The uncertainty of the COVID-19 virus’ life cycle and duration of the job losses loom large over the consumer goods and retail industry."
Many of us have experienced navigating a business through a recession. But no brand or retailer has had to rework spending, marketing, new item, supply chain and retail execution strategies to respond to sudden changes in shopper behavior after a worldwide pandemic and surge in unemployment.
The uncertainty of the COVID-19 virus’ life cycle and duration of the job losses loom large over the consumer goods and retail industry. Exacerbating the industry’s challenges are the pandemic-related supply chain issues hampering consumer goods companies’ ability to supply products and retailers’ ability to get those products into shoppers’ hands.
To help product manufacturers and retailers better respond to near-term and longer-term changes in shopper behavior, the Advantage Analytics, Insights & Intelligence team went to work, learning from the past and the present. Here are three key findings:
Consumers are likely to react to this recession as they have others.
During the Great Recession of 2008-2009, shoppers prioritized needs versus wants and made trade-offs to manage their budgets. We expect the same to happen this year, as unemployment rates are expected to hover between 10% and 20%.
In 2008, nearly 70% of consumers cut back spending on non-essential groceries, according to an IRI survey of 1,000 consumers conducted that August. Almost 60% bought fewer individual-serving packages, 55% percent bought smaller quantities of their favorite treats and the same percentage bought fewer prepared meals at grocery stories.
Expect consumers to place a greater emphasis on a brand’s value proposition and trustworthiness. Of note: During the last recession, a full 50% of consumers reported purchasing more private-label products and just over half bought fewer organics. Development and penetration of store brands has grown in the last decade, so demand is likely to grow as shoppers look for more value and many of those who tried private-label items due to name-brand out-of-stocks stick with the store brand.
Related to this, in the personal care segment, consumers may choose value brands that will work for the entire family, rather than individual use. But in the cleaning category, shoppers will likely purchase products that have a greater perceived power to combat germs or a reputation for trustworthiness.
But they’re also likely to react in ways not seen during the last recession.
The rapid transformation in shopper behavior specifically related to COVID-19 will have long-term effects. Prior to the pandemic, households were shifting to fill-in and quick-trip shopping. Now, shoppers are making fewer, but larger-buy trips to avoid exposure and adhere to isolate-at-home guidance. And online grocery buying, not a factor in the last recession and having little momentum prior to COVID-19, has become — and will remain — a game-changer for many brands and retailers.
We also anticipate brand loyalty taking a hit, a victim of the surge in out-of-stocks. Our SMARTeam research reveals nearly 70% of pandemic-era grocery shoppers have purchased brands that were new to them, and 28% expect to stick with at least one of those brands.
As physical distancing continues to push at-home meal occasions — and companies keep at least some of their associates working remotely longer term — shoppers will go on searching for easy morning, daytime and dinner solutions and products that allow them to plan meals ahead. Expect sales of packaged and frozen foods to remain elevated, even as more fresh foods make their way back into the basket.
Post-pandemic behavior will look different than pre-pandemic behavior.
Even as the country rebounds from the health crisis and works through the recession, the dramatic lifestyle changes we’ve all experienced will have a lasting impact on consumer behavior. Here’s what we see coming in the food, personal care and healthcare categories:
- Shoppers will shift back to natural and organic foods, but may not be as fully engaged as they were just before COVID-19 changed their lives.
- As employment and activities outside the home ramp up, consumers will turn back to convenience items, but health concerns will continue to dampen the desire to dine out.
- Consumers will continue to turn to comfort foods.
- Shoppers will be more selective in premium splurges in cosmetics and hair care.
- “Lockdown pregnancies” could drive an increase in baby-related categories.
- Shoppers will purchase more vitamins, supplements and wellness products.
- Cleanliness will continue to be a huge focus in people’s lives and shoppers will look to household and laundry care brands they trust.
- Uneasiness over a resurgence of COVID-19 may slow the pre-pandemic trend toward self-diagnosis and self-reliant healthcare.
Like so many aspects of the pandemic, answers to now-unknowns will determine 2020 discretionary spending and economic recovery. Chief among them: the duration of stay-at-home orders, which is driving demand of all items related to staying at home, not just food.
As anxious consumers react to ongoing uncertainty, we advise brands and retailers to focus short term on conventional offerings, center-store items, frozen foods, and breakfast and lunch meal parts, especially products that lend themselves to easy meal prep and extend purchase cycles.
Now’s the time to connect — or reconnect — with shoppers who have tried new channels, new retailers and new brands to feed and care for their families. Our advice: Seize the opportunity to introduce new, but relevant-for-the-time, products and services.