By Brian Owens
The retail landscape for over-the-counter health, beauty and grocery categories is undergoing unprecedented transformation. Once-unified product categories are splintering into specialized segments, while artificial intelligence is revolutionizing how brands connect with consumers. For Consumer Brand and Sales leaders, understanding these shifts is critical to maintaining relevance in an increasingly fragmented marketplace.
The new path to purchase
Today’s consumer journey is shaped by three intertwined trends that have fundamentally altered the brand-consumer relationship:
First, declining trust in institutions has shifted expectations around brand authenticity. Consumers are increasingly skeptical of traditional marketing claims and instead seek brands that demonstrate genuine values and transparency.
Second, greater flexibility in personal identity has freed consumers from conventional shopping behaviors. WPP BAV disruption research indicates that “people feel free to explore more possibilities for identity and life choices,” leading to less predictable purchasing patterns and greater openness to new brands.
Third, a dramatic power shift from brands to consumers has elevated expectations for brand responsiveness. Consumers now demand personalized experiences, immediate service and meaningful connections with the brands they choose.
Category fragmentation: the new reality
For O-T-C health, beauty and grocery retailers, these disruptions have manifested in significant category fragmentation. BAV metrics reveal alarming declines in category differentiation: 34% for O-T-C health, 26% for beauty and 23% for grocery retail over the past decade.
What was once a straightforward O-T-C health category dominated by a few major players has evolved into a complex ecosystem of specialized solutions targeting specific health concerns and lifestyle preferences. Similarly, the traditional beauty counter model has given way to niche brands focused on specific ingredients or beauty philosophies, while grocery retail now spans everything from hard discounters to premium organic markets.
WPP BAV research shows that sameness is particularly dangerous in an era where brand leadership is increasingly difficult to sustain. Of brands that occupied the leadership quadrant in 2014, only around half remained there 10 years later.
AI: threat and opportunity
Artificial intelligence represents perhaps the most significant technological disruption facing retail categories today. For brand leaders, AI presents both challenges and opportunities.
On one hand, AI is fundamentally changing how consumers discover products. While Google continues to dominate search, AI-powered alternatives like ChatGPT are gaining traction, particularly among younger consumers. This shift requires brands to adapt their discoverability strategies beyond traditional SEO.
AI is also challenging brands’ ability to control their narrative. As BAV notes, “AI is scraping information from all over the Web — and drawing conclusions. AI can hallucinate and misinterpret information.” This requires brands to be more vigilant about their digital presence and messaging consistency.
On the other hand, AI enables unprecedented levels of personalization in product recommendations, marketing communications and shopping experiences. For O-T-C health brands, this might mean personalized supplement regimens; for beauty brands, custom skin care formulations; and for grocery retailers, AI-curated shopping lists based on dietary preferences.
Mass market vs. niche brand approaches
Mass market and niche brands require fundamentally different approaches to thrive amid disruption:
Mass market brands should leverage their scale advantages while finding ways to appear locally relevant. Rather than competing directly with niche players, successful mass market brands are evolving into platforms that curate specialized offerings. Major grocery retailers, for example, are creating store-within-store concepts featuring local- and community-owned brands.
Niche brands should double down on collaborative partnership and community building. As BAV research indicates, “Disruptors build worlds. This type of strategy, which we call Worldbuilding, sits at the convergence of community, culture and commerce to build enduring and engaging brands.” Successful niche brands focus on solving specific problems or serving consumer segments with unmatched expertise and authenticity.
Strategic imperatives for future share leadership
For brand and sales leaders navigating this complex landscape, five key principles emerge:
• Differentiation is non-negotiable: In a landscape of increasing sameness, meaningful differentiation drives both market performance and shareholder value. BAV research demonstrates that the most differentiated brands dramatically outperform market indices even during disruptive periods, with a portfolio of the Top 50 Most Differentiated Brands increasing 1,026% over a 10-year period compared to 301% for NASDAQ.
• Self-disruption is essential: Successful brands like Apple and Lego have thrived for decades by continually disrupting themselves while remaining true to their core identity. As BAV advises, “Disrupt the brand before it’s disrupted.”
• Local relevance matters more than ever: As consumers increasingly identify with local communities over national identity, brands must find authentic ways to connect locally. Hyperlocal brands share community values, language and even inside jokes, creating authentic connections that national brands struggle to replicate.
• AI requires vigilant management: While AI offers tremendous opportunities for personalization and efficiency, it also challenges brands’ ability to control their narrative. Brands must be hypervigilant about their digital presence and messaging consistency.
• Regular brand health monitoring is critical: Regular assessment of brand equity using frameworks like BAV’s four pillars (Differentiation, Relevance, Esteem and Knowledge) helps identify early warning signs of brand fatigue, commoditization or fading before they become critical.
The path forward
The retail landscape will continue to evolve rapidly, but brands that maintain strong differentiation, embrace self-disruption, connect authentically with communities and manage AI strategically will be positioned to thrive despite — or even because of — ongoing disruption.
As BAV concludes, “Disruption is unavoidable. It’s not just a phase in the marketplace. It’s the rhythm of the universe.” For O-T-C health, beauty and grocery retail brands, the challenge is not to avoid disruption but to harness its transformative power to build stronger, more resilient brands that truly matter to consumers.
Brian Owens is managing director of strategy and insights at BAV Group.
