The Consumerization of Wellness

THE COWEN INSIGHT

The consumerization of wellness can be captured by the convergence of heightened customer expectations and health & wellness needs. This shift is underpinned by accelerating spending power among Millennials and Gen Z, advanced technology, digital, disruptive technology, and direct-to-consumer engagement.

THE FUTURE OF CONSUMER EXPECTATIONS

Consumerization drives value and convenience through digital innovation, transparent pricing, and connected channels, as these features transcend heightened customer expectations. This movement is accelerating following two years of disruption brought by the pandemic, increased focus on general well-being, and rising spending power among Millennial and Gen Z consumers. Longer term, customer expectations will only go higher with increased competition and analogous experiences, which will occur across the consumer and traditional medical fields. Accelerating employee healthcare costs and the introduction of Health Savings Accounts (HSAs) is further reinforcing consumerization in the healthcare space.

BLURRING THE LINES BETWEEN SECTORS

Evidence of adoption and strength in consumerization in the retail channel includes scientific innovation in beauty products, telehealth capabilities, and multi-channel fitness. Meanwhile, the health care sector is seeing a rapid ascent of Rx delivery, at-home testing capabilities, and medical device technology. We are in the early innings of the consumerization movement across the wellness and health care spaces as Venture Capital deployed $27.5bn in the private markets last year, while large cap public companies are just beginning to pivot and invest in the field. Winners are gaining share with best practices seen in the consumer sector, which have yet to be universally deployed in health and wellness. Practices such as going direct, investing in digital, and disrupting legacy markets.

COWEN’S D3 FRAMEWORK

Going direct, investing in digital, and disrupting legacy markets are all strategies leaders initiate to capitalize on the accelerating consumerization movement. Our analysis includes cross-sector insights from 11 analysts across the consumer and health care sectors, such as Retail, Cannabis, Synthetic Biology, Life Science & Diagnostic Tools, and Health Care IT, as well as input from Cowen’s Washington Research Group on FDA regulation. Our full report overlays the traditional health care perspective as Cowen has been at the forefront of the trend for years, including hosting various conferences (most recently the FutureHealth Conference), expert calls, and authoring reports. Additionally, we synthesize several proprietary surveys across beauty, vision care, and consumer health for a look into the next major catalysts.

WHAT TO WATCH, RISING EXPECTATIONS FOR CONVENIENCE & TRANSPARENCY

Increased spending power among Gen Z and Millennials is driving the secular shift in changing expectations towards more digital integration, transparent pricing, and professional quality products. Our surveys indicate the new generation of customers care about quality and pricing even in recessionary environments, have high gym membership rates, and customer satisfaction typically leads to frequent repeat purchases. Five core trends we expect for the near-term development of consumerization of wellness are:

(1) Innovation through direct and community engagement

(2) Redefining customer centricity

(3) Creating new TAMs through cross-functionality

(4) Continuing secular trend towards cleaner and more sustainable products

(5) An increase in consumers taking responsibility for their own health