes, consumer have relationships with smart objects that are similar to “master–servant” relationships, but sometimes the consumer and the smart object behave more like partners. For example, Amazon’s Alexa might remind a consumer of an upcoming appointment or communicate with other devices to turn off or turn on lights.

New technology platforms push firms to think about engaging consumers in multiple roles. Just as CVS Health is moving towards considering people in both their roles as both customers and patients, platforms like AirBnB and Uber are being pushed to consider their customers in other roles such as producers. Daellert’s paper ( 2019 , issue 2) suggests that consumer co-production activities require firms to rethink their role in the marketing value creation process. He encourages marketers in the sharing economy to not only think about how to support consumers in fulfilling their own consumption needs but also to help them create value for other consumers.

Consumers’ use of products and brands to fulfill their goals is often shaped by experiences that far predate the typical span of a customer journey. Mende and colleagues (Mende et al. 2019 , issue 2) show that the early life experiences of consumers with their caregivers shape their relationships with romantic partners and their consumer journeys with regard to romantic consumption even in adulthood. Similarly, the paper by Hamilton and colleagues (Hamilton et al. 2019 , issue 3) examines consumer decision journeys that are constrained by a scarcity of products and/or a scarcity of resources. Research on customer journeys often implicitly assumes that consumers have access to products and services and that they have sufficient resources to buy them. However, many consumers experience either temporary restrictions on the availability of products or resources or chronic scarcity. In particular, there is growing evidence that scarcity of resources during childhood can have a lasting effect on how consumers navigate their decision journeys.

Another case in which consumer journeys are influenced by experiences that far predate the customer journey is in inspiring brand experiences during foreign exchange trips. Vredeveld and Coulter ( 2019 , issue 2) study the consumer journeys of international students from nine countries temporarily living in the U.S. They find that the cultural experiential goals of these students influence their use of brands during their stay in the U.S. In some cases, their brand usage is motivated and interpreted based on expectations developed when they were exposed to the brands before they came to the U.S., such as in American movies.

Some of the papers in the special issue expand the scope of previous work on customer journeys by considering multiple service providers and spillovers across them. For example, Hildebrand and Schlager ( 2019 , issue 2) examine how pre-shopping activity on social media affects consumers’ subsequent shopping behavior. Their field study and experiments show that using Facebook before engaging in a product configuration task makes consumers more likely to choose conventional product features. Using Facebook seems to encourage consumers to focus more on how others will evaluate them, making them less willing to choose unconventional features.

The stage in the journey in which consumers encounter features can also influence their receptivity to the features. Schamp et al. ( 2019 , issue 2) show that ethical attributes (such as environmentally friendly ingredients) have more influence at some stages of the consumer decision journey (choice; when consumers are considering small assortments) than at other stages (consideration; when consumers are considering large assortments). Thus, a consumer’s interest in ethical attributes is not static, but depends on the stage of the journey.

Work by Kranzbuehler and colleagues (Kranzbühler et al. 2019 , issue 2) considers how to structure a consumer’s interactions with multiple service providers across a consumer journey. Specifically, they consider cases in which firms may want to dissociate themselves from a consumer touchpoint, such as when that touchpoint is inherently dissatisfying for customers. Using both a field study and experiments, these authors identify conditions under which firms may want to use branded outsourcing as a strategic tool to reduce their own brand’s associations with a negative touchpoint. Notably, the extent to which consumers perceive multiple brand-owned touchpoints as being designed in a thematically cohesive and consistent manner, which Kuehnl and colleagues (Kuehnl et al. 2019 , issue 3) call “effective customer journey design,” tends to affect consumers’ evaluation of utilitarian brand attributes more than their evaluation of hedonic brand attributes. In contrast, evaluation of hedonic brand attributes is influenced more by the brand experience.

