Latest news:

You are currently not logged in

Log in
Opinion

How COVID-19 will change consumer behaviour

This is part of a special report on life after coronavirus. Find more stories on what economic recovery looks like, how the fashion sector could emerge even stronger and tips for managing the remote workplace here. 

A week is a long time in politics, so the saying goes. It seems even longer in the days of coronavirus. But given the significant impact the pandemic will have on our societal values and shopping behaviour, it’s worth thinking now about what the new normal will look like, particularly in retail.

Pessimism and cutbacks

An NAB consumer anxiety survey from early April showed consumers to be particularly pessimistic about spending on major household items, travel and investment properties. This may be compounded by the loss of superannuation funds for those nearing retirement age due to stock market volatility, so some may need to remain in the workforce longer.   

One area where the gloom is lifting is online groceries, which is currently seeing greater uptake by new cohorts, such as baby boomers. People in Spain and Italy have traditionally been reluctant to buy outside physical stores, particularly groceries, but this too is changing. 

According to Britain’s Financial Times, Carrefour Italy said its online customers had doubled, and sales – via its 30-minute delivery service – were up more than tenfold. Despite the temporary challenges facing online grocery delivery, many consumers may be pleasantly surprised by the online shopping experience and stick with it post-pandemic – at least occasionally.

The post-pandemic society

The side effects of people all over the world living in self-isolation will impact their values, and how and what they choose to consume in the future.

As so many Australians have been separated from friends and loved ones for months, it’s likely that they will be re-evaluating the importance of human connection. Combined with a newfound familiarity with online shopping, this may also lead to a new consumer assessment and expectations of physical retail stores. Greater emphasis could be placed around places where people can gather, potentially accelerating the development of malls as community gathering spaces, rather than merely merchandise display and transaction conduits.

In a post-pandemic world where more people will be working from home at least some of the time, there will be less need for corporate apparel and luxury items. This will likely be part of a wide-ranging consumer re-assessment of their values and the role of products in their lives. So, in the expected recession during and post-pandemic, it’s quite possible that discretionary and luxury items will take a hit.

Within households, there may also be also a shift in who actually does the shopping, given that traditionally, a significant majority of grocery trips are often performed by women. Last year, analysis from the Pew Research Center in the US found that 80 per cent of mothers do both the shopping and cooking at home. Those figures were similar for childfree couples.

However post-pandemic, the gender roles within households may change, as men spend more time working at home with their children, and corporate workplaces offer more flexible working arrangements. There may be an uptick in paternal parenting, or at least a more even balance of childcare. This could then be extrapolated to shopping; if more dads are working at home and looking after the kids, then they could do more grocery shopping. 

An increased consumer focus on health and biosecurity may see the growth of health and wellbeing products and retailers, including products with bacteria-killing capabilities. Consumers may become more cautious of who steps into their environment and what they may bring in with them, such as tradespeople entering homes.

Allied to a potential review of supply chains and a shift to local production, nervous consumers wary of global supply shortages may show more interest in supporting local retailers and refocusing on local community relationships. For example, in April, more than 70 Australian fashion brands banded together to create the

‘We wear Australian’ campaign to encourage consumers to support their local designers. 

Department stores re-imagined

COVID-19 will serve to accelerate the decline of some retail channels already in trouble, particularly department stores. These have been losing customers to discount department stores for a number of years, despite their best efforts to stem that tide. They have bloated store networks and footprints requiring trimming, and currently lack the ability to tailor to local communities. In other words, they have lost relevance.

Some department stores may even be acquired by major retail giants such as Amazon, others will go under entirely. Some may survive, such as Nordstrom, through quality and a good service model. In any event, surviving department stores are expected to change their model to become more locally salient and less reliant on promotions.

It’s possible that in Australia, there will be a rationalisation of department stores, along with a change of model to embrace more flexibility via casual workforce, concession-based inventory models and percentage rent-based occupancy models. Category leading retailers such as Bunnings and Officeworks are likely to increase market share, putting them in a position to acquire other retailers and create online marketplaces.

While in the US, a shift to online grocery shopping is expected to negatively impact neighbourhood shopping centres anchored by supermarket and pharmaceutical retailers, in Australia, it’s likely to be the larger centres with a high proportion of discretionary category retailers that will need to change their model and repurpose real estate as retail property vacancies proliferate.

People get ready

So, what can retailers and manufacturers do to prepare for this brave new world, to capitalise on current events and set themselves up for ongoing success, resilience and future-proofing against similar events?

According to management consulting firm Bain, retailers need to review customer and market data to determine where they will need to protect or win back share. However, they will also need to focus on how to nurture relationships with high-value customers and put plans in place to reactivate demand. Other considerations include investment plans for omnichannel fulfilment, store network resizing, and a long-term perspective on “supply chain and logistical setups to increase flexibility, resilience and capabilities”.

Data company McKinsey offers a five-step model, focusing on resolve, resilience, return, re-imagination, and reform. The first two steps look at near-term operational and cashflow challenges. Steps three through five involve creating plans to return the business to scale, what needs to be reinvented or done differently, taking into account potential regulatory and competitive shifts.

They are stressed by both Bain and McKinsey that even though retailers are currently figuring out how to best work throughout the crisis, they should already have a team in place looking at operations post-pandemic.

These may be challenging times, but it is an opportunity for businesses to look internally and take stock of who they are, what they stand for, what they do and how that relates to what consumers are going to value in the future.

A few months ago, retailers may have been pontificating about the vagaries of minor budget variances, but since then, many managed to significantly change their business models within just a few weeks. As Gartner analyst Mark Raskino points out, “In four months, six months or a year – whenever the virus is beaten into submission – [people] will go back to their ‘day jobs’, forever changed. What seemed hard or impossible before, will feel easy and trivial by comparison.”

Norrelle Goldring has 20 years’ experience in retail, category, channel and customer strategy, planning, research and marketing, working in and with global retailers, manufacturers, research and consulting houses. Contact Norrelle on 0411 735 190 or email norrellegoldring@hotmail.com

This story is from the May 2020 issue of Inside Retail magazine. Subscribe here

No Comments | Be the first to comment
+-

Comment Manually

No comments