As we all face into our new reality, at least (hopefully) in the short term, it’s hard to predict what changes in consumer behaviour COVID-19 will lead to in the long term. Our Marketing Director, Shane Kavanagh, explores some of the latest consumer data resulting from the pandemic.
The COVID-19 virus has changed all our lives. At a global level we are seeing restricted movement, increased physical distancing and isolation, the impacts of which are significantly pronounced on global and local consumer behaviour.
The unprecedented and unpredictable nature of the crisis makes the question of recovery timelines across all sectors difficult to imagine. Whether two months or two years, one of the few certainties is that for now and potentially in the long term, our forced hiatus from socialisation in all its forms has changed how we interact with the world.
We are now all the ‘90s nerd in the basement, surrounded by take away containers, watching too much TV and playing videogames. Throw in a survivalist instinct (The great toilet paper shortage of 2020, that was feared and never emerged), alcohol, smartphones and, crucially, supreme confidence in eCommerce driven by the likes of Facebook, Amazon, Netflix, Apple, Google et al and we might never need to leave our houses again.
The new consumer
The truth is that we have no clear picture of what this person will look like. In every media house, trade association and business across the world there are people trying to predict behaviour and take cues from the fragments of information emerging.
Consumer activity seems frenzied in this time. People are reacting to each new snippet of information, driven at best by legitimate news sources and at worst by the myriad of panicked or malicious ‘news’ stories circulated via social media.
A recent study by Suzy, the online market research platform in the USA, identified two tiers of purchasing habits that have emerged from the crisis.
Tier one, survival purchases, that consumers are purchasing considerably more of:
- Food & Beverage; 74%
- Personal Care items; 50%
- Household cleaning items; 47%
- OTC Medicine; 33%
Tier two, sanity purchases:
- Alcohol; 24%
- Entertainment (incl. streaming services): 22%
- Beauty Products: 21%
- Electronics: 15%
Traditionally, high street retail was the focus for the majority of these purchases, but this channel has essentially shut up shop for the duration of the crisis. Online retail has been one of the main beneficiaries as consumers come to terms with how to exist in their new restricted realities.
Grocery retail has predictably seen serious spikes in online. Even in less developed online retail environments, in rural areas, physical to online ratios have fundamentally changed with one grocery retailer recently referring to online pre-COVID at 2%, now at 33% and predicted post percentage as settling above 20%.
Need in the now and next economies
Clearly, what has not changed is need. We need things. We need food, to maintain our shelter, to be entertained, to replace items, to fix items. In a globalised economy (we are one, and the current situation is unlikely to change that irrevocably) that need is and will continue to be expressed by the movement of goods across international borders.
The fact of the matter is that parts, ingredients and elements for production and living now come from across the world. Pharmaceuticals produced in one country and sold on to international markets rely on constituent ingredients that are in most cases imported from multiple locations worldwide. This applies to most businesses from manufacturing to tech to farming. The odds on a part needed to repair a combine harvester being produced in same country as the machine itself is used are slim.
Consumers as much as businesses follow this pattern of ordering from across the world, they did so before, that habit is growing and will continue to do so now though in more limited circumstances. When we emerge into the next version of this economy, there will likely be an explosion of international online activity.
FX and payments; where do we go from here?
Foreign currency will exist as long as nations and economic alliances do. From the Euro to the Dollar, Sterling, Yen and all currencies in between. The need to exchange currencies will continue. The format in which they are used may evolve. It will likely continue to move from physical to digital in the business sectors (more deals will be done virtually; businesses will save on travel and, crucially, enhance their digital payment technology capabilities) with consumers following over time. Pre-COVID, this shift was happening, slowly. Our new reality is an externally driven tipping point for digital and contactless payments. In a recent article, The Guardian newspaper in the UK reported that domestic cash usage in that market had more than halved in the days to March 24th. It is likely that domestic cash usage will continue to follow this trend when ‘All this is over’. Consumer travel related cash usage is likely to maintain in one format or another as some travellers will remain sceptical of card acceptance across the globe.
The consumer and corporate travel sectors will recover but what exactly they will look like remains to be seen. Our desire and need to travel to different countries, experience different cultures and even to lie on a beach and try to let the stress of COVID isolation and distancing seep from the pores will be strong. Even in the short period of time our respective lockdowns have been in place, we are feeling a deficit of experiences. The desire to recoup our lost time together will likely lead to group experience hunting. This is unlikely to be instant, there will be a wariness, an underlying concern for safety that will take time to ease.
Understanding the dynamics between consumer behaviour and digital commerce will provide opportunities in the long run. Companies that realise that the clients and consumers they target within specific verticals are changing and that the way they transact is changing will benefit. It will become more important than ever to use technology to provide value and seek incremental revenue at all transaction points.
Whether we all re-emerge from our caves merrily hugging everyone we meet, jumping on planes and cramming into transport systems or we take our time to trust the social constructs we had before, one thing is for sure, all is indeed changed. Those who are ready to harness the energy this brings can create beneficial change too.