Knowing how to engage consumers effectively may depend on the length of the consumer’s journey with the brand. Akaka and Schau ( 2019 , issue 3) show that as consumers’ identities evolve, their consumption practices also evolve. Focusing on the practice of surfing, they show that identity alignment (and misalignment) over time encourages consumers to change the way they interact with products and brands. Turning to firms’ efforts to engage consumers, Hanson et al. ( 2019 , issue 2) examine the effects of different kinds of incentives for engagement, such as points and badges, for consumers to engage in an online brand community. They show that for novices, who are new to the community, signals that communicate a specific social role drive more engagement (such as creating discussions, posting comments, and future engagement intentions) than signals that do not provide role clarity. However, for consumers with longer tenure, the degree to which incentives communicate a social role is less influential. Notably, consumers develop and change along their journeys, and firms need to take this evolution into consideration.

Conclusion and research directions

To summarize, we propose that important strategic insights can be uncovered by moving from a focus on a customer’s journey with a single firm to a broader scope, in which the consumer may shift between roles as a patient and consumer or between roles as a producer and consumer. These consumer journeys may include interactions with other consumers, as in the case of brand communities or when buying for others, and interactions with smart objects. Consumer journeys may encompass interactions with multiple firms, either by the design of the focal firm, as in the case of outsourcing, or in spite of its efforts, as in the case of comparison shopping. These journeys are often extended in time and initiated in distant places, with lagged effects on consumers’ decision making with respect to specific products and brands. We hope that as you finish reading this issue you will allow this broadened perspective on consumers’ journeys to spark your own ideas and future research.

A treasure trove of future research directions is embedded in each of the papers that encompass this issue. Here we underscore a few possible future directions. First, future theory and research should investigate the temporality and duration of consumer journeys. This issue has uncovered challenges in neatly defining a pre-core-post customer journey process, suggesting the value of more adaptive and customized time frames depending on the consumer journey context. Moreover, the pre- and post- components of a consumer’s journey may themselves be quite prolonged, as consumers develop histories with brands, navigate networked relationships with smart objects in their homes, or replicate relational journeys from their past.

Second, future theory and research should interrogate when and how consumption processes are experienced as journeys and how that metaphor shapes consumers’ experiences. For example, thinking of a consumption process as a journey versus, for example a job to be done, may change how consumers think about control, unanticipated events, obstacles, failures, emotions, progress, and outcomes. Journeys may not always be motivated by explicit goals, and goals may change over time. This may, in turn, have additional implications for when and how we think about customer journeys and customer experience. Importantly, when is it useful and when does it create value to frame a process as a consumer journey, and when not?

Third, future research should deepen our understanding of people’s movements between their roles as customers and other roles, and the role of companions in consumers’ journeys. As a whole, the articles in this issue suggest that a contextualized view of these movements between roles, sometimes with companions, can shed important insight on customer touchpoints even when these touchpoints comprise only a small portion of the overall consumer journey. This broadened perspective emphasizes the way in which consumer journeys collide, interplay, and change directions.

Finally, not new to our issue, there are widening opportunities to investigate how new platforms and technologies are interfacing with elements of both consumer and customer journeys as enablers, rewards, obstacles, and companions. Again, we contend it is useful to consider these platforms and technologies as part of a consumer journey, and not just as funnels through which consumers come to engage with the firm.

We are confident that readers will identify many additional exciting contexts and opportunities for investigating consumer’s journeys, and we look forward to watching how the journey continues.

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Rebecca Hamilton

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Hamilton, R., Price, L.L. Consumer journeys: developing consumer-based strategy. J. of the Acad. Mark. Sci. 47 , 187–191 (2019). https://doi.org/10.1007/s11747-019-00636-y

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Published : 09 February 2019

Issue Date : 15 March 2019

DOI : https://doi.org/10.1007/s11747-019-00636-y

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Competing on Customer Journeys

• David C. Edelman
• Marc Singer

As digital technology has enabled shoppers to easily research and buy products online, sellers have been scrambling after them, trying to understand and satisfy their wants. Savvy companies, however, are using new tools, processes, and organizational structures to proactively lead digital customers from consideration to purchase and beyond. They are creating compelling customer journeys and managing them like any other product—and gaining a source of competitive advantage.

Building successful journeys requires four key capabilities: automation, to smoothly carry customers through each step of their online path; personalization, to create a customized experience for each individual; contextual interaction, to engage customers and appropriately sequence the steps they take; and journey innovation, to add improvements that enhance and extend the journey and foster customer loyalty.

In addition, the most successful companies have a particular organizational structure, with a chief experience officer overseeing a journey-focused strategist and a “journey product manager.” This latter role is critical—the journey product manager leads a team of designers, developers, data analysts, marketers, and others to create and sustain superior journeys, and he or she is accountable for the journey’s ROI and general business performance.

You have to create new value at every step.

Idea in Brief

The problem.

Digital tools have put shoppers in the driver’s seat, allowing them to easily research and compare products, place orders, and get doorstep delivery of their items. Sellers have largely been reactive, scrambling to position themselves where customers will find them.

The Solution

Companies can use new technologies, processes, and organizational structures to proactively lead rather than follow customers on their digital journeys. By making the journey a compelling, customized, and open-ended experience, firms can woo buyers, earn their loyalty, and gain a competitive advantage.

The Strategy

Superior journeys feature automation, personalization, context-based interaction, and ongoing innovation. To achieve all this, companies need to treat journeys like products, built and supported by a cross-functional team that’s led by a manager responsible for the journey’s business performance.

The explosion of digital technologies over the past decade has created “empowered” consumers so expert in their use of tools and information that they can call the shots, hunting down what they want when they want it and getting it delivered to their doorsteps at a rock-bottom price. In response, retailers and service providers have scrambled to develop big data and analytics capabilities in order to understand their customers and wrest back control. For much of this time, companies have been reacting to customers, trying to anticipate their next moves and position themselves in shoppers’ paths as they navigate the decision journey from consideration to purchase.

• David C. Edelman is an executive adviser and a senior lecturer at Harvard Business School.
• Marc Singer is the director of McKinsey’s global customer engagement practice.

Partner Center

A growth journey toward green and local

McKinsey: From your perspective, how did the market conditions for grocery retail evolve in 2023? And how was business for Auchan?

Yves Claude: Last year was a challenging one for the industry in multiple respects. The French economy went through some difficult times. Things went reasonably well for Auchan during the first three quarters of 2023, but the fourth quarter was more challenging. In addition, our suppliers increased their prices significantly, and with only 8 percent market share in France, we don’t have much bargaining power. We had to pass on price increases to our customers, and many of them traded away to other players.

The customer experience has to be grounded in the warmth of human interaction. Yves Claude, CEO, Auchan Retail

McKinsey: Did you experience the same challenges in other countries as well?

Yves Claude: Not as much. In other countries, such as Portugal and Spain, Auchan offers the best prices in the market. This is a real advantage in times of high inflation. Some markets have shown more resilience, both in terms of sales and in terms of profitability, because consumers there are more willing to spend money on groceries. Households in Spain and Portugal have lower average incomes than those in France, but shoppers in those countries will still spend money on good food. In Spain, we also successfully integrated the Dia stores we acquired in mid-2023, subsequent to the acquisition the previous year. That was a big step for us. And in Portugal, we signed the acquisition of Dia stores.

McKinsey: What are your thoughts on inflation?

Yves Claude: In France, inflation dominated the news in 2023, and it put pressure on our profits. Now, as inflation slows, the sector can return to more conservative commercial strategies. We ended 2023 with an overall price increase of 1 to 2 percent. For some products, we will even lower prices. Overall, and as with most of our competitors as well, our customers bought much more of our private label this past year.

Our buying alliance with Intermarché and Casino will be a real game changer.

McKinsey: How has 2024 been so far?

Yves Claude: We’re off to a challenging start, with strikes and protests that are affecting our supply chains. But we also see signs of hope. Thanks to the acquisition of the Dia stores, we will be able to double our market share in Portugal in 2024. Another reason for optimism is our ten-year buying alliance with Intermarché and Casino. This will be a real game changer. Together, we have 32 percent market share in France. That makes us a force to be reckoned with.

In Paris, half the population now lives alone, so they prefer packaged meals and smaller portions.

McKinsey: How are shopping habits changing in the markets in which you operate?

Yves Claude: In Paris, half the population now lives alone, so they prefer packaged meals and smaller portions. Our new concept stores will help us gauge the demand for ready meals. We will even offer our customers the option to eat these meals on-site. Hypermarkets are still working for families or older customers, but a lot of younger people don’t shop there. They prefer to buy their groceries close to their home, in a local store with a human touch. So we must improve the experience to keep these customers coming into our stores. The customer experience has to be grounded in the warmth of human interaction.

We try to purchase as much locally as possible.

McKinsey: What are you doing to promote sustainability?

Yves Claude: We’re a family business. We take a long-term view. We want to make sure that we are responsible. We can’t aspire to please everyone; we aspire to stand up for our values. For example, we try to do as much local purchasing as possible. We also want to be long-term partners for our suppliers. We have worked with some of them for over 60 years, and we will stand by them in the quest for sustainability.

McKinsey: How are your customers responding to your commitment to sustainability?

Yves Claude: Consumers want healthy food, ideally from local producers, but they are also price conscious. We want to offer consumers with smaller budgets quality products that more affluent shoppers buy in small local shops. Our purpose is “#vivre mieux” [“#live better”], and it drives all our decisions. We want consumers to have food sovereignty. To make this happen, we need to communicate clearly about the quality and the origin of the food we sell so consumers can make informed choices. Take chicken. Many grocers import chicken from faraway countries to get better prices. At Auchan, we sell only French chicken. We shrink our margin to do it. We can’t turn the tide alone. It takes a joint effort, including the government, associations, and farmers.

McKinsey: How far along are you on the e-grocery journey?

Yves Claude: The average Auchan shopper has 30 products in their cart, including heavy packs of bottled water, frozen products, and ready meals. That’s a lot of variety, and it’s hard to handle in terms of logistics. To make things even more difficult for us, most of our online customers want home delivery.

For click-and-collect to be fully effective, pick-up locations need to be on a consumer’s path from their place of work or study to their home.

McKinsey: Is click and collect a viable alternative?

Yves Claude: It could be, but for it to be fully effective, the pickup locations need to be on a consumer’s path from their place of work or study to their home. Our current store locations are not always ideal for that type of business.

McKinsey: What about the online experience itself?

Yves Claude: Customer expectations are very high. They expect a sleek, highly functional website with features such as filtering tools, customer reviews, and videos. We don’t have all of that in place at this point. So the online purchasing journey isn’t yet as engaging and as seamless as we would like it to be. We’re working on it, but we take it one step at a time to get it right. Some parts of our assortment, such as textiles, aren’t even available online yet. We will change that soon.

McKinsey: What are your thoughts on format evolution?

Yves Claude: I don’t think more hypermarkets will open in the countries in which we do business, or at least only very few will. Because of changing shopper needs, we expect to see a lot of stores with smaller footprints to open in the future, which will restore balance in the market. To partake in this development, we are working on a franchise model to build a network of small, independent stores run by local entrepreneurs. When we advertised this opportunity internally, many of our employees started selling their Auchan shares to free up capital, start their own store, and be their own boss. This project is very close to my heart because it’s about empowerment. It’s a way for us to give something back to the people who work for us and expand our network at the same time. We are also now reducing the size of our hypermarkets.

McKinsey: Looking ahead beyond 2024, what is your top priority?

Yves Claude: We will push for growth in the markets in which we are already present, rather than enter new territories. Right now, our market share is relatively low in most markets: 8 percent share in France, 6 percent in Spain, 5 percent in Romania, 3 percent in Poland. As a result, our volumes are too low to command attention from suppliers. For suppliers, volume is key, and they prefer exclusivity. Some suppliers shut us out because of this. So growing market share is a priority for us. Our aspiration is to reach a double-digit market share in each market. France, Spain, and Portugal are our priorities right now, but we will pursue market share growth in other countries as well.

Yves Claude is the CEO of Auchan Retail. Alexandre Kleis is an associate partner in McKinsey’s Zurich office, where Franck Laizet is a senior partner.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

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News & Insights

McKinsey: Commodities Trading Generated US$104 Billion in 2023

April 12, 2024 — 11:30 am EDT

Written by Giann Liguid for Investing News Network  ->

A recent report from McKinsey highlights trends seen in commodities trading over the past year.

The document shows that despite global uncertainty, commodities trading generated over US$100 billion in earnings before interest and taxes in 2023, translating into more than US$150 billion in gross margin.

McKinsey mentions challenges related to COVID-19 and geopolitical conflicts, such as increased price volatility and supply chain disruptions, but notes that commodities trading value pools have show resilience.

Total trading values remained relatively stable in 2023 following rapid growth from 2021 to 2022.

Commodities trading trends in 2023

Looking at specific commodities, McKinsey notes that oil and oil-based products remain the largest value pool, although their profitability decreased in 2023. The firm also notes that the year brought physical volatility.

Total demand for oil is seen growing for the majority of this decade, followed by a decline after 2030. Demand for the commodity is forecast to decrease by nearly 50 percent by 2050.

Until then, competition is anticipated to escalate as more large players enter the fray. According to McKinsey, national oil companies and legacy oil marketers are already bolstering their trading capabilities.

For power and gas, trading pool value saw a bump in 2023, with markets seeing above-average volatility.

New opportunities are emerging in power and gas trading, particularly around entering new markets, data-driven trading and investments in new assets like battery energy storage systems.

The liquefied natural gas (LNG) market continued to grow in 2023, playing a crucial role in maintaining energy security in Europe. Similar to oil, market competition is poised to escalate as players that traditionally relied on long-term pipeline gas contracts, particularly in Europe, can now leverage their existing customer base to bolster their trading capabilities.

For metals and mining, trading profitability decreased in 2023, driven by elevated energy prices and lower commodities prices. Even so, nickel production saw a notable upsurge, largely driven by Indonesia, while lithium output experienced only modest growth. McKinsey sees the energy transition driving metals demand in the years to come.

Commodities sector increasingly interconnected

Aside from that, the McKinsey report highlights two major trends shaping commodities markets today.

The first is increasing interconnectedness. According to McKinsey, the average correlation between commodities vital to the energy transition has doubled, reaching 56 percent from 2015 to 2019.

Part of the reason for that is increased diversification of supply, which has led to a decrease in long-term relationships and a surge in short-term contracts. The LNG market exemplifies this shift, notes McKinsey, with approximately 100 new LNG tankers launched in the past three years, poised to surpass oil carriers by 2028.

Similarly, flexible contracts are gaining traction as buyers seek to mitigate risk. This shift often leads to higher exposure to global prices, as residual volumes are typically priced based on current market levels. The competition between Asia and Europe for additional LNG volumes highlights the growing preference for spot or indexed contracts.

However, not all markets follow this pattern. Critical industries like agriculture and certain metals, where supply chain security is paramount, often enjoy protection from local authorities.

Power to play a key role in the energy transition

The second major trend McKinsey mentions is the growing role of power in the energy transition.

The firm notes that power will be key to meeting the net-zero goals outlined in the Paris Agreement, and states that the power sector's value is anticipated to grow by up to 5 percent annually, reaching US$1.3 trillion to US$2.4 trillion by 2040.

However, the road to a sustainable energy future is not straightforward. Unlike other commodities, power demands immediate generation and consumption in close proximity. While solar and wind have spearheaded initial efforts in the energy transition, the journey to achieving the next 50 percent reduction in emissions presents complex hurdles.

Solutions such as nuclear, hydrogen and carbon capture necessitate substantial investments, alongside urgent grid expansions to accommodate evolving demands.

In Germany alone, the annual buildout of the transmission grid is projected to skyrocket by a factor of five, with approximately 1,900 kilometers added per annum by 2035, compared to a mere 400 kilometers previously.

Renewables, particularly wind and solar, are also set to dominate the power mix from 2030 to 2050. Yet this reliance on renewables introduces dependencies on other commodities. For instance, wind turbines, which are integral to renewable energy infrastructure, heavily rely on materials like steel, copper and aluminum.

​Investor takeaway

As uncertainty drives large value pools in commodities trading, McKinsey is suggesting that players in this market embrace data-driven trading, which involves artificial intelligence.

The firm believes this approach can give commodities traders an advantage, particularly in power and gas.

"To expand capabilities and agility, players will need to think through the macrotrends to determine which cross-commodity opportunities are the best fit, what role traders can play in power, and how to differentiate across managing illiquid risks, data-driven trading, and having deep capabilities in niche commodities," states McKinsey.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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